Can financial inclusion ease the back-to-school pressure?

Bu Anthea Paelo, Ph.D

At the start of this academic year, schools reported a low turn-up of students, with parents citing the lack of money to pay for school fees. Beyond school fees, students often require additional material to facilitate their attendance. For cash-strapped parents, the financial demands of the beginning of a school term are excessive. As a result, several students begin the school term late or without the necessary material to aid their studying resulting in poor performance, especially in rural schools.

While parents are aware of the necessity for school fees months in advance, it is still a challenge for most to plan for timely payment due to low incomes. The other challenge is that even where parents have a steady source of income, they need access to financial services to help them plan, save, or access credit that would provide cash flow during the opening of the school term. Such parents could benefit from financial inclusion.

Financial inclusion refers to the access and usage of financial services. According to the 2021 Global Findex study, 66% of Ugandan adults own a regulated deposit account, an increase from 59% in 2017. The Bank of Uganda also reports that there were over 22 million active mobile money subscribers and 235 financial access points for every 10,000 adults in Uganda, thrice the number five years ago. Uganda has thus seen significant progress in access to some financial services.

However, there needs to be more growth in the usage of financial services and the benefits consumers derive. For instance, according to the 2021 Global Findex study, of 71% of Ugandan adults who saved money, only 39% did so using an account from a formal financial institution. Additionally, of the 75% of Ugandan adults who borrowed money in 2021, only 29% did so from a formal financial institution.

Statistics suggest that while Ugandans require financial services such as savings and credit, which could come in handy during the back-to-school period, minority access these services from financial institutions. Likely, the type of savings and credit products available at these institutions do not cater to the specific profile and needs of a large portion of the Ugandan population. Financial service providers need to go beyond their traditional services to meet the needs of their clients by, for example, developing customised tailored services to support parents in planning, saving, and borrowing to meet their school fees demands. These financial service products should have three key features to help solve beginning-of-school term dilemmas.

First, these products should let parents deposit money as and when they receive it, not monthly. Much of the Ugandan population are seasonal income earners, Uganda being an agricultural economy. Given the sector’s seasonality, income is only available during specific periods of the year. These periods only sometimes coincide with the opening of schools. This feature would enable parents to save their income during the harvest season when products are on sale and shore this up for periods of planting and low income.

Second, these financial accounts should be low-cost or even zero-rated. Finscope 2018 survey data cited the high bank fees as one of the reasons Ugandans avoid formal financial institutions. Low-fee accounts would incentivise parents to open and continually deposit income as and when it is received. The frequent use of the account would help parents obtain a credit history that would form the basis for small loans to capture shortfalls at the start of the school term. Financial institutions would benefit from increased deposits and use of the services by the parents.

Third, these financial services should be convenient. The account should be easy to open and maintain. Parents should be able to access the account through their phones and even carry out some transactions using USSD such as *130#. Deposits should be possible through various channels, such as agents. Schools could consider being agents to ease the collection and payment of fees.

An inclusive financial sector can alleviate stress caused by the demands of the start of the school term. However, financial institutions must be prepared to develop and provide innovative financial services that meet the needs of consumers.

Photo credit: Image by Freepik


Anthea Paelo, PhD is the Intervention Manager, Business Environment at Financial Sector Deepening Uganda

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