Chambers & Partners has detected the use of an ad blocker.
We make use of tailor-made ads to enhance your experience of our website.
Please 'whitelist'

Uganda in Global

Use the dropdowns below to find recommended firms and editorial commentary.

Practice areas

Uganda Overview

Contributed by Katende, Ssempebwa & Co

Agency Banking in Uganda: What You Need To Know

The banking industry in Uganda continues to innovate in its bid to fully maximise the untapped economic potential across the nation. In this vein, it recently introduced agency banking. This is where a third party, to wit, a designated agent, in agency with a licensed financial institution, extends bank services outside the four walls of the banking hall.

The rationale is to target the “unbanked” and “under-banked” rural communities who earn money but, as yet, do not utilise banking services. There are myriad reasons for this: some are distrustful of financial institutions, others are intimidated because of their lack of financial literacy. Others still, have a very long commute to the nearest bank and as such opt to “keep their money under the bed.”

In Uganda, mobile money transactions using the various telecom service providers such as MTN (U) Limited and Airtel (U) Limited have been widely successful in reaching rural communities where hitherto financial institutions were struggling. “Mobile money” is e-money available to a user to conduct transactions through a mobile phone. The mobile money wallet/mobile money account is an electronic money (e-money) account which receives electronic value either after the account holder deposits cash via an agent or receives a payment/remittance from elsewhere. Mobile money has proved to be an undeniable draw for rural communities; agent banking is an attempt to provide further financial inclusion.

The Financial Institutions (Amendment) Act 2016, which amended the Financial Institutions Act of 2004, defines agent banking as the conduct by a person of financial institution business on behalf of a financial institution as may be approved by the Bank of Uganda (BOU). The Financial Institutions (Agent Banking) Regulations, 2017 (“the Regulations”) commenced on the 14th of July, 2017. These aim to foster financial inclusion by offering banking services in a cost-effective manner, provide a framework for the agent banking services and to provide a minimum set of standards for consumer protection and risk management.

Financial institutions 

The financial institutions, as the principal in the agent-principal relationship, are wholly responsible for the activities carried out by their agents. They are charged with responsibilities including selection and supervision of agents, risk identification, documentation and mitigation and settlement of losses suffered by consumers.

To apply for agency banking, the Regulations require a financial institution to first secure written approval from the BOU to add agent banking services to its portfolio. Its application to the BOU must contain its proposed modus operandi for the agency banking including the number of agents it will have in the field per district for the next year, and how it envisages management of the agent network including agent training, supervision and liquidity management. The financial institution must also avail information on its proposed technology platform to execute the agency banking, which must have the bandwidth to process instructions issued electronically in real time. It must have an agency selection due diligence policy, a draft of the agency contract and a risk management framework. The Regulations contain a prescribed form for a financial institution to vet the suitability of its agents.

These requirements may seem onerous, but in the long run, they are cost-effective for financial institutions since they will reduce the operational costs of having to set up brick and mortar stores.


An agent needs approval by the BOU before they can commence operations, even after approval from the financial institution! An agent can be any entity, for instance a limited liability company, a partnership, or a sole proprietorship. The Regulations forbid financial institutions’ employees, affiliates or associates from conducting agency banking. The agent-principal relationship is non-exclusive, meaning the agent can have several financial institutions on its roster at any given time. The agent must also have held a bank account for a minimum of six months consecutively and have been in business for at least a year. Typically, agents are small shop or kiosk owners, gas stations, hardware stores or mobile money agents. They offer financial services including but not limited to balance enquiries, cash withdrawals, payment of bills, payment of salaries, transfer of funds, disbursement and repayment of loans and cash deposits to their customers.

The agents are forbidden from: conducting transactions during communication failures, conducting transactions without issuance of receipt or acknowledgement, charging fees directly to consumers, offering banking services on its personal account, providing foreign exchange transactions, distributing cheque books, and distributing debit, credit cards or PIN mailers. Further, an agent must not continue with agency banking where it has a proven criminal record involving fraud, dishonesty, integrity or any other financial impropriety or a disciplinary case.

As expected, there is an agency contract between the financial institution and the agent. For the avoidance of doubt, the financial institution is wholly responsible for the entire undertaking. The regulator is granted access to the agent’s banking records and systems, there must be anti-money laundering (AML) and countering the financing of terrorism (CFT) provided for under the Anti-Money Laundering Act, 2013 and the Anti-Terrorism Act, 2002. There are transaction limits for agents and consumers. The contract also delineates the remuneration of the agent, business hours, confidentiality, and aspects regarding termination of the contract. It is worth noting that the BOU can direct the termination of the agreement as it deems appropriate, despite it not being a party to the contract.

The financial institution has to conduct agent training on matters concerning Know Your Customer (KYC) requirements, transactional limits, 2-factor authentication, and identification of suspicious transactions.

What this means 

Agency banking is not without its challenges, some of which are: inadequate infrastructure such as power and security, and theft or robbery of cash and equipment. In some instances there is poor customer service by the agents, or fraudsters using agents to defraud bank customers, which does little to endear sceptics to financial institutions. Disruptions in network connections are problematic; fluctuation of IT networks affects the agent's transactions resulting in delayed, duplicated or failed transactions. Lack of permanent premises in the more remote areas presents a challenge locating agents in such areas.

The financial institutions are taking steps to mitigate these challenges by, for instance, ensuring there is constant training of agents, and improvement in the agents’ technology platform to be better equipped to handle technical issues.

The Regulations provide protection for consumers by setting minimum requirements, such as requiring agents to issue a receipt or acknowledgement of each transaction, putting in place proper signage indicating the parent bank, a list of services offered, and a written notice that no charges or fees are levied at the agent location.

The agency banking realm is replete with opportunities for lawyers. These run the gamut from drafting the agency contracts, mitigating liability of financial institutions for an agent’s acts and omissions, ensuring compliance with AML and CFT laws, consumer protection, and dispute resolution between financial institutions, agents and consumers.

In sum, agency banking has been executed successfully in neighbouring countries such as Kenya, Tanzania and Rwanda. It is early days yet, but the potential for it to diminish the vast numbers of the “unbanked” and “under-banked” in Uganda is astounding, and plans by various financial institutions are afoot to ensure it is achieved effectively.