The BOU gives the green light to more financial payment solutions

Kampala, Uganda | THE INDEPENDENT | The Bank of Uganda (BoU) has licensed two more financial solutions under the Sandbox Regulatory Framework as it implements laws to promote financial inclusion and security.

A regulatory sandbox is a framework set up by a financial sector regulator to enable small-scale live testing of innovations by private companies in a controlled environment under the supervision of the regulator. This is intended to ensure that there are no repercussions to the public, including the loss of money, which is a common crime in the financial sector in Uganda and other developing financial markets.

Culipa Ltd and Absa Bank Uganda Ltd are the latest to have received permission to test their respective innovations under the Sandbox agreement. Culipa will test a payment processing and money transfer service that allows individuals and/or small businesses to easily receive mobile money payments by leveraging social media platforms.

Absa Bank will test a digital wallet solution that works on all types of phones via SIM skin technology. This mobile payment technology consists of a thin plastic membrane that can be attached to any mobile phone SIM card and provides full transactional capabilities, such as person-to-person payments, bill payments, merchant payments and withdrawals, and can also support microcredit operations. .

The Absa digital wallet will also be accessible through a mobile app and web portal with the aim of boosting financial inclusion, especially for Uganda’s unbanked population.

Under the Sandbox framework launched last year, the Bank of Uganda first licensed ‘Wave Transfer Ltd’, a mobile payment system company operating as ‘Wave’. He came with a promise to primarily serve those who don’t have a bank account.

Bank of Uganda dismisses fears that opening the market to so many small operators could increase the risk to the safety and security of money, instead saying it is ready to license more operators to improve the scope of access to formal financial services.

“The Bank of Uganda invites more companies to develop and test financial innovations under the Regulatory Sandbox Framework. The Bank reassures the public of its commitment to preserving the safety and integrity of the financial system,” said Deputy Governor Michael Atingi-Ego.

One of the achievements of the sandbox regulatory framework is the decision to accept cryptocurrency operators into the system. The BOU has opposed cryptocurrency technology since 2018 because, being a digital financial system, it is difficult to regulate.

The regulator has always insisted that anyone who agrees to participate in business does so at their own risk, without expecting compensation from the authorities in the event of loss. But the Central Bank has now invited members of the Blockchain Association of Uganda (BAU) to share their knowledge with the regulator.

“Your call for peer-to-peer learning with our technical staff on crypt-economic models is granted with positivity by BoU. We investigated whether the regulatory sandbox is the right environment to test certain use cases” , Andrew Kawere, director of the Bank of Uganda’s National Payments Department, said in an email.

Association president Kwame Rugunda confirmed meetings between the association and the regulator in May. There are up to 40 fintech companies operating in the country, many of which are attached to banks and telecommunications companies, but the majority of them have not yet obtained a license from the BOU. BOU says they want everyone registered so the bank takes control to keep people’s funds safe

“Protecting the interests of our customers is one of the most important things we can do as Bank of Uganda. In Uganda, our level of understanding regarding digital and online finance is quite low. In general, people need some protection against rather advanced financial innovations,” Kawere said.

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