Uganda’s Remittance Corridors
51
Table 3.3. Affordability of Deposit Services Affordability (percent of GDPPC) Minimum amount to ... Africa Region
Open Checking Account
Open Savings Account
Annual fee for ...
Maintain Checking Account
Maintain Savings Account
Checking Account
Savings Account
Uganda
51.12
48.62
1.73
29.52
24.88
3.37
Kenya
11.71
44.30
0.00
41.82
12.82
2.07
116.39
68.26
55.88
64.75
7.87
1.22
55.41
5.50
N/A
5.11
0.00
0.00
Cameroon Ethiopia Ghana
22.69
21.89
0.09
11.99
5.90
0.58
Madagascar
38.86
19.35
0.00
17.59
5.15
0.00
Malawi Mozambique Nigeria Sierra Leon Zambia
0.00
17.89
0.00
17.89
21.98
3.63
29.61
15.71
14.19
7.20
N/A
0.30
106.42
22.07
0.00
1.96
0.05
0.00
51.63
44.89
8.81
43.56
26.63
0.00
0.00
7.87
0.00
7.87
N/A
N/A
Note: Gross domestic product per capita (GDPPC). Source: Beck and others (2007).
such accounts when compared to local currency accounts. In its effort to satisfy the knowyour-customer measure, a bank may require a beneficiary to open an account for remi ance receipts if it is more than US$100. Furthermore, the cost of maintenance and operation of a local currency bank account is high in Uganda. Table 3.3 gives comparative cost structure in the Africa Region in terms of bank affordability. It is evident that Uganda has high bank intermediation costs. This would inhibit the people from using banking facilities for their needs.
Regulatory Framework Full liberalization of the capital account was implemented in Uganda in 1997. Both residents and non-residents are free to bring in and take out foreign exchange, maintain foreign exchange accounts with local or overseas commercial banks, and hold foreign exchange–denominated instruments without restrictions. Liberalization and operation of a free exchange rate regime resulted in the gradual unification of the inter-bank and forex bureaus exchange rates and narrowing of the spread between buying and selling exchange rates. Although it may not be possible to determine the size of the informal market in foreign exchange, it is evident that liberalization a racted and increased the number of players in the formal sector. Commercial banks and MTOs who are licensed by the Central Bank can conduct money transfer businesses. The Financial Institution Act 2004, the Foreign Exchange Act 2004, and the Foreign Exchange Regulations 2006 regulate money transfer businesses. The Financial Institution Act regulates remi ance businesses by commercial banks.13 The Foreign Exchange Regulations does not apply to banks licensed under the Financial Institutions Act. Banks offer remi ance services through correspondents and, in some cases, have relationships with international MTOs.