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AUGUST 2021 /ISSUE 011 , FREE COPY SERVICES MAGAZINE

Banking on Innovative Financial Technology to Deliver a Cashless Economy

FINANCE & BANKING MICRO FINANCE FINANCIAL NEWS How banks and fintechs are Digitizing financial transactions Artificial intelligence as a key leading into a cashless in Micro Finance Institutions, driver of the bank of the future. economy post COVID -19. SACCOs to promote efficiency.

UGANDA KENYA RWANDA SOUTH SUDAN BURUNDI TANZANIA ISSUE 11 July - August 2021 I Financial Services Magazine Finance and Banking

II ISSUE 11 July - August 2021 Financial Services Magazine Finance and Banking CONTENTS 01 How Banks & Fintechs are Leading Uganda into a Cashless Economy Post Covid 19

04 Towards a Cashless Economy in Uganda-A Regulatory Perspective

08 Digital Banking Innovations mean Uganda is On Track to Achieve a Cashless Economy

11 Financial Inclusion & Evolution of Digital Payments In Uganda

12 Artificial intelligence as a key driver of the bank of the future

16 Role of Data Driven Analytics in Business Decision Making

18 Emerging Financial Crimes and Digital Threats to Financial Sector Growth

22 Relevance of Bancassurance to The Customer Today

24 Uganda - Dealing with Cyber security Risk in The Banking and Financial Services Industry: The Need for a New Mindset

27 : Overcoming Challenging Times Through Customer Focus and Dedication

29 Digitizing Financial Transactions in Microfinance Institutions and SACCOs to Promote Efficiency

32 Wealth Creation Through Enterprise Development

34 Driving Innovation Through Financial Technology and Predictive Analytics

36 How Resilient Organizations Can Thrive Even in Times of Uncertainties

41 The Uganda Institute of Banking and Financial Services holds first ever Joint Annual General Meeting and Graduation Ceremony

44 Professional & Academic Programs (September 2021 Intake)

ISSUE 11 July - August 2021 III Financial Services Magazine FinancePublisher and Banking Foreword THE UGANDA INSTITUTE OF BANKING AND FINANCIAL SERVICES ISO 9001:2008 CERTIFIED

Plot 10 Buganda Road, P.O.Box 4986, , Uganda Tel: +256414255847/8 Web: www.uibfs.or.ug

CHIEF EXECUTIVE OFFICER Dear esteemed readers, I welcome you to the 11th Edition Goretti Masadde of The Financial Services Magazine. MEMBERSHIP & BUSINESS DEVELOPMENT MANAGER Sulaiman Semakula The just concluded 2021 Annual Bankers Conference organized by the Uganda Bankers Association (UBA) REGISTRAR Semakula Richard under the theme, “Bend but don’t Break: How the Financial Sector Can Thrive In the Era of the 4th Industrial FINANCE & ADMIN. MANAGER Revolution”, highlighted the key developments in financial Apollo Michael Engwau technology, financial inclusion and responsible banking for EDITORIAL COMMITTEE sustainability. Sylvia Juuko, Sulaiman Semakula Benedict Buhanguzi

The theme for this edition “Banking on Innovative financial WRITERS/CONTRIBUTORS technology to deliver a cashless economy” is a continuation Dr. Charles Augustine Abuka, Diana Wanyama Akullo, Bernard Wasswa, Sulaiman Semakula, Perry Mason, of the discussion on how the banking and financial services Fred Migadde, David Kawaida, David Masinde, industry can leverage financial technology to improve Ronald Mugwanya and automate the delivery and use of financial services to enhance financial inclusion and economic transformation. PHOTOGRAPHY Courtesy & internet The edition focuses on key topics relating to use of digital LAYOUT& DESIGN platforms, technological innovations such as the 4th Ssemanda Paul +256772 049707 industrial revolution. They include; how banks and fintechs can lead Uganda to a cash less economy post COVID – PRINTING Printing & Publishing Co Ltd. 19 and a regulatory perspective, financial inclusion and evolution of digital payments, utilization of digital platforms SALES & ADVERTISING to drive commercial Agricultural productivity and digitizing Trans 5 Ltd financial transactions in Microfinance Institutions and James Odeke +256704745732 /+256786080896 SACCOs for efficiency. CIRCULATION Very importantly, this edition offers insights in emerging Uganda, Kenya, Tanzania, South Sudan, Rwanda. financial crimes and digital threats to the growth of the COPYRIGHT financial services sector and how to deal with them as well The information contained in this publication is given as how resilient Organizations can thrive even in times of in good faith and has been derived from sources Uncertainties. believed to be reliable and accurate, however, neither Last but not least, the reader is offered an overview of The Uganda institute of banking and financial services (UIBFS) nor any person involved in the preparation of the online training programs and other offerings at the this publication accepts any form of liability whatsoever Institute. for its contents including advertisements, opinions, advise or information or any consequences from its use. I invite you to read this Edition of the Financial Services No part of this publication may be reproduced, stored in any retrieval system, or transmitted in any form or by Magazine and share in the rewarding experience it any electrical, mechanical, photocopying, recording or presents. inkjet printing without prior written permission of the Goretti Masadde publisher. ISSUE 11 July - August 2021 CHIEF EXECUTIVE OFFICER Financial Services Magazine Finance and Banking

How Banks & Fintechs are Leading Uganda into a Cashless Economy Post Covid 19

By Diana Akullu Wanyama

Introduction Cashless economy Effects of COVID 19 According to the , Predominantly Uganda`s economy pandemic on Financial there are 25 Licensed commercial has been a cash economy. Most Services banks in Uganda as at July 01, financial transactions were cash The COVID-19 pandemic drastically 2020. Banks play an important based until the introduction of reduced social interactions. This role in providing financial services mobile money in 2009.A cashless affected not only banks but the to the public and businesses thus economy can be defined as an economy in general. With customer ensuring economic stability. The economy where all transactions numbers in branches drastically term Fintech is a short form for flow through electronic channels reduced due to observing social Financial Technology. It includes such as debit cards, credit cards, distancing SOPs from the Ministry computer programs, applications internet banking, mobile banking of Health and World Health and other technologies used to payment systems etc. as opposed Organization, banks have had to enable or support banking and to use of cash. Normally the refocus on alternative cashless financial services. There are transition to a cashless economy channels to deliver financial about 200 Fintech companies in can be traced from Cash to Cash- services to the last mile customers. Uganda serving different sectors lite to Cashless economy. in Uganda. Both entities are respectively represented under umbrella association bodies: - Some of the benefits of a cashless economy include: eliminating several business Uganda Bankers Association(UBA) “ risks like theft of cash by employees, counterfeit money, effective Anti-Money and Financial Technology service

laundering measures, increased financial transaction speeds, enable financial providers’ association (FITSPA) authorities stimulate economic“ growth by formulating better government polices Uganda. based on data analysis.

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Current sector Brief According to data from Central , Cashless transactions increased in the first half of 2020 compared to the first half of 2019.This upward trend was attributed to the deliberate effort by banks to increase cashless transactions as a measure to reduce COVID-19 spread while reducing online transaction costs to the customer. The value of credit card payments rose by 19.7%, value of Mobile Banking and Internet banking increased by 157.3% and 52.9% respectively. It states that the value of POS transactions grew by 14.5% while the value of card payments increased by 19.7%. In Uganda today, the main cashless channels include; Debit cards, Credit cards, Mobile Wallet Apps, Mobile and Internet banking, Agent Banking POS (Point of Sales), etc.

Debit and Credit cards – can be used by customers to withdraw, make cashless in store or online purchases. Some common global card partners are: - VISA, MasterCard, Union Pay, etc.

Mobile Wallet Apps – These allow users to send, receive and store money. They can be linked to bank accounts allowing users to carry out Cash in and Cash Out transactions, Utility payments, Fees and e-commerce payments, at their convenience.

Mobile and Internet banking – A cashless payment option for Individuals and Businesses with internet access on different tools such as smart phones, laptops, desktops etc.

Agent Banking – Banks have established a network of agents that allow customers to carry out deposits and withdrawals within their own proximity and at their convenience. This could be noted as a cash lite intervention on a cashless economy journey.

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Cashless economy initiatives encourage onboarding and usage the various industry like Central As a regulator of the Financial of cashless channels e.g. Change bank, Fintechs, Commercial banks, Sector, Bank of Uganda (BOU) of processes to accommodate Telco’s etc. These courses are is responsible for driving policy e-KYC for customers unable to visit being overseen by the Digital that enables the drive to attain a the branches for account opening, Frontiers Association (DFA) cashless economy. As part of its dormant account reactivation. Uganda. effort in creating suitable policy New market-based products for to enable this transformation, cashless channel users are also Conclusion and impact BOU has led the formation, being introduced e.g. Instant A fully cashless economy does not implementation of the following mobile at lower rates, only require banks and Fintechs to policies with stakeholders in the coupled with insurance, utility collaborate, but also the National economy: - National Financial payment options to drive uptake. government to support in setting Inclusion strategy 2017-2022 Overall banks have formed new up the infrastructure, policies and National Payments Systems synergies with Fintechs and other and laws that create enabling Act 2020, which was tabled to stakeholders to drive innovation. environments for this to happen. promote efficiency and safety of Fintechs have on their part, legally Skilled man power to support this payment systems in Uganda. registered a legal representative infrastructure is also required and Banks are gearing towards body, FITSPA which strives to this is achieved through training in cashless transactions for create a conducive environment the Digital Finance courses. customers through promotion for fintech players to innovate, of Digital channel awareness scale and thrive. Fintechs are The Writer works as the Chairperson, & projects e.g. ATMs locations, deliberately striving to address Digital Frontiers Association (DFA) Pull and push transaction via cash to cashless constraints Uganda. mobile platforms and Agency through innovation and banking. Internally banks are integrations with banks. Reference: continuously restructuring and Digital Financial Literacy courses Quarterly Financial Stability Review Digitizing internal processes to are being taken up by staff in Report June 2020, Bank of Uganda

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Towards a Cashless Economy in Uganda - A Regulatory Perspective By Dr. Charles Augustine Abuka

Digital Banking and Financial intelligence has been used to derive patterns 01 Innovations that predict behavior and prices; mimicking Digital banking is an important component human judgements to provide automated of the move to online banking. This is where decisions on trading, credit approvals, banking services are provided over the regulatory compliance and fraud detection internet. The shift from traditional to digital among others. banking has been ongoing, and has been aided by progress in banking service digitization. Distributed ledgers have also emerged Indeed, digital banking has involved high as a key technology supporting multiple levels of process automation and web-based applications. One structure of a distributed services in which cross-institutional service ledger, Blockchain, has particularly stood out provision is enabled to ensure the efficient and has offered the potential to use virtual conduct of transactions as well as delivery currencies that have transformed payments of various banking products. It provides and securities settlements. Developments the ability for users to access financial in cryptography have facilitated a variety of data through their desktops, mobile and applications including smart contracts and Automated Teller Machines (ATMs). The major robust security systems, complimented by benefits of digital banking include business biometrics and sensing technologies. Finally, efficiency, cost savings, increased accuracy, and something many of us would relate improved competitiveness, greater agility and to, mobile access internet has enabled a enhanced security. number of Ugandans to access a wide range of financial services. These have included the Innovations in financial technology now convenient digital wallets, mobile banking, drive payment systems, saving, borrowing, crowd-funding and peer to peer transactions. risk management and financial advisory Innovations in mobile financial services services. Through the application of advanced are currently at the front line of spurring algorithms to big data, for example, artificial financial inclusion in a number of low -income countries.

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Digital banking and financial technology possible at lower costs. So, in many different innovations are driving the move towards a ways, the future is one in which virtual cashless economy in Uganda. But what we currencies will give physical currencies a literal are seeing today is just the beginning! Take ‘run for their money’. For the Bank of Uganda a moment, step into a time machine and (BOU), the implications are clear - monetary fast forward to the next two decades down policy will have to respond to the new realities the road. The debate will be about shifting and demands. monetary policy implementation from policy rates guided by macroeconomic models What about artificial intelligence? The use forecasting inflation, to virtual pricing units of artificial intelligence will also be the generated by advanced algorithms, with the order of the day in 2040. Machines will help of artificial intelligence. The traditional have enhanced capabilities to assist in role of banking services will have been policy making. For example, they will be completely transformed; bank vaults will have able to offer real time inflation and output been rendered meaningless as currency will projections and will be capable of uncovering be stored over computer cloud spaces. What macro-financial linkages within the micro- we now consider as new innovations involving economy. The phenomenon of big data will virtual currencies, artificial intelligence and have become much clearer and already new models of financial intermediation will adopted by companies. More data will be be the order of the day; and will be having available and more accessible thanks to a profound effect on central banking and advanced wireless networks, more social on consumers’ financial way of life. Let networks and vast storage capacity; and us examine the impact of some of these it will be more valuable when paired with innovations. artificial intelligence. Available data will be more granular with details such as economic First, consider virtual currencies, these differ agents behavioral trends with regard to widely from e-money or money remittance consumption, expenditure, investment and platforms like MTN mobile money, Airtel saving during different stages of the business Money, Mpesa or Western Union; which are cycles. The central bank’s main activity will backed by already existing fiat currencies. be to find ways to leverage this information Virtual currencies provide their own unit of in its efforts to provide and implement more account and payment systems, without the effective monetary policy and undertake more need for central clearinghouses. By 2040, forward-looking financial sector supervisory virtual currencies will pose such a threat to actions. physical currencies that central banks will have to deal with the reality of the situation. Finally, by 2040, models for financial Indeed, the technological challenges that intermediation will expand beyond the virtual currencies pose today will have been traditional banking services that we are addressed. This will make virtual currencies accustomed to. Traditional bank deposits and highly secure from hackers; their technology loans will be largely overtaken by alternative will be scalable; and their volatility will have technology driven solutions or services, been significantly reduced, making them less especially electronic wallets and peer to peer risky. The reality in 2040 will be that virtual lending platforms, with an edge in big data currencies will offer genuine alternatives and artificial intelligence for credit scoring. for countries engaged in regional trade as For the BOU, this means that the scope for international cross-border payments will be financial regulation will have broadened

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beyond the focus on the traditional financial to grow. Our payments space is composed intermediaries, to also oversee other parties of the infrastructure operated by Bank in, and providers of, technology led financial of Uganda such as the Uganda National services, such as telecoms and social media Interbank Settlement System (UNISS), the companies. The mechanisms for transmission Automated Clearing House System (ACH) of monetary policy will also have been revised. and the Central Securities Depository (CSD). In 2021, BOU is primarily using commercial The private payment service providers banks as transmission mechanisms for on the other hand include the following; monetary policy, by providing liquidity through the Agent Banking Company which runs the banks. However, in 2040, with more the shared platform for bank agents, the models for financial intermediation in play, the Interswitch that offers switching services for BOU will have to expand its counterparties banks, credit institutions and microfinance for open market operations, as well as widen deposit-taking institutions, the mobile its regulatory scope in this perspective. The network operators – that offer mobile money realm of central banking will have grown; services in partnership with supervised regulatory practices will have shifted as financial institutions, debit, credit & prepaid regulated entities will no longer be the ‘well- card issuers and financial institutions which defined entities’ we were accustomed to provide automated teller machines, point today. Financial regulation will have expanded of sales, internet as well as mobile banking its focus beyond “financial entities” to services. However, it is the mobile money “financial activities”. Employees in the central services that are the most prominent bank will have obtained the required expertise indication of the drive to employ digital in assessment of the soundness and safety payments in the country. As at end December of computer algorithms to be well equipped 2020, the mobile money service providers to monitor, analyze and promptly act upon had enlisted the services of 263,698 Agents massive amounts of real time financial activity in different parts of the country delivering data. a number of services such as domestic & international funds transfer, payment of utility II. The reality of technology and bills, fees and taxes, e-value based micro 02 Cashless transactions saving, micro loans, micro insurance, group There are a number of factors driving financial wallets, transfers from Bank to Wallet (B2W) innovation world over. These include shifting and Wallet to Bank (W2B). From inception consumer preferences in terms of higher in March 2009, the usage of mobile money expectations for convenience, speed, cost services in Uganda has continued to grow. and user-friendliness. In addition, rapid As at end December, 2020, the number of evolution of technology in the areas of mobile registered customers stood at 31 million technology, internet, computing power compared to 27 million in December 2019, and big data have also driven the move to reflecting a 13 percent increase. cashless transactions. Belgium, Canada, Sweden, France and the United Kingdom are now the leading economies in which non cash payments as a share of total value of consumer payments exceeds 89 percent. Cash transactions still dominate consumer spending in Uganda. However, the use of technology in the payment system is starting

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Conclusion and Implications for to systemic financial risks as a result of high 03 Uganda volatility and herding effects. These risks These rapid developments and fast-changing and challenges make the FinTech Mountain environment in the payments space requires a little steep to climb, but the opportunities BOU to take lead in the promotion of are difficult to resist. The good news is that e-payments through a number of initiatives. FinTech itself will offer some of the regulatory and supervisory solutions that we seek to First, to operationalize of the legal framework avert the potential challenges implied by the to implement the NPS Act, 2020, and the new normal. associated regulations as well as the issuance of the relevant guidelines. This will include Third, the promotion of interoperability across the pilot implementation of the Regulatory payment platforms will be an important Sandbox for promoting safe and sound game changer. The BoU is already seeking to payments innovations. develop a national switch, for interoperability among payment system operators, which Second, strengthening the oversight is expected to reduce costs and boost framework for the payments system through efficiency. In addition, it is important to the adoption of effective risk management foster competition, consumer protection and approaches to ensure the safety and efficient stakeholder collaboration. Market competition functioning of payment systems through and a level playing field are essential in the on-site and off-site supervision of payment provision of inclusive payment services. The systems. Strong oversight is important central bank will seek to facilitate competition because there are still a number of risks to allow for the emergence of new players that need to be overcome. Virtual currencies and innovative products to safely meet the currently have high operational risks due to needs of the unserved and underserved. the decentralized nature of systems that they operate on with limited or no formal Finally, there will be need for more governance structures and are greatly cooperation, research and information susceptible to cyber risk. The anonymity of sharing between the Bank of Uganda, participants and un-tracked cross-border other regulators, policymakers, academics, transfers could also potentially facilitate illicit investors and financial services firms within activities like terrorism financing, money and across countries in this new area of laundering, evasion of capital controls and FinTech. taxes. In terms of financial stability, the increased interconnectedness could give rise The Writer is the Executive Director Operations at Bank of Uganda

References David M. et al. (2016). “Distributed ledger technology in payments, clearing, and settlement”. Federal Reserve Board, Washington, D.C. Dong He, et al. 2017. “FinTech and Financial Services: Initial Considerations.” International Monetary Fund. Dong He, et al. 2016. “Virtual Currencies and Beyond: Initial Considerations.” International Monetary Fund. FATF (2015). “Virtual Currencies: A Guidance for Risk-based Approach.” Financial Action Task Force. Financial Stability Board (2017), “Financial Stability Implications from FinTech: Supervisory and Regulatory Issues that Merit Authorities’ Attention,” June.

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Digital Banking Innovations mean Uganda is On Track to Achieve a Cashless Economy By Patricia Musiime

he financial regulator, Bank of Uganda is Cumulatively this year, we have 92% of our driving efforts for the country to achieve financial services being sold on a digital Ta cashless economy by the end of this platform or a non-cash platform as opposed decade. to walking into a branch to do a physical transaction. There are several advantages, but chief Our intention is to push this to about 95% of among them is the significant cost-saving our customers being able to transact outside arising from printing and transportation of the branch set up. currency notes. In doing this, we also ensure that all the For the ordinary Ugandans, the stress of solutions we offer our customers are safer dealing with cash is substantially reduced by a alternatives to running on cash. switch to digital payments. But awareness is vital. So the bank has Stanbic Bank’s digital transformation strategy embraced the opportunity to enlighten and was accelerated in 2020 by the COVID -19 educate communities, right down to the pandemic. grassroots, what a cashless economy means and the security and transparency that it The Bank’s commitment to digital innovation comes with it. has been key in the rollout of several new solutions suitable for our customers’ needs Most of our innovations are led by customer and the prevailing environment. insights. Based on the data received from the branches or call centres, we are able to gauge In a way, this gives our customers some the innovation gap. measure of normalcy in the wake of the Our value proposition as a bank is solving pandemic. problems of both our current customer base and non-customers alike. As Stanbic Bank, Uganda is our home and we are passionate about leading the For our customers, every solution on our transformation of her financial sector. shelves be it, a personal account, business The digital space has become a crucial driving account, corporate account and the force for financial services as reflected by transactions on lending opportunities, come their uptake among customers. from a digital point of view.

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For instance, a personal account holder also a huge opportunity for people to access can have access to online banking, internet services more affordably. banking and mobile banking. If you have The other place to look at for our non-cash a corporate account, business online and products is our Point of Sales. business enterprise online are available. These digital platforms or digital channels If you are at supermarket or petrol station, enable customers to execute or transact on there is no need to go to an ATM and our products digitally. And this is just the withdraw money. Our cards can be used at transactional end. If we go into the more very many points of sales for the purchase of specialized areas like trade then we have goods and services. what we call Quantum trade. Stanbic believes in mutually beneficial partnerships. This is a channel where a customer can apply for trade products, such as a guarantee or For many of the solutions we put out there, a Letter of Credit. Then, they are able to there has to be a handshake between the transact end-to-end without the need for fintschs, the Mobile Network Operators physical cash moving on that transaction. (MNOs) and the bank. This is probably the number one bucket of partnerships, but we Customers can access all financial services also have partnerships with Interswitch, the online within the shortest time possible Agency Banking Company and so on. instead of having to run all over town, trying to get to a banking hall. It is very safe, There is always an expertise that you need seamless and there is no physical need to to bring onboard to deliver a better solution exchange money. for your customers. This strategy, we believe, shall enable us achieve a cashless economy For the convenience of both our customers within this decade. and non customers, we have a new product called Flexipay. Flexipay is a wallet solution The writer is the Head of Integrated Channels at that enables you to transact wherever your Stanbic Bank Uganda account is held. Perhaps you only have a mobile money account or maybe holding an account in Stanbic or in another bank. Or you may not have any of these options. “ Flexiplay is basically a financial inclusion As Stanbic Bank, solution which allows one to pay for goods Uganda is our home and services, be it merchants, utilities, URA or and we are passionate your local duka operator. With Flexipay, money is moving from one about leading the

wallet to another and the main reason why it transformation of her stands out compared to other wallets, is its financial sector.“ affordability and user friendliness.

Taking into account our responsibility to promote financial inclusion, we offer the Flexipay wallet at a much cheaper cost. It is

ISSUE 11 July - August 2021 9 Financial Services Magazine Micro Finance Bank anytime, anywhere with

Utility / Deposit Bill Payments & withdraw

Access Get a Airtel money ku simu & Mobile money

Download the app on GooglePlay or simply dial *224# and follow the prompts

For more details, please call our toll free number 0800220500 Email: customercare@ nancetrust.co.ug or visit any of our 35 branches countrywide. www.financetrust.co.ug @FinanceTrustBankug @financetrust /FinanceTrustBank 10 ISSUE 11 July - August 2021 Regulated by Bank of Uganda. Customer Deposits protected by the Deposit Protection Fund. Financial Services Magazine PostBank BoastsMicro ofFinance Robust Digital Financial Solutions, Fostering Cashless Transactions Bank and Financial Inclusion in Uganda.

anytime, Modern digital technologies have undoubtedly taken over the people impacted by the lockdown. The seamless payments are financial services’ sector with key innovations influencing attributed to the support from telcos, Airtel and MTN. This is accessibility to financial services by customers. In contrast to also an indicator that telco-bank partnerships will be a game anywhere the tedious brick and mortar banking system, customers now changer in achieving financial inclusion and cashless transact in a more convenient, safer and less-time consuming economies in the near future. manner, anywhere and at any time. PostBank is devoted to sourcing and taking up feasible with Financial technology is visibly an enabler for financial inclusion opportunities with the existing telcos and Fin Techs to ensure in the 21st century and cannot be overlooked when setting that customers who are o£en underbanked or excluded, are agendas to achieve cashless economies. The COVID-19 availed with comprehensive product portfolios to choose from pandemic has even further accelerated the need and uptake for with the aim of transforming their lives and livelihoods. digital banking services – the future is digital. Therefore, to PostBank is committed to aggressively innovate and adapt to foster cashless transactions and financial inclusion in Uganda, PostBank has assembled and rebooted its digital services and new and emerging technologies in the marketplace such that products. the mandate to improve and transform the livelihoods of Ugandans is achieved overly and beyond. With the upgraded Internet Banking, businesses can conveniently make EFTs, manage their accounts, and perform online transactions from their homes, o¬‡ices and on the About PostBank Uganda. move. The bank is modernizing and upgrading its system to PostBank Uganda (PBU) is a public company limited by shares remain competitive in the fast-paced digital economy. and formed under the Public Enterprises Reform and Divestiture “We have revamped our digital banking channels to ensure Statute of 1983 and the Uganda Communications Act, 1997. It stellar customer experience across all our distribution was incorporated under the Companies Act in 1998 and is owned channels. A year ago, over 90% of our customer transactions were over the counter, but that has been reduced to 40% - by the Government of Uganda with 100% shareholding. meaning that 60% of our customers trust and rely more on PostBank Uganda has since grown to boast of 49 branches , 56 digital channels. We have achieved this by being the issuers of Utility / ATMs countrywide, stretching from Yumbe to , from Kotido Deposit the UnionPay PostCard in Uganda, to allow customers make Bill Payments cashless transactions. Mobile banking via Post Mobile USSD to , and over 400 Post Agents. & withdraw Code (*263#) and the PostApp enable PostBank customers check their account balance, attain their statements, make cash transfers, mobile money payments, pay bills and so on with convenience and in the safety of their homes, businesses Enjoy the freedom to during the COVID-19 pandemic.” Andrew Agaba, Chief Business choose how you bank with Access Get a O‡icer says. PostBank Mobile Banking Airtel money Loan ku simu PostBank is also migrating its ATM network to smart ATMS & Mobile money (recyclers) that can accept and credit deposits in real-time. To drive this, the bank is upgrading its switch and the core banking system. PostBank has also rolled out a fully- fledged BILLS BANK ACCOUNT MINI multi-lingual contact centre, that serves customers remotely. PAYMENT TRANSFERS STATEMENT Furthermore, expanding the digital financial services o‡ering for the unbanked and underbanked population in Uganda can be achieved by strengthening partnerships between tele BALANCE MOBILE MONEY TOP UP communication and banking sector since they all have the INQURIY ingredients to provide higher-value financial services. Download the app on GooglePlay According to a Uganda Communications Commission Q4 Market Report, In the Quarter ending December 2020, the total or simply dial *224# and follow the prompts active mobile money accounts stood at 22.5 million up from 20.9 million in the first quarter, the number of active mobile Download the PostApp agents had grown to 235,790 from 227,736 in September, this is indicative of the growth in number of Ugandans using feature For more details, please call our toll free number 0800220500 or smart phones to access financial services. Toll free Whatsapp Email 0800 217 200 +256 707 993 930 [email protected]

Email: customercare@ nancetrust.co.ug or visit any of our 35 branches countrywide. PostBank Uganda was recently appointed as a trusted partner Customer Deposits are protected by the Deposit Protection Fund of Uganda. www.postbank.co.ug to disburse the Government COVID-19 relief funds to vulnerable PostBank is regulated by the Bank of Uganda. www.financetrust.co.ug @FinanceTrustBankug @financetrust /FinanceTrustBank ISSUE 11 July - August 2021 11 Regulated by Bank of Uganda. Customer Deposits protected by the Deposit Protection Fund. Financial Services Magazine Financial News

Artificial intelligence as a key driver of the bank of the future

and in an automated fashion. Data Science is about making This includes voice assistants, discoveries and creating insights recommendation systems, and from data and communicating self-driving cars. Machine Learning, these insights and discoveries to a sub-field of AI, is defined by non-technical stakeholders. Arthur Samuel as the “field of study that gives computers the ability to learn without being explicitly programmed”. Whereas By Perry Francis Ogom

Technology is changing our society Artificial and digitisation is challenging the intelligence(AI): way we live. Today, everything Programs with the ability to learn and reason like humans. that involves technology seems to have some element of Artificial Intelligence. Artificial intelligence Machine learning (ML): is seen by many as an engine Algorithms with the ability to of productivity and economic learn without being explicitly growth. It can increase efficiency programmed and vastly improve the decision- making process by analysing large amounts of data. Deep learning (DL): Subset of machine learning in which artificial neural Artificial intelligence (AI) is a field networks adapt and learn of research that dates back to from large databases. the Second World War. It has gained prominence in recent years because technological advances DATA SCIENCE: have made it possible for almost anybody to crunch massive data, A cross-disciplinary using powerful algorithms in a field that seeks to short time at a minimum cost. It extract meaning is often confused with Machine insights from data. Learning, Deep Learning and Data Science. Andrew Ng, former Chief source: corpncc.com Scientist at Baidu defines AI as “a huge set of tools for making computers behave intelligently”

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AI is impacting a diverse range In 2020, Absa Bank Uganda Data democratisation is where of domains such as Agriculture, launched “Abby” to its customers. everyone in an organisation has E-Commerce, Healthcare, “Abby” is a 24/7 digital personal skills, confidence, and access to Telecommunication, Academia, banker powered by AI technology. produce data informed decisions Governments, and Financial It is designed to support Absa and products. According to Service industry is no exception. bank customers who intend to a 2019 survey conducted by make payments, purchase airtime, Deloitte on becoming a data Today, banks are investing heavily access account information or driven organisation, companies in AI solutions as part of the answer general queries. As banks with data democratisation are journey of becoming data-driven invest in AI technology, they twice more likely to exceed their organisations. Such investments must augment their investments business goals. 48% of these are providing enabling environment focusing on Data Democratisation businesses outperformed their for banks to create new products, to leverage on AI’s full potential. targets compared to 22% who services, and acquire new Furthermore, for AI to remain had “diluted” analytics culture. In customers. Additionally, AI is the key driver of the bank of the the McKinsey white paper, it was seen as a catalyst for banks to future, financial institutions in revealed that high performing effectively execute their customer Uganda must start the journey of organisations are 65% more likely retention strategies and increase democratizing data. to provide data access to frontline their revenue streams. employees whenever needed.

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Data Education Will Help Drive Data-Informed Decision Making

• Problem solving with data • Using statistics & analysis. Data • Writing SQL & Education using data at Airbnb • Visualising data • Setting up, • Single source of delivering & truth interpreting • Access Data Informed experiments permissions Descisions • Data Documentation Data Data • Airpal • Data & tools Access Tools • Data portal request process • ERF • Knowledge Repo • Microsoft Excel • Superset • Tableau

source: Democratising Data at Airbnb.com

In Uganda there is a shortage of Additionally, equipping every The Writer is a Data Scientist / data talent. However, financial employee with basic data skills Researcher based in the UK and can be institutions can benefit from data will free up data analysts to reached on democratization by building data concentrate on complex data [email protected] skills from a broader employee science problems that can deliver base which always results in huge value for organisations. deeper insights. Employees in Data democratisation will remain the various functions within central in building a data culture organisations are domain experts for the bank of the future and it who understand the regulatory shall enable financial institutions requirements, policies, legislations, maximise the full potential of AI. processes and leveraging on domain expertise will lead to better outcomes for the banks.

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ISSUE 11 July - August 2021 15 Financial Services Magazine Financial News

Role of Data Driven Analytics in Business Decision Making

without the need for conscious 2. Why it happened, reasoning. This lack of conscious 3. What will happen and reasoning is the gap that leads to 4. How is it likely to happen or problems that make businesses how can you make it happen? fail. In addition, this gap can only The consecutive order of the be filled by the use of data driven questions above provides more analytics in business decision and more value to the business making. and the same order reflect the Hence, welcome to the world difficulty of applying data driven By Bernard Wasswa of data driven analytics, where analytics to answer the same data is a business asset when questions and make business In Uganda, most business owners used efficiently to guide business decisions. The relationship use intuition to analyze their decision making. Therefore, the between those questions, business business performance and make role of data driven analytics in value and difficulty of analytics is decisions for the future. Some business decision making is meant graphically captured by the Gartner people even talk of receiving to answer questions about; Analytic Ascendancy Model below: visions and dreams about the 1. What has happened to the next step to take in their business business or how things are going. Some How can we make businesses have managed to get it happen away with this approach and this happen? has worked for some business Prescriptive owners and decision makers, Why will Analytics who have applied the intuition happen? approach over time, gathering a rich experience of related intuitive Why did it Predictive reasoning to make decisions, and happened? Analytics they are proud of it, and some What Diagnostic Optimisation happened? swear by it. Analytics Foresight However, this can only be done by Descriptive few, whose subconscious minds VALUE Analytics are literary super visionary. For the majority of the average people though, intuition-based reasoning Insight just cannot work and many have lost businesses because of this method of business decision making. According to the oxford InformationHindsight dictionary, intuition is the ability to understand something instinctively, DIFFICULTY 16 ISSUE 11 July - August 2021 Financial Services Magazine Financial News

Again, for the majority of business Some basic numbers are needed with credible cash flow projections owners who appreciate and to support your move even before and market intelligence data when recognize the need for data you write the business plan, which a critical stakeholder needs it. This driven analytics, they do not know will contain details of the same is often rather too late and causes where to start and this is painful. numbers. delays to the intended actual However, the best way to start is to On this same note, Ugandan need, like getting credit or filing have a data and analytics strategy businesses should start taking regulatory returns. designed and championed by top business plans seriously. I found So then, what next? As shown in management itself. For small and it counterproductive when I learnt the picture, there is different types micro businesses where the top that many Ugandan businesses of analytics. However, achieving management, middle management start without a business plan. analytical maturity is a journey, a and junior management are all the Worse of all, those who made a culmination of lessons, mistakes same person, it is advisable to get business plan did it because it was and tough discussions made to rely outsourced consultancy services. asked by a stakeholder, and the on data driven analytics to make plan itself is often nowhere close decisions. The most important If you are reading this and you are to the active business proposition. ingredient is the “political” will by a business owner, I recommend top management to rely on data to that you first implement a data Business plans do contain data make decisions for business. The and analytics plan if you don’t driven analytical sections like data economy is full of experts like have one before introducing any market intelligence and cash this writer, who assist businesses new interventions to determine flow projects which regulators, that want to make it a habit to use the new course of the direction of investors and the business are data driven analytics in business your business. Moreover, for the supposed to use to tell when the decision making. new joiners, those planning to start business will be able to run on a startups, do not do it without some day-to-day basis or not. In fact, The Writer is a Data Scientist based in data to support your decision. some lucky businesses come up Johannesburg, South Africa

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Emerging Financial Crimes and Digital Threats to Financial Sector Growth By David Kawaida

Introduction that hold physical cash. These components must he rapid advancement in Information all work in unison to ensure the confidentiality, Technology (IT) and increasing importance integrity and availability of financial transactions. of data for strategic gain has tremendously The main stakeholder, the central bank, supervises changed the way financial institutions deliver and regulates operations of all other players to Tproducts to the populace. As a result, institutions are ensure there is sanity and a level playing field. Each heavily digitizing their operations by moving away stakeholder maintains a technology infrastructure from brick-and-motor branch networks to alternative footprint and connects to the other for purposes digital channels that enable customers to transact moving electronic funds, and the risk of failure of this from anywhere at any time. system must be prioritized now more than ever.

At the heart of digital financial systems are Below are some key digital threats and emerging stakeholders that regulate, process payments, financial crimes that interfere with the sector’s growth integrate/aggregate/route payments and those today:

Continuity Risk

Information & Supply Chain Cybersecurity Attacks Risk

Key Threats to Digital Finance Logging, Monitoring & Other Incident Threats Response

Insider Threat

Figure 1: Key Digital Finance Risks

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Information and Cybersecurity Third-party or Supply Chain 01 Risk Management Capability 03 Attacks While some financial institutions have Modern payment systems would not attained maturity and are continuously work if we didn’t have aggregators improving their information and cyber to link merchants and other players risk management capability, many to a bank or an e-money/utilities still lack the relevant structures, service provider. In addition, financial people, processes and technology institutions heavily rely on third-parties to match the level of sophistication to outsource some of their operations and relative ease with which today’s (for instance: card production, cyber-attacks are conducted. As more telecommunications and network entities move to digitization, this risk connectivity, payments routing, is going to emerge as one of the most hardware and software supply and important component of enterprise risk SMS and USSD routing). A supply chain management (ERM); thus boards must attack, an emerging and very serious begin prioritizing it. attack, occurs when someone infiltrates a system through an outside vendor or 02 Insider Threat provider with access to your systems or As one of the most common causes data. of fraud in the sector, insider threats The biggest risk areas in payments for can be either malicious (disgruntled instance are connection points between employees, fraudulent or compromised key players in the payments ecosystem. staff by malicious/external actors), or As an example, a mobile money unintentional acts by poorly trained subscriber from one network who staff. For instance, investigation into wishes to send money to a recipient some recent cases of fraud in the in another network must initiate the banking sector reveal that an internal transaction from their network which in personnel was paid off to introduce a turn connects to the recipient’s network loophole or disclose a secret that would through an aggregator. There can be be used to exploit a weakness that led many complex loops in this kind of flow to the transfer of large sums of money. and every connection point represents Fraudulent insiders, for instance, if a risk. The integrations are usually not checked, could create entries in governed by high level agreements core banking or payment systems, like and rules, but the actual security due- addition of new rogue accounts, funding diligence of the third-parties is not of accounts without physical value, usually comprehensively done. introducing malicious code in software to credit their accounts by very small A recent breach of a key aggregator amounts in a way that’s hard to detect between 2 of the largest mobile (salami attack), among others. network operators/e-money providers in Uganda and their respective banks revealed that malicious actors fraudulently transacted over UGX 1 billion, and the main cause as per expert reports was an exploited weakness at the aggregator’s environment.

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MNO USD Partnering Gateway Licenced Providers Institutions Regulators: UCC CUSTOMER BOU URSB

app

Web 3rd Parties

Banks Intergrators, aggregators, Fintechs and Agents MM service providers Businessses

Figure 2: Key players in financial payments

Logging, Monitoring and Continuity risk 04 Incident Response 05 IT plays a strategic role in modern The risk of inadequate monitoring financial institutions today; thus the risk of technology for operational of failure to restore systems to normal incidents, fraudulent activity and operation or providing redundant cyber-attacks is a prevalent issue computing environment after a disaster in many environments. Financial or disruption respectively, presents a institutions process thousands to very serious issue. Executives must millions of transactions a day, payment classify this risk as highest priority since instructions are enabled through the impact(s) could potentially affect the message exchanges between points lifeline of the business itself. of integration with third-parties to e-money providers and privileged The Writer is an Information Technology, internal personnel access payment Security, Risk & Audit Professional and banking systems to administer them. Real-time transaction monitoring for detection of potential fraudulent activity and establishment of security operations center (SOC) for cyber threats detection and response must be done to reduce this risk to acceptable appetite limits.

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Victoria Office Park, Block B, Plot 6-9, Ben Kiwanuka Okot Close , P. O. Box 7566 Kampala - Uganda Tel: +256 414346297 / 346930 / 258150 Fax: +256 414 346 147, Email: [email protected], Website: www.pridemicrofinance.co.ug

facebook.com/prideug twitter.com/prideug prideug mdi +256 702 096300 ‘Your Growth is Our Pride’

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Relevance of Bancassurance to The Customer Today By Gava Ibrahim Public Relations, Uganda Insurers Association

n January 2016, parliament passed into law, Digitization amendments to the Financial Institutions Act (FIA), Customers like to be served in one stop centers, Iwhich allowed for insurance companies to use banks the digitization of bank processes makes product as a distribution channel to extend insurance policies. distribution seamless for customers to access. It also Four years later, the growth and adoption of acts as a catalyst for Insurance companies to digitize bancassurance is one of the most significant changes their internal processes such as applications and in the financial services sector. claims. A total of 19 Supervised Financial Institutions The alliance between banks and insurance companies (SFIs) are authorized and licensed to carry out serves customers better, they are able to access Bancassurance (under life and non-life insurance) in improved and enhanced products on the market for Uganda. (IRA 2021). example customers can now access Comprehensive The introduction of Banc Assurance was premised on Motor Insurance through Bank apps. This alliance widening the distribution channel and easing access of enhances internal technical expertise and acts a cost Insurance services to customers. Today the benefits reduction strategy thus serving customers better. that accrue to this channel are worth mentioning as Furthermore, customer feedback is well captured they create a clear impression and appreciation of since banks and Insurance companies have integrated Insurance in the eyes of the public. systems thus further contributing to improved product development. Customers benefit from the enhanced It has revolutionized systems to serve customers product development better as many banks today have and continue to Banks and Insurance companies are able to plan digitize processes such as the transition from paper products that suit customer tastes, needs and transactions to digital applications and paperless preferences. Insurance is selling a promise, one which claim processes. One can say that banks have created requires personal counseling and persuasion to improvement in delivering Insurance as a service materialize and bear fruit. because they are providing all-inclusive products to customers. In such times, we encourage customers to Complimenting of the Traditional make use of digitized distribution avenues to access distribution channels of Insurance insurance and limit the spread of the virus. Banks have a wide network of branches that act as distribution points for Insurance companies. This to Banc assurance continues to grow as evidenced the customers creates convenience through which by the IRA presentation made on 26th November they can access Insurance with ease directly through 2020, as at end of Q3 2020, Total Gross Premium the Banks. Written through bancassurance agents amounted to Ugx 52,040,503,077 representing 6.36 % of Q3 2020 industry GWP of Ugx 818,721,983,211. Gross

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Commission received Ugx 8,216,315,976 at the end through what Bank specified persons can sell to of Q3 2020 compared to Ugx 6,538,402,075 over the the market as well as the improving of the guiding same period in 2019. regulations with our working relationship with the This growth in bancassurance business can be regulator. attributed to increased awareness life insurance The product offering for life products through market and entry of banks in the bancassurance bancassurance has in so many ways assisted space. The number of commercial banks that are with the management of current pandemic and embracing bancassurance continue to grow, number its rigours through limiting its spread but also of twenty (20) Supervised Financial Institutions (SFIs) enhanced and improved the customer experience are authorized to carry out Bancassurance business and cushioned against hardships presented. Today (under life and no-life insurance) in Uganda. They have customers through certain banks can access Motor been licensed by the Insurance Regulatory Authority Comprehensive Insurance through Bank applications (IRA) Uganda to operate as Bancassurance agents. improving their customer journey. The growth of bancassurance entice customers to acquire relevant insurance. With all the development of bancassurance one would As Uganda Insurers Association we have created say that insurance has remained true to its relevancy synergies with the Uganda Bankers Association with the securities offered under the life products to where we hold annual conferences to facilitate Bank cushion against the economic effects of the Covid 19 operations selling Insurance. The conferences have pandemic. Banc assurance is reawakening the need yielded some positives that include; improving the to enhance our innovativeness, creativeness and training needs of the bank assurance agents through relevancy to serve customers better. the Insurance Training College, market dynamic

Bancassurance Planning is securing the future while in the present by doing something about it NOW. With a pool of over 20 banks and 30 insurance companies enjoy purchasing your insurance with ease. #stayhome #staysafe #maskup

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Uganda - Dealing with Cyber security Risk in The Banking and Financial Services Industry: The Need for a New Mindset By David Masinde

Background Why is Knowledge of Cyber Security When setting up a business, you will need various Important in Banking? IT resources, such as smart devices, PCs and cloud- I give four reasons why Cyber security is of great based systems. Such a business will also be keeping importance in banking. First, of late, nearly all banks customer data, employee information and other have now adapted the use of digital banking, which sensitive information which needs to be kept securely. includes; use of debit cards and credit cards or Such valuable information is likely to be of interest to mobile wallets. Also, disruptive technologies such cyber criminals. For these reasons, an awareness and as smartphones, virtual and augmented reality, cloud basic understanding of the threats posed in a cyber- computing, big data analytics, Internet of things, world will help protect your digital assets, intellectual artificial intelligence and robotics have also found property and your business. Cybercrime is one of their way into the design of customer experience the most prolific forms of international crime, with for nearly all banks and microfinance institutions in damages set to cost the global economy USD 10.5 Uganda. In this context, it becomes very important to trillion annually by 2025, according to Cyber security ensure that all measures of cyber security are in place, Ventures. to protect such sensitive data.

What is Cyber security, and has it affected Secondly, as COVID-19 spread across the globe, our banking sector before? many financial institutions transitioned to online. There are various definitions of the term cyber security, Thus, the pandemic only increased this urgency, specifically; it is the practice of defending systems forcing many new clients to conduct online from information disclosure and threats. There are transactions even when they had very little information several common areas of cyber security, including, on how to protect themselves against online fraud. but not limited to: network security, cloud security, Third, cyber breaches can be particularly expensive – data loss prevention, intrusion detection, identity both in terms of the cost to fix the problem and the and access management, endpoint protection, and potential cost of lost customers due to a lack of anti- malware. Among the most serious attacks trust. The 2020 bank performance analysis by UIBFS in Uganda in 2020 was the mobile money heist, reveals that nearly all bank reported an increase in which it is alleged telecom companies and banks in customer deposits by between 14% and 125%. including MTN, Airtel, Stanbic and Bank of Africa were Therefore, banking institutions must embrace a wide robbed of Shs7b. Apart from these, array of cyber security tools that can help to limit the and DFCU Bank have also been victims of cyber fraud likelihood of any such costly breach. and lost billions of shillings to hackers.

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Fourth reason relates to the goal of financial inclusion forums will help provide a unique and commercially efforts. FSD – Uganda reports that about 76% of safe space to bring together government and industry Ugandan adults are rural-based who until recently saw bodies alongside academia and regulators within no value in opening a bank account or using other Uganda to support and develop cyber security best formal financial institutions. The Uganda Institute practices. of Banking and Financial Services (UIBFS) has joined hands with other financial service providers, including the Ministry of Finance, Planning and Economic Development (M0FPED), Bank of Uganda (BoU), Financial Sector Deepening (FSD-Uganda) and member bank organizations in efforts to increase formal financial inclusion in Uganda by running the “Financial Services Awareness Month” every year. Increased knowledge of financial services has enabled Specific steps include the creation of the ICT and the recently unbanked rural population to access Cyber Security Committee, reviewed the increasing financial services via mobile money, agency banking cyber security incidences, trends and threats, noting and other technology platforms. Unfortunately, many that the banking & overall financial sector fraternity of them have not learned how to spot scam or e-fraud. was operating in an environment of escalating cyber Fraudsters are targeting such “semi-analogue” risk and its increasing impact on financial services population which is just transitioning from analogue to operations, innovation and digitization. UBA further digital because of abundance in security lapses. Indeed, noted that cyber risk was pervasive in nature, scale cyber security training shouldn’t only target staff in and impact and to mitigate this risk, a consensus was financial institutions and high-end clients. It should reached that an industry approach would be more also extend to ordinary novice users of digital banking effective than isolated efforts of individual institutions. services regardless of where they work and stay. The committee recommended that a cyber-security Developing the right mindset – The role of operations center be established to among others UBA and the UIBFS build cyber security capability within the industry A significant number of institutions in Uganda are championed at the UBA level complete with starting to offer cyber security related training as a specialized forensic capabilities to ensure readiness, way of helping end- users develop the right mindset. support proactiveness, detection, defense and At the Uganda Institute of Banking and Financial incidence management. Services (UIBFS), we have already designed and have been delivering trainings on cyber security to staff Conclusion from 32-member organizations in the banking and As a major recommendation, developing the right financial services sector over the past three years. The mindset to help forestall potential cyber-attacks training is also open to public. The training focuses will require embracing a structured training and on emerging cyber security threats, methodologies, certification framework for Cyber security related entry points, vulnerabilities and protection. This not careers in Uganda right from secondary school level. only helps to minimize the growing risk of human error This will help for prepare majority of Ugandans for the that’s allowing threats to bypass their complex and new and emerging technologies, increase awareness powerful security systems in organizations, but helps of the cyber threat to these technologies, and to protect employees in their private life as well. empower them to create right security standards for Uganda Bankers Association (UBA) has also initiated them. industry wide collaborations by supporting policy and regulation within its members’ organizations. These The writer is a consultant statistician, data scientist and An Associate Trainer in Digital Programmes at The Uganda Institute of Banking and Financial Services, Kampala. ISSUE 11 July - August 2021 25 Financial Services Magazine Financial News

No one structures a commercial mortgage better than we do Talk to us today if you are looking to purchase or construct a commercial property (Hostels, Hotels, Schools, Offices etc) or want to refinance an existing mortgage. We are sure to give you a great offer in good time at great rates.

For more information, visit your nearest branch or call us on Tel: 0417/0200 803 000

Housing Finance Bank is regulated by Bank of Uganda. Customer deposits are protected by the Deposit Protection Fund.

housingfinancebank housingfinanceU 0790 542262 www.housingfinance.co.ug 26 ISSUE 11 July - August 2021 Head Office: 4 Wampewo Avenue, , P. O Box 1539 Kampala Financial Services Magazine Financial News

Housing Finance Bank: Overcoming Challenging Times Through Customer Focus and Dedication Michael Mugabi, CEO Housing Finance Bank

ousing Finance Bank is the leading Banking during the challenging times mortgage and consumer Bank offering a The COVID-19 pandemic has created an increased comprehensive range of financial solutions need for remote and alternative methods of accessing for individuals, business and groups across financial services. Unsurprisingly, Housing Finance Hall sectors of the economy. For over the past 54 Bank had already began its investment in digital years, we have established and developed a strong, transformation years ago with the aim of creating profitable and sustainable financial institution that better value for its growing tech savvy customer base. focuses on supporting the development of Uganda, In 2015, Housing Finance Bank introduced mobile our motherland. banking. The Bank has since launched a number of digital solutions including Internet Banking and Agent We have grown from 2 branches to 17 branches Banking. Our digital offerings have enabled customers countrywide with about 450 dedicated resource to seamlessly access several banking services from persons. Our footprint also stretches through 22 the comfort of their residences, businesses and even ATMs and over 500 bank agents spread out to ease on the road. accessibility for our customers. We exist to provide efficient, innovative, customer-centric financial Business and Trade Support services for the benefit of all our stakeholders and Housing Finance Bank Limited provides an array partners. We are also committed to making every of integrated financial solutions for both import Ugandan’s dream of owning a house possible. and export trading activity – from straight forward Supporting up to 60 percent of all Uganda’s mortgage traditional trade products to bespoke and structured accounts, we continue to craft affordable housing trade finance solutions. finance solutions for our growing population. Our business support solutions include short term and medium term facilities. We also structure Import financing including Letters of Credit, Import Bills for Collection, Import Loans as well as Export Financing relating to Pre-Shipment Finance, Export Bills for Collection and Commodity Financing.

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Other trade solutions include Bank Guarantees, Retention and Supplier Guarantees. Contractors are Unsecured Bid Bonds worth five hundred million also supported through Contract Finance, Certificate shillings available within 24 hours. We also offer Discounting and LPO Financing. Performance Guarantees, Advance Payment,

Bridging the housing deficit Overall, Housing Finance Bank continues to enhance The country’s high urbanization rate and growing flexibility and inclusiveness with all solutions available population continue to predict an increasing demand to our customers. Our commitment to delivering on for shelter and housing solutions. At Housing Finance our mandate is unmatched as we continue on this Bank, we are fully committed to bridging the housing journey of creating a better and vibrant future for deficit gap in the country and are always innovating Uganda. ways to accomplish that. In our weighted initiatives towards closing the current 2.1 million housing units’ gap, we introduced 100% financing to enable the purchase or completion of residential property, established partnership with developers of affordable housing units, paved way for flexible loan repayments including early loan redemption and longer repayment periods. We have also commenced financing of Incremental housing activities which enables construction in phases and use of untitled land for collateral. The Bank has also launched the financing of housing support services including solar and water connection.

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Digitizing Financial Transactions in Microfinance Institutions and SACCOs to Promote Efficiency By Fred Migadde

icrofinance is a source of financial services Microfinance practitioners have urged that the high for small entrepreneurs and low-income interest rates are unavoidable because the cost of individuals or groups who otherwise making each loan cannot be reduced below a certain would have no other access to financial limit, while still allowing the lender to cover costs like Mservices. Microfinance is also seen as a movement, staff salaries, monitoring costs and others. Besides whose objective is a world in which as many poor that, most microfinance clients reside in remote areas, and near poor households and small businesses have with various geographical barriers. permanent access to an appropriate range of financial services including savings, credit, insurance, and fund The traditional approach to microfinance has thus transfers. The main purpose of microfinance is to lift made limited progress in resolving the problem it people out of poverty through financial inclusion. The purports to address. That the poor clientele pays the main mechanism for the delivery of financial services highest cost for small business capital. This implies to such clients is relationship-based banking for the that the borrowers who do not earn at least 35% rate individual entrepreneurs & small business and group- of return from their businesses may end up in a worse based models, where several entrepreneurs come state, after taking up the credit. together to apply for credit and other services, as a group.

The sense of social belonging is very strong in Uganda with up to 75% of Ugandans leaning on “ The main challenge of microfinance is providing groups as a financial coping mechanism. Such groups small loans at an affordable cost. The global predominantly include SACCOs and VSLAs. Many average interest rate for microfinance loans is 35%, of these groups do not have digital Management and 40% in Uganda, with rates reaching as high as Information Systems in place and consequently suffer 70% in some places. The main reason for the high from a lack of oversight, high operating costs, high risk interest rates is the high transaction cost of the

of fraud, multi-borrowing, process inefficiencies, and traditional microfinance operations relative to the missed collections. loan size. “ The main challenge of microfinance is providing small loans at an affordable cost. The global average interest rate for microfinance loans is 35%, and 40% in Uganda, with rates reaching as high as 70% in some places. The main reason for the high interest rates is the high transaction cost of the traditional microfinance operations relative to the loan size.

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Digitizing financial transactions in microfinance With digitization comes greater productivity and institutions and SACCOs can improve the efficiency efficiency in managing operations. The digitization and reduce on the cost of offering micro credit by process can reduce the typical workday by as much maximizing economies of scale, to increase the speed, two to four hours. The main driver for this is the fact security, and transparency of transactions and to that tasks such as reconciling accounts, generating allow for more tailored financial services that serve reports and processing transactions can all be the poor. done with a single button click. With this increased efficiency comes the ability to quickly comply with Digital Financial Services include a broad range of regulations. In future, digitization will play a greater services accessed and delivered through digital role in compliance. This is because under the Tier 4 channels like mobile phones, internet, ATMs, POS Microfinance and Money Lenders Act 2016, Tier 4 terminals. They can respond to both the supply side institutions will be required to send monthly reports to barriers to access to financial services, such as high Uganda Micro Finance Regulatory Authority (UMRA). operating costs, as well as the demand-side barriers, including volatile and small incomes for the poor, lack The Writer is an Agribusiness Specialist working with of ID, trust and formality and geographical barriers. Centenary Bank

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EFC Uganda Limited (MDI), incorporated in 2012, is one of the fastest growing microfinance institutions Wealth in Uganda. It is licensed and supervised by the Bank of Uganda and prides itself in offering fast, convenient, and simple customer tailored financial services to Creation Micro, Small and Medium Entrepreneurs ( MSMEs). Its main aim is to enable entrepreneurs have access to loans, savings, and digital solutions to catapult their Through businesses from point A to Z.

EFC Uganda’s loan products are well aligned with its Enterprise mission of partnering with micro, small and medium entrepreneurs to increase access to financial services while contributing to wealth creation, improvement Development of people’s living conditions and development of Uganda’s private sector. We offer Business Loans, Home Improvement Loans and the Women Market Trader Loan that provide entrepreneurs with working capital where they can grow and be profitable.

The EFC Business loan was specifically crafted to finance inventory or equipment purchases, investments, agricultural supplies and other business- related purposes. This product has helped different entrepreneurs to be successful and expand their businesses. Ssenyondo Ronald, an EFC customer, testifies to the successful partnership with EFC Uganda. With the advice and several loans he acquired from EFC, his capital is worth 140 million shillings and still growing.

It is our aim to support entrepreneurship while providing loans to the ‘missing middle’ and this EFC Uganda Limited includes women. The Women Market Trader loan, “ (MDI) aims is to enable one of our flagship products, was designed for the entrepreneurs have access empowerment of female business owners, to drive

to loans, savings, and digital positive impact of women’s decision-making power, solutions to catapult their “ enhance their overall socio-economic status and help businesses from point A to Z. in the expansion of the girl-child’s access to skills and education. With this product, EFC Uganda has made a significant contribution to gender equality and promoted sustainable livelihoods and better working conditions for women.

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In addition to the loan products, EFC Uganda offers savings accounts which includes the Regular Savings Account, Premium Savings and Fixed Term Savings account that offer competitive and favorable interest rates to meet the ever-changing needs of the entrepreneur.

The Regular Savings Account allows entrepreneurs to make daily business transactions enabling them to plan and grow their enterprises, enjoy unlimited deposits, withdraws and mobile access are some of the benefits that come with the product to allow customers to do more of what is important to them. While the Premium Savings Account allows members to put money aside to save for specific goals like education, medical plans, capital for business expansion etc. with unlimited deposits and withdraws. Lastly, the Fixed Term Deposit Savings Account offers very high and competitive interest rates on the market over and above 12% making it the perfect account for entrepreneurs desirous of building their investment portfolio with a steady income flow. The more the MSMEs put away for investment in the present, the more they will earn later to inject in their growing businesses.

Our savings products are intended to cushion the customers in the event of emergencies, so they can navigate through life’s unexpected events with less disruptions. With the COVID-19 pandemic, EFC has positioned itself unobtrusively at the doorstep, offering its credit and savings services beyond its two full-service branches and five Business Loan Centers. Through digital options such as Easy Mobile and so much more. These allow the customer to become fully self- serving, make businesses thrive, create employment to disrupt the cycle of poverty in the new normal. This aligns well with the EFC Uganda’s vision “To be the preferred financial services partner for Micro Small and Medium Entrepreneurs (MSMEs) in Uganda.”

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Driving Innovation Through Financial Technology and Predictive Analytics

In 2019, global information services Enhancing accelerated growth, company, Experian, acquired innovation in the local credit Compuscan CRB, Uganda’s first credit sector bureau established in 2006. In Uganda, Bureau credit scoring was introduced to the company introduced first-of-their Uganda in 2015 by Compuscan CRB Ltd kind financial technology solutions (now Experian Uganda) in partnership such as the Financial Card System, with FINCA Uganda. Compuscore, credit reports, and credit scoring to the coupled with auto-decisioning country, all of which have significantly technology, has become a keystone in impacted the country’s people, transforming the credit market from businesses, and economy. traditional lending methods to new digital or mobile channels for several “The Covid-19 pandemic has affected Ugandan banks. many organisations and forced them to Compuscore produces a three-digit consider new ways of doing business. credit risk score that predicts the In response to a changing marketplace, probability of default based on a organisations have turned to digital consumer’s credit behaviour. Lenders channels as an alternative way to have used it in Uganda to assess the deliver services to their customers. To risk of new credit applicants and enable effectively provide these services in a digitisation for those clients that have complex business environment, lenders adopted and implemented mobile in Uganda are increasingly using credit lending. risk scoring models to predict the risk and behaviour of their customers,” says Credit scores will increasingly be used Mark Mwanje, Managing Director of to determine whether a borrower Experian Uganda. gets a loan and the rates they pay. Additionally, insurers, telecoms and other lenders are also likely to use credit scores in determining credit risk for consumers accessing services from them.

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Improved customer insight is critical Experian commissioned a study, conducted by Forrester Consulting in 2020, called Enterprise Agility and Smart Routes to Digital Transformation. It considered various Europe, Middle East, and African (EMEA) based businesses’ approaches to resilience and focused on the key drivers, pain points and innovations underway.

“The report highlighted how the pandemic had driven a comprehensive and lasting shift in both consumer and business behaviour, expectations and priorities, with many firms recognising that improved customer insight is critical. A significant spike in non-performing loans, financial over- commitment, exposure and default predicted as part of the pandemic after- shock makes understanding customers all the more important,” adds Mwanje.

Technology tipping point Investments are required in data, analytics, technology – but especially into seamless digital customer journeys and automation. Long-term commercial relationships can be fundamentally improved with access to a combination of the right analytical expertise and most consistently complete datasets. “One of Experian Uganda’s innovation strategies is to expand our clients’ adoption of data and analytics, helping them understand their customers in times of disruption. We are committed to developing data-driven insights for our clients to support further their acquisition, customer management, collections, and product development ambitions. Additionally, our financial technology helps our clients promote financial inclusion in the country,” concludes Mwanje

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How Resilient Organizations Can Thrive Even in Times of Uncertainties

By Ronald Mugwanya

or many organizations, the year 2020 This level of swiftness in action to protect was a litmus test in as far as leadership, employees and customers as well as Forganizational systems, culture and shareholder value in times of crisis earned strategy are concerned. It awakened many the company a lot of stakeholder goodwill. executives to the need for a reimagined Employee passion in the vision of the strategy for resilience, one which is holistic company and customer loyalty all saw an in nature and all-embracing not only for a upward trajectory. global pandemic but rather purposed to tackle uncertainty and risk across the board. This company had proven resilient but this was not accidental. A lot of hard work had “We quickly dug down deep into our roots: gone into this effort over time. focusing on doing more with less,” said a CEO and founder of one of the companies which Uncertainty and the Business World managed to deliver excellent results during Today the year. Globalization and its resultant Like many businesses, this company equally interdependence among nations and struggled, there was panic and sales took a organizations presents enormous opportunity. downward spiral. Covid-19 was a wild cat However, this is equally accompanied by having stricken unexpectedly and no one risk. In a business sense, this translates into had clear answers on how to act. But, this increasing uncertainty and complexity in the was only for a short period of time. In this business environment. Today, organizational company, the culture had been built in such strategic scenarios are filled with events that a way that the organization was highly agile were hitherto considered a one-off but have and adaptive to situations as they unfold. since become main stream. Management made swift adjustments, allowing remote working using gadgets and Indeed, on the onset of the global pandemic technologies which were already available in 2019 while COVID-19 was ransacking to the staff, they also came up with an lives in some European capitals and Asia, a emergency financial plan that would enable 2020 World Economic Forum (WEF) survey the organization to survive for months on global risks, a global pandemic was hardly without business from key accounts. mentioned. Instead, respondents only worried about 37 other risks which they thought to be more significant.

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The world of risk and uncertainty will only The resultant recommendations therefore, get more complex as we evolve and the inform management insights and behaviour prospect for more globally significant events relative to market, supply chain, technology evermore likely. Social and racial divisions are and people activity. Organizational resilience becoming more prominent, climate change is usually tested under the following and its unpredictable consequences, trade circumstances. and political divisions among the world’s • Resilience by design- this means an superpowers all bear serious ramifications on organization is taking a holistic approach the business environment. to resilience. The organizational strategy, structure and culture are aligned in such a To survive and thrive in this environment, manner that they deliver on the resilience an organization must possess the willpower agenda long-term. and passion to take on uncertainty by the • Resilience through change- an organization horns and have this zeal wired into the overall is able to wither challenges and threats corporate DNA. that emerge with the passage of time. The organization is agile and adaptable to How does a Resilient Organization transformational pressure. Look Like? • Resilience through diversity- this relates Resilient organizations are these which to the ability of an organization to cope have their lenses in the future drawing with adversity as it emerges. This calls scenarios and counter measures. They for clear demarcation of authority to plan and invest in tools and techniques as facilitate timely decision making as well well as cultures that enable quick action in as requisite contingency plans. disruptive environments. Put plainly, they are pre-emptive in their plans and actions in Resilience in the Banking and everything they do. They have inbuilt cross Financial Services Industry functional strategic competencies which As already highlighted above, organizational enable them stand together rather than in resilience is ambiguous and may mean silos and fight as a team when crisis strikes. different things across businesses and industries. Banking and Financial services A resilient organization exhibits competencies organizations already exude adequate in the following three areas: financial resilience and this is clearly implied • Financially- an organization can absorb in the recently realised annual statement of shocks to its liquidity position, income and results in Uganda. Reputational resilience asset base. is also ably managed by way of customer • Operationally- be well positioned to deal centric and responsive policies. with supply chain, data and employee disruptions. The biggest challenge for players in this • Reputational resilience- the organization industry is operational resilience. The has a respected public image and is in regulatory regime keeps getting tough and good shape to fend off negative publicity. the complimentary pressure to comply keeps chipping off profits, increasing digitization Resiliency and Ambiguity and remote working also present challenges Organizational leadership usually focuses of information security because hackers are on various scenarios in the formulation of actively on the lookout for loosely guarded strategic goals. targets.

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How to build resilience in your Invest in building expertise- a key residue organization and team. of crisis and uncertainty is heuristics and As already discussed above, organizations improvisation. These two rest on a foundation operate in a sea of uncertainty and we can of knowledge so, continuous learning and only expect this to get bigger and deeper training as well as retooling are crucial as evidenced by the Covid-19 pandemic. ingredients in the journey to building a However, business leaders are not helpless, resilient organization. some solutions are prescribed below to stimulate thinking on how to build resilience The first port of call in times of uncertainty is among teams and organizations as a whole. organizational resilience. Management should High level process mapping- understand develop competencies to rely on internal thoroughly which approaches are used capability to wither the storm in unchartered where, when and how often. Establish if territory. The global pandemic has offered your organization tends to favour a particular a resounding alarm for many executives to approach. Evaluate if this is the best approach wake up to the fact that resilience is not a or find out if this can be improved or if the one-off act but rather a way of life that ought organization could be better off with it. to be integrated in the entire organization’s Practice doing more with less- challenge fabric. your team to accomplish an ambitious task with significantly reduced resources or The Writer is the Training and Partnership Executive engage in brainstorming sessions to stretch at The Uganda Institute of Banking and Financial teams to imagine how they would operate Services if a key resource suddenly became scarce or unavailable.

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40 ISSUE 11 July - August 2021 Financial Services Magazine UIBFS News & Events

The Uganda Institute of Banking and Financial Services holds first ever Joint Annual General Meeting and Graduation Ceremony

Board Members and CEO during the Annual General Meeting and 9th Graduation Ceremony.

For the first time, the Institute held a joint Annual The new Institute Board Chairman, Mr. Michael General Meeting and 09th Graduation Ceremony on Mugabi also CEO, Housing Finance Bank while Friday, 28th May 2021 at . It presenting the 2020 annual report mentioned that was a hybrid Scientific event where Board ,Council the Institute was greatly affected by the ban on members, graduands and a few selected guests training activity for the months of March to June 2020 physically attended the event at Sheraton while as part of COVID - 19 infection preventive measures observing the COVID -19 SOPs and the rest of the and Standard Operating Procedures (SOPs). At the members attended virtually. time the Institute quickly adopted virtual learning using the already established E- learning platform. The AGM approved nomination of Mr. Jjingo Total enrolment for Institute courses during 2020 Michael, General Manager, Commercial Banking stood at 1,817, representing a decline in absolute Centenary Bank as UIBFS Fellow representative on terms of 927 (or 34%) compared with 2019 that had the Institute’s Board and Ms Veronicah Namagembe, 2,744 enrolments. Of these 1,670 (or 92%) enrolled CEO, Pride Microfinance (MDI) Ltd as UIBFS Fellows on short skills courses and 147(or 8%) on professional representative on Council. and postgraduate programmes.

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The Institute also registered a 30% decline in revenue Namuwonge Immaculate, one of the best students in 2020 as compared to 2019. During the period, UGX and works with Centenary Bank appreciated the skills 1.5Bn was realized down from UGX 2.1Bn realized in and knowledge she has obtained from the course that 2019. Overall, the Institute registered a deficit of UGX have greatly helped her in her banking career and 205Mn compared to deficit position of UGX 119mn urged bankers and non bankers to enroll for these in 2019. This was due to the significant reduction in professional programs at the Institute. revenue brought due to the COVID 19 disruption on 10 students who had successfully graduated in training activities throughout the year. Master of Arts in Financial Services ( offered by UIBBFS in partnership with University) and 78 students graduated in the different professional 08 in Post Graduate Diploma in Agricultural Risk and courses namely, Certified Professional Banker, Management ( offered in collaboration with Mountains Banking Certificate, Diploma in Microfinance, Certified of the Moon University) were also recognized at the Credit Management and Chartered Banker. Students event. who attained distinctions in each course were awarded certificates of recognition. Lalam Beatrice The Council President, represented by Mr. Guster , Namuwonge Immaculate , Ndagimana Martin and Kayinja, the Deputy Council President said that the Rukesha Valence graduates of Certified Professional banking and financial services industry continues Banker course and Nuwamanya Julius and Okweda to face the challenge of quality professional human Williams graduates of Certified Credit Management capital across ranks. ”It is important to note that the program obtained distinctions and were recognized industry has exponentially grown in size offer, delivery for their outstanding performance. platforms and players over the years and is currently rapidly changing to include core and non-core banking services which aim to satisfy the changing needs of customers” he noted.

He also stressed that the convergence of finance and technology has to date posed the greatest opportunity and challenge especially regarding human capital. This trend has resulted in a need for well- balanced talent. This kind of environment calls for agility of our human resource and of the institute to be able to have in place programs that support the shift and commended the institute for adopting to change to online learning and instruction as well as seeking collaborations to offer digital and soft skills leaning programs as a response.

He also congratulated the industry for obtaining a Chartered Banker qualification, a professional qualification accredited by National Council for higher education as an equivalent to any internationally recognized professional qualification that was secured Namuwonge receiving her Certificate of recognition from through UIBFS. Dr. Twinemanzi Tumubweine, ED Supervision at BOU who “For long we have had some professionals like the represented the Patron and Governor Bank of Uganda accountants be identified with a single qualification but not bankers. With the accreditation of the

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Chartered Banker Program, bankers have an opportunity to distinguish themselves as solid professionals. To this end we expect to have a young crop of students go through this program as well as agile existing bankers so that we can quickly as an industry derive benefits from true bankers of the day.” he said.

He further said that starting this year, the Institute shall focus on implementing its new membership program through a robust Continuous Professional Development Program, achieving its vision of becoming a Centre of excellence in banking and financial services training and deliver on research and consultancy on emerging industry issues and Mr. Mugabi Michael new Institute Board Chairman and CEO appealed to all Bank CEOs to actively support the Housing Finance Bank addressing members at the AGM Institute to achieve its vision The Patron represented by Executive Director, Supervision, Bank of Uganda, Dr. Twinemanzi Tumubweine urged the Institute to develop training programs to respond to the needs of the industry. He stressed the need for soft skills trainings, trainings in convergence between Banking and Technology and pairing Customer preferences and expectations to help practitioners to quickly adapt to the ever- changing banking environment.

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Professional & Academic Programs (September 2021 Intake)

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Digital And Computer Based Programs Available For 2021 Course Packages Cost (UGX) Cohort size (15 Participants Individual and above) 1. Certificate in Computer Microsoft Office 300,000/= 300,000/= Application Applications & Online Essentials 2. Certificate in Data Entry and Epi Info, Epi data, Minitab, 400,000/= 400,000/= Statistical Analysis Stata, SPSS & Excel 3. Data Entry and Statistical Epi Info, Epi data, Minitab, 850,000/= 400,000/= Analysis (Advanced) Stata, SPSS & Excel, E-views & R 4. Certificate in Computerized Tally ERP 9.2 & Quickbooks 400,000/= 400,000/= Accounting 2020 5. Certificate in Data Mining & Tableau & Power BI 850,000/= 400,000/= Business Intelligence 6. Applied Time series and Stata & E-views 600,000/= 400,000/= Panel Data Econometrics 7. Advanced Databases SQL, mysql on Windows, 850,000/= 400,000/= Linux & Ubuntu 8. Digital Marketing & Corporate Digital Content 850,000/= 400,000/= Communications Development Tools 9. Advanced Excel Excel 2019 400,000/= 400,000/=

Short and Executive Programs as below:

• Short Banking and Finance Courses ( 1-5 days) • Specialized Courses ( Up to 6 months leading to certification in a specific area) • Microfinance Programs

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Membership and Continous Professional Development ( CPD) Program

Log on to http://www.join.uibfs.or.ug and sign up for UIBFS membership and enjoy a number of membership benefits that include the Institute’s Continuous Professional Development ( CPD) Program in all areas of banking and Finance .

To Apply Follow this online application link: sms.uibfs.or.ug Visit the website : www.uibfs.or.ug

For inquiries about application and other details, please contact us as follows:

UIBFS mail: [email protected] (for general inquiries) or

Registrar: [email protected] /0414233628/0772467127 (for Professional & Post graduate courses).

Training & Partnership Executive: [email protected]/ 0775430099/0705254012 (for Short skills courses).

Membership & Business Development: [email protected] /0414255848 /0701583513 (for registration & renewal)

Digital Programmes: [email protected] /0414233628/0759981772 (for inquiries regarding Digital programmes).

E-learning Executive: [email protected] /0701782931/0776768658 (in regard to E - learning issues).

50 ISSUE 11 July - August 2021 Financial Services Magazine UIBFS News Corporate & Events Member Directory CORPORATE MEMBERS’ DIRECTORY

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