Digital banking: Why it is good for business and jobs

Opportunities for growth

Michael Niyitegeka, an ICT consultant in Kampala told The Independent in an interview that once well implemented – with concrete firewalls to prevent cyber crimes – digital banking will cut costs of doing business and result into improved efficiency in addition to increased profit margins.

“…and ideally that should result into reduced interest rates and other charges levied by banks on services offered to their customers,” he said.

Even Bank of Uganda Governor Emmanuel Tumusiime Mutebile reads the situation the same way. While addressing bankers in Kampala at a dinner on November 25 2016, he urged them to find ways of cutting operational costs so as to check the high cost of lending [hovering around 24% per annum] that was killing private sector growth.

Mutebile said annual operating costs as a percentage of average bank assets were as still as high at more than 7% than they were 10 years ago. As a percentage of their earning assets, he said, banks’ operating costs averaged nearly 11%.

The good thing, according to Niyitegeka is; access to mobile phones currently printed at slightly over 50% (where about 20 million people noted as telecom customers) will bolster the new system that widely uses digital banking.

Commenting on unemployment worries, Niyitegeka said: “…yes it can hurt employment but it can indirectly create more when banks become more efficient and engage in other forms of banking.”

The other forms he was referring to includes agency banking (where banks use agents to offer financial services) which many Kenyan banks are embracing in order to reach out to all the bankable population.

Kenya’s digital success story has seen banks swiftly respond by downsizing their branch networks.

Bank of Africa is shutting down 12 out of its 42 branches. Ecobank is closing nine out of its 30 branches. Diamond Trust Bank is doing the same.

All these banks have physical presence in Uganda. But top officials at these banks have not openly come out to announce their detailed strategy on the matter.

But Niyitegeka said that the decisions in Kenya are justified and Uganda would follow at the right time.

“When you have an agent to offer services on your behalf in places where you are nonexistent you do not need to be there physically,” he said, “I hope agency banking will make things happen when it comes to Uganda.”

Niyitegeka equated agency banking to telecommunication mobile money platforms that are creating thousands of jobs directly and indirectly in Uganda and other markets where the service is offered.

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editor@independent.co.ug