Factors Hindering Financial Inclusion in Uganda: A Case Study of Kamuli District

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Background to the Study
Uganda’s Vision 2040 highlights access to finance as one of the barriers among others that are affecting the competitiveness of the economy. Most individuals and firms access credit from informal sources. One of the reasons for the limited access to credit is the low level of domestic savings which affects the ability by institutions to offer long term finance. As such, the Government of Uganda (GoU) intends to increase gross national savings from the current level of 14.5 percent to about 35 percent of GDP by 2040, as a means to accelerate structural transformation (National Planning Authority, 2013).
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There are six credit institutions and four MDIs, which are complementing commercial banks in the provision of financial products and services to the population. In addition, 20 insurance companies are licensed and regulated by the Insurance Regulatory Authority (IRA).
The financial structure also comprises of the microfinance institutions (MFI) which include SACCOs of Tier 41 by grading, providing financial services to people in peri-urban and rural areas. Since 2009, there has been a tremendous evolution in mobile money services that has changed Uganda’s financial landscape to include a large proportion of the population that was formerly excluded from the financial services sector.
Despite the noted improvements, financial deepening in Uganda is still very low and the financial system remains under-developed in a number of respects. The banking sector is still highly concentrated with 3 out of 24 commercial banks accounting for approximately 50 percent of the total market share i.e. assets, deposits and number of branches (Lwanga et al. 2013). Most commercial bank branches are concentrated in the capital, Kampala, and other urban centres leaving the rural population with no access to commercial bank services.
The cost of credit in Uganda is still very high with prime lending rates averaging 15 percent. Interest rate spreads— one of the measures of the efficiency of the banking sector and therefore instrumental in the mobilization of investible

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