Bank of Uganda (BoU) Deputy Governor Michael Atingi-Ego has emphasized the importance of saving money in formal financial institutions to ensure its value grows over time. He mentioned that money saved informally, such as in pots or under mattresses, does not gain value and does little to stimulate economic growth.
Dr. Atingi-Ego made this assertion during the World Saving Day commemoration in Kampala, stressing the need for financial service providers to offer maximum security for customer savings while also providing interest on their deposits.
He explained, “Saving money without earning a reasonable return in a pot or under a mattress is unwise because the amount remains static, while the prices of goods and services consistently rise. Over time, money saved this way becomes less effective.”
To preserve and increase the value of money, Dr. Atingi-Ego underlined the necessity of earning a return higher than inflation, which can only be achieved by saving with formal and regulated financial institutions such as banks, credit institutions, and microfinance deposit-taking institutions.
Uganda faces a challenge in developing a robust saving culture, partly due to the absence of an incentivized saving system. Savers often receive minimal returns or no returns at all, which prompts many potential savers to resort to informal methods.
Additionally, the collapse of banks, particularly in the 1990s, and the rising threat of cybercrime, where customers’ bank accounts are emptied, have eroded trust in formal financial institutions.
These factors have contributed to higher lending costs for financial institutions, as they need substantial sums to secure credit for onward lending. Interest rates in Uganda have averaged above 20 percent for the past two decades.
The 2020 Financial Capability Survey conducted by the Bank of Uganda revealed that around 50 percent of Ugandans save money. However, 40 percent of them save for immediate consumption, while only 20 percent save with the aim of achieving specific life goals, such as owning a house. Less than 5 percent save to invest, resulting in a gap in the mobilization of investment capital and business expansion.
In response, the Bank of Uganda is working on a new National Financial Inclusion Strategy for 2023-28. The strategy aims to reduce financial exclusion and access barriers to formal financial services, promote the use of high-quality and affordable formal financial products, and enhance financial consumer protection and capability.
Dr. Atingi-Ego stressed the importance of cultivating discipline among Ugandans to foster a saving culture. He highlighted that while saving money may not always be easy, it is a discipline worth developing. The Bank of Uganda remains committed to supporting the growth of a solid savings culture by providing Ugandans with a safe and secure financial system for their savings.
Mobile money has played a significant role in creating new avenues for saving, with numerous Fintech operators offering various saving channels, making it more accessible for Ugandans to save and earn interest.
Interest Rates in Uganda (Last 20 Years)
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