Financial Technology (FinTechs) companies have the necessary innovative solutions to address these challenges. Let’s take a look at some reasons why FinTechs represent an opportunity for SMEs in Uganda:

1. FinTechs boost growth of trade
In Uganda, there are more cellphones than people with bank accounts, according to World Bank data, and more than 12.16 million people are connected to the internet, according to DataReportal. The widespread growth of new technologies has also made way for e‑commerce.

According to the Ministry of ICT, the e-commerce market is expected to grow at a rate of 17.1 % between 2020 – 2024 and the ecommerce user penetration is expected to hit 37.1 percent by 2024 because an increasing number of people are making purchases online.

This will enable SMEs to grow their businesses and increase their productivity by having a faster and secure transaction time through FinTech innovative solutions.

2. FinTechs facilitate financing for SMEs
FinTech companies such as Yo! Uganda put SMEs with growth potential in direct contact with funding sources that are prepared to invest in them.

For instance, Yo! Uganda has partnered with United States African Development Foundation (USADF) to roll out Mastercard Farmer Network – a digital agriculture solution that digitizes marketplaces, payments and workflows within the agriculture sector.

The aim of the partnership creates a permanent link between key stakeholders [inclusive of SMEs] in the agriculture sector, which serves as the largest employer in the Ugandan economy. It has created a one-stop digital marketplace, advancing digital inclusion and fostering wealth creation for both individuals and communities.

3. FinTechs generate useful data on their clients
Connectivity generates a large amount of information, called big data, which can be digitally analyzed to reveal patterns of behavior. This has revolutionized the business world, changing the way sales are done and marketing campaigns are conducted.

Big data provides SMEs, and FinTechs with much more information on their clients. This allows for personalizing campaigns based on the target audiences.

4. FinTechs innovate in credit risk analysis
FinTechs have played a fundamental role in developing new, cost-effective methods for banks to rate credit risk. For example, analyzing potential clients’ likelihood and ability to repay.

These alternative methods enable banks to provide credit to SMEs that have no credit history—or a limited credit history—based on other types of measurement that make it possible to assess whether an individual will meet loan payments. In addition, they make it possible to access sources of information different from those used by traditional banks.

5. FinTechs provide liquidity with greater flexibility and efficiency
Seeking liquidity is a fundamental task for SMEs, previously taking up large amounts of their time. FinTechs offer an easy solution through on-line factoring and other services that provide more efficient and flexible ways of keeping the cash flow. This mechanism makes it possible to collect payments within a short time frame and digitally.

Overtime, financial technology companies have become a driving force behind the development of different sectors and industries in Uganda. Therefore, SMEs need to consider turning to financial technology, or FinTech, to join hundreds of other SMEs reaping the benefits of working with FinTech companies.

According to the UN’s Food and Agriculture Organization, Uganda’s fertile agricultural land has the potential to feed 200 million people. 80% of Uganda’s land is arable but only 35% is being cultivated. In fiscal year 2020/2021, agriculture accounted for about 23.7% of GDP, and 31% of export earnings. The UBOS estimates that about 70% of Uganda’s working population is employed in agriculture.

Challenges
Agriculture plays an important role in providing food security and sustainability for the people in any country. However, lack of funding and limited distribution channels to reach customers are frequent problems faced by farmers to meet the level of sustainability.

Digital marketplace with Fintech enabled might transform agriculture’s business process into more sustainable in terms of funding and distribution. FinTech offers farmers convenient ways of getting sources of funding through crowdfunding and digital payment system. Thus, digital marketplace can act as a platform for FinTech to integrate the innovative financial solution into a broader agricultural ecosystem.

Government and Fintech
In order to boost agricultural production, government of Uganda should find a way to be able to tap into financial technology (FinTech) in linking farmers with financial services. The Fintech industry in Uganda has the potential to enhance agricultural productivity because of its enormous amplitude for financial circuits through making financial services and products accessible even to the marginalized farmers.

Through the use of modern financial technology, we could as well witness improved cost efficiency across the food supply chain in the country.

Access to agricultural financing plays a critical role in enabling the agriculture sector, including smallholder farmers and business enterprises, to adopt productivity-enhancing technologies and practices.

However, agricultural transformation also requires farmers to shift from traditional agricultural payment systems to using available digital money services to reduce their financial risks.

As of now, Yo! Uganda has partnered with United States African Development Foundation (USADF) to roll out Mastercard Farmer Network – a digital agriculture solution that digitizes marketplaces, payments and workflows within the agriculture sector.

The aim of the partnership is to create permanent links between key stakeholders in the agriculture sector, which serves as the largest employer in the Ugandan economy. It will create a one-stop digital marketplace, advancing digital inclusion and fostering wealth creation for both individuals and communities.

The implementation of this digital technology is already helping to bring more visibility to supply chains and help move farmers away from unreliable and risky cash-based interactions. The platform provides a digital marketplace for buyers who are looking for sustainable sources of quality produce at favorable market prices and a place for small-holder farmers to access reliable markets and fair prices.

However to be able to maximize these opportunities, there is a need to increase the awareness and knowledge of farmers on these kinds of platforms.