Deputy Governor Lauds Centenary Bank for Accelerating Digitalization

The Deputy Governor Bank of Uganda, Michael Atingi-Ego, officiated at the launch of Centenary Bank’s platinum Mastercard debit card, stressing the importance of digitisation in the financial sector.

 In his speech days ago in Kampala, he pointed out that, “The spike in the usage of digital financial and payment services during the pandemic has been astounding.” He commended Centenary Bank for having “played a part in this domestic acceleration of digitalization,” saying “the launch of its Mastercard Platinum debit card is only the next evolution of its digital channels.”

He said the experience of mobile money in East Africa had proved that digital technology is a firm lever for financial inclusion. “Technology offers means to improve access to financing for households as well as small and medium-sized enterprises. Using digitalisation, Centenary Bank can go beyond reaching the rural and underserved to transform their access to financial services by discreetly leveraging their digital payment data to overcome their lack of collateral.”

He said it was it critical to enhancing risk management frameworks to contain the risks that are inherent to digital financial and payment services, such as cyberattacks, outages, technical glitches, fraud, and faulty algorithms.

Atingi-Ego added: “The BoU, in partnership with stakeholders such as the Uganda Bankers Association, is championing the development of a National Payment Systems Strategy to promote electronic payments through a four-pronged approach, …(i) promoting infrastructure development and interoperability via a centralized switch to reduce transaction costs; (ii) operationalizing the National Payment Systems Act, 2020; (iii) fostering innovations, competition, consumer protection and digital financial literacy; and (iv) strengthening collaboration among supervised financial institutions, FinTechs, government MDAs and development partners.”

He said BoU will continue to support the digitalization of financial services and e-Payments with the associated risk management, as well as advocating for lower and comparable costs.

BoU policy measures responsible for banking sector’s resilience during covid-19

The banking sector’s resilience to the pandemic shock, he said, has been aided by the Bank of Uganda’s policy measures although systemic risks are heightened due to the slow pace of economic recovery.

He said the banking sector non-performing loans ratio rose to 5.4 percent in the quarter to September from 4.8 percent in June 2021. In an environment of increased risk aversion, banks holdings of government securities spiked 31.1 percent in the year to September 2021.

“Private sector credit growth declined to 8.6 percent in the year to September 2021from 10.2 percent in the year to September 2020. The banking sector remains liquid and profitable although strict vigilance must be maintained against the impact of potentially higher NPLs going forward.”

He said BoU has gradually reduced the central policy rate from 9 percent in February 2020 to an all-time low of 6.5 percent in August 2021 and kept it steady beyond to stimulate the recovery of economic activity. “We continue to urge commercial banks to reduce lending rates in step with the central bank rate, especially since inflation has remained contained and its outlook is benign. Having maintained the credit relief measures for the hardest-hit contact intensive sectors that remain under pandemic containment restrictions, the BoU is pleased that commercial banks have committed to easing the debt burden facing the education and entertainment sectors, on a case by-case basis and at the discretion of each lender.”

Despite the havoc wreaked by the pandemic, he said, the Covid-19 crisis has accelerated digitalization and the use of digital money. The pandemic has reinforced the trend of cashless payments. Internet shopping has become more popular, and contactless payments by card or mobile phones have picked up significantly.

Atingi-Ego said the value of payments by mobile banking, debit cards, POS, mobile money, and internet banking shot up by 84.4%, 75.6%, 46.0%, 43.1%, and 31.8%, respectively, from September 2020 to September 2021. The spike in the usage of digital financial and payment services during the pandemic has been astounding.

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