Highlights: Impact of COVID-19 on the economic resilience and financial behaviour of Ugandans

Highlights: Impact of COVID-19 on the economic resilience and financial behaviour of Ugandans

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    FSD Uganda partnered with the Ministry of Finance, Planning & Economic Development and undertook a COVID-19 tracker survey which traced the impact of COVID-19 on livelihoods, financial behavior, and social responses of Ugandans. The phone-based survey was conducted in 5 waves between April and September 2020.

    Similar surveys were conducted by the FSD Network in Kenya, Rwanda, South Africa, Nigeria, Zambia, and Ghana. The COVID-19 Tracker explored composite data sets from across the continent.

    This highlights document is based on an analysis of data from the five waves of the tracker survey and presents insights on how the pandemic continues to affect Ugandan adults across several domains.

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    FI4R Diaries Round I Insights: Linking Refugees to Formal Financial Services

    FI4R Diaries Round I Insights: Linking Refugees to Formal Financial Services

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      By The Financial Inclusion for Refugees (FI4R) team

      Financial services are an important avenue for refugees to save money, access loans, and manage life shocks. However, many of them struggle to access finance because of legal barriers, lack of identity documentation, lack of credit history in their new locations, or collateral as security. Despite the challenges they face in accessing formal finance, refugees have found ways around financial exclusion. They save in savings groups, borrow informally, and receive remittances. As part of a financial diaries[1] study started in September 2020 by BFA, we spoke to 48 refugee households in Uganda to understand their financial lives over the course of a year. This blog shares the initial insights from the financial diaries research in Nakivale and West Nile refugee settlements.

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      FI4R Diaries Round II Insights: How Refugees Perceive and Cope with Risk

      FI4R Diaries Round II Insights: How Refugees Perceive and Cope with Risk

      By The Financial Inclusion for Refugees (FI4R) team

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        This is part two of an ongoing series of insights from a financial diaries study undertaken with refugees in Uganda, focused on their ability to cope with risks. The respondents are drawn from customers served by three financial service providers: Equity Bank Uganda, VisionFund Uganda, and the Rural Finance Initiative.

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        Cooperatives as Engines of Transformation

        Cooperatives as Engines of Transformation

        By Anthea Paelo

        Cooperatives continue to be an important engine for economic productivity and growth in countries like Uganda. They play a critical role in mobilizing savings, increasing access to credit, and facilitate various activities along production value chains, including procurement, storage and distribution. Where, for example, a farmer might find it challenging to access a tractor to plough his fields, or credit to purchase seeds, as a part of a cooperative he can access these inputs more readily and at much better terms. It is perhaps for this reason that as of January 2020, agricultural cooperatives numbered over 9,000, double the number just twelve years ago1.

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        Determinants of Interest Rate Spreads in the Ugandan Banking System

        Determinants of Interest Rate Spreads in the Ugandan Banking System

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          FSD Uganda Executive Director made a presentation as a discussant at the Bank of Uganda (BoU) and International Growth Centre (IGC) Policy Seminar on lending rates. Download the presentation to find out about why we should care about bank interest rate spreads and how it affects every day Ugandans and Ugandan businesses.

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          Market Research on Unsecured Lending for MSMEs

          Market Research on Unsecured Lending for MSMEs

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            Micro, small, and medium enterprises (MSMEs) (including smallholder farmers) struggle to access formal credit due to a lack of collateral and poor record keeping preventing them from making productive investments.

            FSD Uganda works to build inclusive credit market infrastructure to address the retail and business credit gap. FSD Uganda commissioned a study about unsecured lending to MSMEs in high density markets in Kampala, aimed at understanding the demand and supply challenges in accessing working capital. Examples of high-density markets include: Owino, Nakawa and Kalerwe markets.

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            Informal Sector Pensions: Protecting millions of East Africans from old-age poverty

            Informal Sector Pensions: Protecting millions of East Africans from old-age poverty

            By Joseph Lutwama.

            It is everyone’s desire to retire with a roof over their head and a decent income that will sustain them through their old age. However, very few ever realize that ideal, and it remains a dream that eludes millions in the region. Many East Africans never retire but die while toiling away as their productivity decreases. Economists and financial experts tell us that it is possible for one to save for retirement, and if those savings are invested well, they stand a better chance of reducing their old-age vulnerability and living their retirement dream. However, this is not the case in East Africa. Kenya, which has the highest pension sector coverage, sees only two out of every 10 working adults save for retirement. What could explain this paradox? In East Africa, the pension system is predominantly focused on the formal sector, leaving the informal sector largely unattended to. With levels of informal employment in East Africa as high as 91 percent, it follows that there would be such low levels of formal retirement savings.

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            Strengthening the effectiveness of Uganda’s consumer protection framework

            Strengthening the effectiveness of Uganda’s consumer protection framework

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              An assessment of credit cost disclosures
              There is a need to promote trust in the financial sector by putting robust consumer protection measures in place – this will help protect lower-income borrowers from poor market conduct and bridge the credit gap in the market.

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              Reimagining settlement communities: responding to the growing financial needs of Uganda’s refugees and their hosts

              Reimagining settlement communities: responding to the growing financial needs of Uganda’s refugees and their hosts

              By David Darkwa & Fred Ndiwalana.

              Mama Nicole is what most academics would call a ‘Forcibly Displaced Person’ – a refugee. Three years ago, she fled her village in Northern Kivu in the Democratic Republic of Congo when fighting broke out between two armed groups. Upon arriving in Uganda, she chose to settle in Kampala where she felt safer mingling in the city and being proximate to good schools and reliable health care for her four children. Settling in, however, has not been easy. Today, she rents a two-room house in Katanga, one of the sprawling slums of Kampala.  Two of her children go to nearby schools and the other two have dropped out.

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              Empowering refugees and host communities through financial inclusion

              Empowering refugees and host communities through financial inclusion

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                Background: Financial Inclusion for Refugees (FI4R) project

                Uganda hosts one of the largest refugee populations in the world with approximately 1.1 million refugees settled in urban centres and 28 refugee settlements across the country. And while the number of adult Ugandans accessing formal financial services continues to grow, primarily driven by mobile money services, the figures are much lower in refugee settlement communities. According to FinScope 2018, overall financial inclusion stood at 78% for adult men and 77% for adult females in Uganda. In contrast, only 13% of refugees surveyed in Bidi Bidi Refugee Settlement recently were able to access formal credit, with most of them depending on informal groups, which have their limitations, to meet their financial needs.

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                Message from FSD Uganda Executive Director on COVID-19

                Message from FSD Uganda Executive Director on COVID-19

                Uganda confirmed its first case of COVID-19 this weekend. The Government of Uganda, together with private sector actors, continue to demonstrate great leadership by putting in place and adopting progressive measures aimed at protecting Ugandans and limiting the impact of the pandemic.

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                New lives, new tools: The financial lives of refugee communities

                New lives, new tools: The financial lives of refugee communities

                Observations by BFA Global based on initial field research 

                Access to financial services and a steady source of income are key concerns for displaced populations when they begin to settle in camps. Understanding how refugees cope as they grow their livelihoods, incomes and adopt both formal and informal financial tools can provide insights on what financial services they need to strengthen their resilience.

                In August 2019, The Financial Inclusion for Refugees Project (FI4R) was launched by FSD Uganda and FSD Africa in collaboration with BFA Global to conduct refugee financial diaries in Uganda and provide insights into the financial strategies employed by refugees over time to build their livelihoods and manage their finances. The project will also support financial service providers (FSPs) to offer financial services to refugees and host communities. This is the first Financial Diaries project with refugees that will provide a detailed picture, over the course of a year, about the incomes, expenditures and financial flows of refugee households. The project will also reflect on how financial service providers engage with these households.

                The FI4R project kicked off with extensive focus group discussions and individual interviews across Kampala, Nakivale, Bidibidi and Palorinya camps. Several observations stood out from this initial field research.

                Financial and human capital determines how refugees are able to support themselves

                The financial and human capital that refugees arrived with in Uganda was a factor in determining their ability to support themselves, their families and grow their assets and income sources. These findings are similar to observations made during our research in Rwanda on Refugees and Their Money.

                Access to any financial services is key

                Refugees have significantly expanded their use of formal financial instruments since they came to Uganda – particularly mobile money and savings groups. However, these tools were not without risk. Many refugees did not have strong enough livelihoods to keep up with savings group contributions. In addition to this, the risk of sim cards being shut-off  left refugees unsure of whether they would lose money saved in their mobile wallets, a common savings strategy. Several respondents, especially those who operate businesses, narrated how they had tried to access formal financial institutions but had their requests rejected because of the stringent government policy not to accept refugee IDs or other non-approved forms of identification for the (Know Your Customer) KYC process.

                Refugees leave home with little or nothing

                The eagerness to take up financial products would have been hard to believe when these refugees first came to Uganda. Most respondents came into the country with close to nothing, perhaps only in possession of a small phone that was likely broken or even stolen by the time they reached Uganda. Many left their home countries very quickly as a result of violence or threats, which afforded them very little time to prepare. Most of the refugees walked long distances, or at least part of the way, and relied heavily on strangers to get to either Kampala or the camps.

                Small amounts can make a difference in how quickly refugees can get on their feet

                Jack* came from Congo in 2015 with CDF 500,000 ($295) in his pocket, which he changed for 1 million UGX ($270) at the border at Bunagana*. He spent 400,000 UGX ($100) on food and a bus to Nakivale refugee settlement. This left him with 600,000 UGX ($160) to start a business – just enough for him and his wife to start making and selling local sorghum-based drinks. He estimates that they now make a profit of about 10,000 UGX ($2.7) per day which supports the couple and their seven children. Jack was able to save enough from these profits to buy a motorcycle. Leah’s* story follows a similar path. She lives in Bidibidi refugee camp with her five children. She left Juba, where she was a restaurant manager and came to Uganda in 2016 with only a small phone and two cooking pots. When UNHCR gave her two cooking pots, she was able to sell them and used the proceeds to start a business selling sugar and salt – pots are given to all incoming refugees. Leah has since graduated to selling charcoal, and has been able to buy five goats and six local-breed chickens.

                Savings groups are beneficial

                Leah has immensely benefited from her membership in savings groups in the Bidibidi settlement. Initially Leah participated in a rotating savings group with other women selling charcoal (her mechanism to buy the goats), and then from the Accumulating Saving & Credit Association (ASCA) that the rotating savings group morphed into. Currently, she contributes 5,000 UGX ($1.30) per week and has been able to borrow up to 200,000 UGX ($54), paying it back within two months. Early in 2019, she joined a different group of 36 members based in the same area of the settlement camp. This group is sponsored by an NGO which provided them with seeds to grow eggplants and onions. When they sold their produce for 400,000 UGX ($100), the NGO gave the group a grinding mill, encouraging them to start a savings group with the 400,000 UGX. The grinding mill makes a profit of about 30,000 UGX ($8) per month, which goes into the savings group to increase the loan sizes it is able to offer members. However, it must be said that Leah is an exemplary example of a savings group participant. Other women we interviewed had not yet contributed anything to their savings groups or were lagging in their weekly contributions. Challenges that have contributed to the delay in remitting contributions include the lack of adequate income-generating activities within the settlements. Some refugees relied on working for NGOs to either sell them goods or perform small services such as fetching water. This work can prove temporary when projects are complete, and institutions leave.

                Livelihood assets are key for settling down

                The livelihoods refugees create from the human capital they bring from their home countries determines how they settle down. We found a keen “livelihood agility” among some people who had worked in a diverse number of jobs in their home countries – one man in Nakivale farmed, then operated a Boda Boda taxi, finally taking a job as a cleaner in a Vodacom shop. Leah, above, had never sold charcoal, but she understood the basic concepts of running a business from her time as a restaurant manager in Juba.

                This “livelihood agility” is less present with Amara*, a 35-year-old woman from Eritrea who doesn’t write (even Arabic) or speak English or any Ugandan dialect. Amara was married in 1998 to a soldier and she had seven children with him – four are still alive and three died. She was a full-time mother and housewife. She came with her four children to Kampala at the beginning of 2019. Luckily, her husband had built networks with a number of journalist friends while he was in South Sudan. One of them was based in Kampala, and he was able to reach out to the network of Amara’s husband’s friends to support her. In all, Amara received about 11 payments from them through a woman in Kampala, totaling about USD 2,000 (7 million UGX). With this capital, she set up a small shop where she sells powdered and liquid soap, sugar and fresh bread and makes tea and coffee. However, the shop is doing badly and the funds from her husband’s network have stopped. She is behind on rent, even after the landlord decreased it from 480,000 UGX ($130) per month to 380,000 UGX ($103), and she does not have enough money to send the children to school. She is now considering going to one of the settlement camps.

                Stigma and fear are constraints to livelihoods

                Even the refugees who are doing relatively well face huge risks and their livelihoods tend to be constrained, especially in Kampala. They live in constant fear of threats from people back in their home country while also being harassed and stigmatized by the locals.  This makes it difficult to grow a small business and getting a job is almost impossible. When refugees do get jobs, they are often cheated out of their pay or are sexually harassed.   Because many refugees don’t speak or read the language, they are persistently cheated by landlords, business owners, and mobile money agents.

                Access to financial services is still limited

                In addition to the everyday risks that refugees experience, they also face challenges from service providers. The most significant example which currently exists is the unexpected de-registration of their mobile money wallets. There have been instances of fake identity documents presented at the points of registration and financial service providers are now concerned that this does not allow them to undertake a valid KYC process. Sim cards have been shut off with refugees losing money in the process. The refugees we spoke to said they often save in their mobile money accounts – the bank was for larger amounts money, which they never seemed to have. One person we spoke with lost 150,000 UGX ($40) after their sim card was deregistered. Without a proper ID, it is very difficult to recover the money or get the sim card turned back on. Additionally, mobile literacy remains a big challenge.  Refugees usually handover their phones to the mobile money agents to transact for them and are constantly taken advantage of because they don’t understand how to use their phones.

                In the coming months, we will be tracking the financial flows of refugee households in Kampala and the camps of Nakivale, Bidi Bidi and Palorinya in the West Nile region. As we do, we will learn about the income, expenditure and financial flows of refugee households in Uganda, and share these learning with local stakeholders and the global community.

                * Jack is likely to have gotten short-changed as the exchange rate in 2015 was 2.80 and he should have received about 1.4 million UGX.

                Real names have been changed.


                By Observations from the Financial Inclusion for Refugees (FI4R) team

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                Guest blog – Harnessing the power of data to create relevant products and services for consumers

                Guest blog – Harnessing the power of data to create relevant products and services for consumers

                The 2019 Financial Inclusion Week themed Financial Inclusion: For What? Is being recognized globally between October 21 and October 25. The Financial Inclusion Week (FIW) is aimed at getting stakeholders to revisit their fundamental purpose and renew efforts to achieve financial inclusion. FSD Uganda will share a series of reflections from our technical experts and stakeholders. Today, we hear from the Uganda Communication Commission about opportunities that exist to protect and empower consumers through information…

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                Mapping Regulatory Behavioral Biases to Innovation in Financial Services

                Mapping Regulatory Behavioral Biases to Innovation in Financial Services

                By Joseph Lutwama and Kim Kariuki

                Technology advancements in the last two decades have resulted in a chain reaction of innovations in financial services never experienced in this generation. Whereas previously financial services would only be accessed in big, tall and intimidating bank branches, now a financial transaction can be completed in just under a minute without stepping into a bank branch or even talking to a banking relationship manager across the counter.

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                Report on Banking and the Status of Financial Inclusion in Uganda

                Report on Banking and the Status of Financial Inclusion in Uganda

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                  This report aims to give an overview of the Ugandan banking sector and the potential opportunities that exist to increase the banked population. The information generated by the FinScope Uganda survey, conducted in 2018, provides the basis for this report’s analysis.

                  Information presented in all tables and figures are obtained from analysis of FinScope 2018 dataset.

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