Kampala: The Deputy Governor for Bank of Uganda Louis Kasekende says regulated commercial Banks will continue employing licensed banking agents to transact with their customers in terms of and collecting deposits.
Speaking at a workshop for Board Members of Supervised Financial Institutions at Imperial Royale Hotel, Mr Kasekende said agent banking is in line with 2016 amendments to the Financial Institutions Act (FIA) that enable banks to make significant changes to their business models.
“These changes give banks the potential to expand their business and at the same time to reduce their operating costs and improving service delivery,”
In principle, he cautioned banks to establish a presence in localities where it would not be cost effective to operate a conventional brick and mortar branch, thereby extending access to banking services to the population.
He said Boards of Directors have a crucial role to play in ensuring that their financial institution implements proper accounting practices.
“Therefore it is essential that Directors to have a thorough understanding of the changes to financial reporting required by International Financial Reporting Standards 9 (IFRS 9) and how these will be implemented in practice,” he said.
He said financial institutions will be allowed to offer Islamic financial products, which products are on both the liability and asset side of the balance sheet which don’t involve an explicit interest payment.
“Even if a bank does not charge an explicit interest rate on a loan, it still has to cover all of the costs of providing finance, the costs of capital, the transactions costs and the expected costs of loan losses through other types of income charged to the borrower,”
Safeguards must be put in place for both lenders and borrowers, entail complex issues and it will be essential for Boards of Directors to fully understand these issues and if their financial institutions are intending to offer these products to their customers.