Uganda: Kenyan Banker Tips BOU On Key Interest Rates

Jul 26, 2017 | The Observer (Kampala; All Africa

If monetary policy signals enforced by the Bank of Uganda are not being felt within the market, that means financial inclusion initiatives are not yet successful, the former governor of the Central Bank of Kenya has said.

If monetary policy signals enforced by the Bank of Uganda are not being felt within the market, that means financial inclusion initiatives are not yet successful, the former governor of the Central Bank of Kenya has said. Prof Njuguna Ndungu, who was the keynote speaker at the first inaugural annual banker's conference held at Serena hotel, said once a central bank and financial institutions succeed in financial inclusion, it would translate into more Ugandans playing a role in the financial market. "If financial inclusion is succeeding, monetary policy signals should be felt in the market more easily," he told bankers. "Most of the time, they [commercial banks] remain small because they are not attracting a lot of deposits to give them power to intermediate." Ndungu noted that the failure by commercial banks to finance small and medium enterprises (SMEs) and the agriculture sector are some of the signals that show that a lot more work needs to be done. "SMEs are very important to this economy but they are not given financing. But once you succeed in financial inclusion, you [commercial banks] may not have to [give] directives on which sector to lend," he said. BOU has implemented some regulatory reforms recently, which are aimed at extending banking services to the unbanked. For example, the amendments to the Financial Institutions Act 2004, which were passed early last year, paved way for agency banking, Islamic banking, bancassurance (insurance companies using banks to sell their products) and the new requirement for commercial banks to hold more capital, which will offer greater protection for account holders. Read more on All Africa. Source: All Africa