Report on Informal Financial Inclusion in Uganda

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    Efforts to increase formal financial inclusion in Uganda are faced with significant challenges which are both supply and demand side in nature.

    From a supply-side perspective the most significant challenge is that 76% of Ugandan adults are rural-based. The high cost of providing financial services in rural areas often means that formal financial institutions lack the incentive to penetrate these areas as well as the ability to mitigate perceived operational risks.

    From a demand-side perspective on the other hand, the most significant challenge is that most adults rely on sources of income that give them access to small amounts of cash on an inconsistent basis (e.g. almost half (48%) of Ugandan adults rely on farming/fishing activities for money). Their financial behaviour is driven by their daily needs. They are likely to save and borrow small amounts, quick access to savings and credit would be a key requirement, and they are therefore unlikely to see value in opening a bank account or using other formal financial institutions.

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