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.

When fintech emerged in the 21st Century, the term was initially applied to the technology employed at the back-end systems of established financial institutions. ​Since then, however, there has been a shift to more consumer-oriented services and therefore a more consumer-oriented definition. Fintech now includes different sectors and industries such as education, retail banking, fundraising and nonprofit, and investment management to name a few.

Below are benefits that set fintech businesses apart:

1. Cost of transaction

Whether it’s processing fees or commissions, fintech businesses know that users today are particularly attentive to costs. That is why Fintech solution providers often refrain from charging additional fees, such as modification fees, cancellation fees and other hidden charges. Having a better visibility of the various costs incurred may represent considerable savings for a company.

2. Convenience

The COVID-19 pandemic has contributed to the rapid rise of fintech. With the currently limited cash transactions and more increased cashless transactions, fintech companies came out as one of the big winners of the pandemic. Their high level of connectivity allows them to reach a wide audience and allows their audience to reach them at the touch of a button. The flexibility they offer in terms of time and location make them entirely adaptable to their clients’ needs. Companies are also adopting Fintech because it uses technologies to give users a better and reliable customer experience.

3. Speed

In today’s fast-paced world, waiting for an international payment to go through, or a financial institution to grant a loan can sometimes take what feels like forever. That is why fintech companies rely on efficiency to set themselves apart. When you apply for any loan application online, it must be authorized by digital-only lenders that can provide same-day funding, which is only feasible because of fintech innovation. If you need a short-term loan or a payday loan, then with fintech it gets easier. You can simply discover many lenders online and get access to quick service.

Among the provisions of the National Payment Systems Act, 2020 is a requirement for all payment system operators to apply for and qualify for licensing after having satisfied a meticulous process applied by the Central Bank.

The National Payment Systems Act, 2020

The National Payment Systems Act, 2020 followed the National Payment Systems policy which was approved by the Cabinet of Uganda in December 2017. The policy put in place the framework around which the Payment System Law was enacted.

The National Payment Systems (“NPS”) Act was passed by Parliament in May 2020, and assented to by the President on 29^th July 2020 and is therefore the law governing and regulating payment systems in Uganda.

Mobile Money was first launched in Uganda in 2009 and has since been the main digital financial services platform. As well as the mobile money service providers, players in the mobile money network include issuers of payment instruments and issuers of electronic money. Although the industry was previously regulated through the Mobile Money Guidelines of 2013, passing of this law was aimed at increasing the safety and efficiency of payments systems operations by providing a legal basis to ensure compliance from all service providers and operators.

“At Yo!, we see the passing of the NPS Act, 2020 and the grant of our license by Bank of Uganda as a major validation and endorsement of our innovative and then-futuristic Payment Gateway service, Yo! Payments, that we pioneered back in 2010.” says Gerald Begumisa, Managing Director and Founder of Yo!.

“We are very thankful to our customers for trusting our service right from the start. We also consider ourselves fortunate to operate in an environment where the regulator, Bank of Uganda, has taken an approach to establish regulations and guidelines which allow new innovations time to grow and thrive”, he adds.

What this means for Yo!

Being regulated under the auspices of the Bank of Uganda within the prescripts of a license means that every customer transacting via the Yo Payments platform can do so with a new level of TRUST. The license merely validated Yo!’s impeccable track record with regards to the security and reliability of its technical platforms.

The issuing of licenses means that going forward only licensed Payment Operators will be allowed to provide payment and aggregation services, which in turn will boost confidence in the market and allow the mobile money ecosystem to grow to fulfill its real potential.

Yo! looks forward to working with and integrating with the other licensed financial institutions in Uganda to further democratize the financial system in Uganda

About Yo!

Yo-Uganda Limited (“Yo!”), incorporated in January 2006, is a leading technology company based in Uganda. Yo! leverages various mobile platforms to deliver payments solutions to financial institutions, large and small businesses and individuals.

Yo! was the first company to launch and profitably operate a multipurpose mobile payments aggregation service in Uganda, Yo! Payments, in 2010, and has continued to be at the forefront of developing financial technology solutions for business.

Through its Yo! Payments platform, the company provides full support for Mobile Money services including integrations with several banks, utilities and customers wishing to make and accept payments through all mobile networks currently active in Uganda. Apart from mobile money, other mobile platforms leveraged include SMS, USSD and IVR enabling businesses accept payments through Point of Sale devices, Mobile Applications (Apps) and web transactions.

Fintech in Uganda

Digital financial services present tremendous opportunities for the Ugandan business environment to provide high quality, reliable and affordable financial products and services. This is especially necessary for the large number of unbanked and underbanked people whose access to financial services is impeded by the limited spread of banks across the country.

In a recent announcement, Yo! unveiled plans to reach out to and include 300,000 farmers across Uganda into the digital ecosystem through a $250,000 grant partnership with United States African Development Foundation (USADF) and Mastercard, Inc.

“Initiatives such as our digital agriculture solution are important in achieving financial inclusion for more Ugandans,” said Lawrence Totimeh, Head of Business and Service Delivery at Yo! “With the regulatory environment instilling more confidence to the consumer, we shall have greater participation and willingness for more people to take advantage of digital financial services and move away from the riskier cash based transactions.”, he adds.