FSD UgandaEmpowering Uganda’s financial inclusion future through the digital platform strategy
***This is a brief from the 2023 annual report
During the period in review, the digital financial services pillar interventions continued to focus on leveraging technology and a value chain approach to create scalable and sustainable inclusive finance solutions through digital platforms.
Traditional and conventional financial services rarely or hardly deploy digital technology in the delivery of their services. This, however, has proved ineffective in increasing financial inclusion for the unserved and underserved. This is due to their high operating costs, legacy business models and limited competition and innovation. On the other hand, digital financial services (DFS), enabled by fintech, have the potential to lower costs, increase speed, security and transparency and allow for more tailored financial services that serve the poor at scale. This is why digital financial services is a cornerstone of FSD Uganda’s work to promote improved inclusive financial markets.
The digital platform economy strategy approach
Since late 2022, FSD Uganda has been implementing what we have dubbed a platform strategy to drive the uptake of digital financial services among the underserved population segments. This strategy aims to leverage digital technologies to drive economic growth, enhance efficiency, and increase access to financial services. To execute this strategy, we have partnered with three digital platforms namely Ensibuuko Tech Ltd, Emata Uganda Ltd and Quest Digital Finance Ltd. Our work with these platforms in the year focused on laying the foundations critical to delivering inclusive financial solutions to the underserved population segments. The activities implemented varied including but not limited to the following: building the institutional capacity of the platforms, enabling these platforms to review their business models and products and mapping of the ecosystems in which they work. To date, over 619,187 individuals have been able to access and utilize formal financial services through our work with these platforms. Women customers account for 47 percent of these individuals. The activities of these platforms have mainly been in dairy, coffee, maize and oil seeds value chains.
Learnings
Digital platforms can unlock opportunities for financial institutions to more accurately segment and assess the risk of potential customers, through the digital trail of economic activity and transactions they provide. One of the platforms has already established partnerships with Tier III financial institutions to deliver formal financial services to its participants.
Additionally, developing and maintaining an extensive network of digital community entrepreneurs/agents (DCEs) has played a critical role in bridging the digital divide between the largely illiterate participants of the platforms and the digital services they offer. The DCEs not only support in the delivery of the digital services of the platforms but also provide the much-needed digital financial literacy to the platform participants.
However, challenges remain. For instance, in the bundling of financial products such as, insurance. Agricultural insurance has not been well received among the platform participants due to several reasons. Key among them is the complexity of the product and the delays in the payment of insurance claims by the underwriters. These combined have eroded the trust of the platform participants in the insurance offering.
