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Results of a National Survey on Demand, Usage and Access to Financial Services in Uganda 'FinScope Uganda 2009' Report October 2010 Produced by Steadman Now Synovate (U) Limited Nakasero Road, Plot 32 Nakasero, Kampala P.O. Box – 21571 Tel: +256-414-237990/1 Fax: +256-414-347195 E-mail: email@example.com TABLE OF CONTENTS A. ACRONYMS ................................................................................................................... 6 B. GLOSSARY .................................................................................................................... 7 C. EXECUTIVE SUMMARY ................................................................................................. 8 D. QUESTIONNAIRE COMPARISON ................................................................................11 1.0 Introduction ..................................................................................................................12 1.1 Background.................................................................................................................12 1.2 Research Objectives ...................................................................................................13 1.3 Organisation of the report ...........................................................................................13 1.4 Survey methodology ...................................................................................................13 1.4.1 Survey administration ................................................................................................13 1.4.2 Survey design ...........................................................................................................14 1.4.3 Survey areas .............................................................................................................14 1.4.4 Survey instrument .....................................................................................................14 1.4.5 Training .....................................................................................................................15 1.4.6 Fieldwork ..................................................................................................................15 1.4.7 Data management.....................................................................................................16 1.5 Summary ....................................................................................................................16 2.0 Demographics and household characteristics ..........................................................17 2.1 Demographic characteristics .......................................................................................17 2.2 Household characteristics ...........................................................................................19 2.2.1 Type and ownership of dwelling unit..........................................................................19 2.2.2 Housing structure and construction materials ............................................................19 2.2.3 Household facilities ...................................................................................................20 2.2.4 Access to services ....................................................................................................21 2.3 Income and livelihood .................................................................................................22 2.3.1 Sources of income ....................................................................................................22 2.3.2 Main source of income by gender and location .........................................................23 2.3.3 Frequency of earning by source of income ................................................................24 2.3.4 Method of receiving income ......................................................................................25 2.4 Summary ....................................................................................................................26 3.0 Financial access and practice .....................................................................................27 3.1 Uganda's Financial Access Strand..............................................................................29 3.1.1 Financial access by gender and setting .....................................................................30 2 3.1.2 Financial access by region ........................................................................................31 3.1.3 Financial access by highest level of education ..........................................................32 3.1.4 Financial access by employment status ....................................................................33 3.1.5 Financial access by main source of income ..............................................................33 3.1.6 Financial Access Strand Country Comparison ..........................................................34 3.1.6 Usage of formal institutions .......................................................................................35 3.1.7 Multiple usage of institutions .....................................................................................36 3.2 Summary ....................................................................................................................37 4.0 Savings and investment ..............................................................................................38 4.1 Savings-investment status ..........................................................................................38 4.2 Savings strand ............................................................................................................39 4.2.1 Overall savings and investment strand ......................................................................39 4.2.2 Savings/investment strand by education ...................................................................40 4.2.3 Savings/investment strand by employment ...............................................................41 4.2.4 Savings/investment strand by main source of income ...............................................41 4.3 Savings/investment by place.......................................................................................42 4.4 Savings/investment products used..............................................................................43 4.5 Multiple usage of financial institutions .........................................................................43 4.6 Reasons for saving .....................................................................................................44 4.7 Reasons for not investing............................................................................................45 4.8 Summary ....................................................................................................................45 5.0 Credit .............................................................................................................................46 5.1 Incidence of borrowing ................................................................................................46 5.2 Borrowing strand .........................................................................................................47 5.2.1 Overall borrowing strand ...........................................................................................47 5.2.2 Borrowing strand by gender and location ..................................................................48 5.2.3 Borrowing strand by education ..................................................................................49 5.2.4 Borrowing strand by employment ..............................................................................49 5.2.4 Borrowing strand by source of income ......................................................................50 5.3 Sources of credit .........................................................................................................50 5.4 Multiple usage of sources ...........................................................................................51 5.5 Product usage.............................................................................................................51 5.6 Agricultural credit ........................................................................................................52 5.7 Summary ....................................................................................................................53 3 6.0 Banking and other formal transactions ......................................................................54 6.1 Banking and overall formal financial Inclusion status ..................................................54 6.2 Banking and overall formal financial inclusion by employment ....................................54 6.3 Banking and other formal products used .....................................................................55 6.4 Transactions conducted ..............................................................................................56 6.5 Summary ....................................................................................................................56 7.0 Insurance and risk management .................................................................................57 7.1 Risk Management .......................................................................................................57 7.1.1 Perceived major risks ................................................................................................57 7.1.2 Ways of dealing with risks .........................................................................................58 7.2 Insurance ....................................................................................................................58 7.2.1 Insurance by product .................................................................................................59 7.2.2 Perceived benefits of insurance ................................................................................60 7.2.3 Reasons for not taking insurance ..............................................................................60 7.3 Summary ....................................................................................................................61 8.0 Money transfer and remittances..................................................................................61 8.1 Incidence of transfers..................................................................................................61 8.2 Sources of money .......................................................................................................61 8.3 Transfers within Uganda .............................................................................................62 8.4 Remittances ................................................................................................................62 8.5 Form and frequency of receiving money .....................................................................63 8.6 Use of money received ...............................................................................................64 8.7 Summary ....................................................................................................................65 9.0 Financial literacy and decision making ......................................................................65 9.1 Decision making .........................................................................................................65 9.2 Effective literacy ..........................................................................................................66 9.3 Numeracy skills ...........................................................................................................66 9.4 Sources of information ................................................................................................67 9.5 Knowledge of financial services and institutions ..........................................................68 9.5.1 Definition of saving ....................................................................................................68 9.5.2 Knowledge of insurance as a risk management tool ..................................................68 9.6 Perceptions towards products of financial institutions .................................................69 9.7 Understanding financial terminologies.........................................................................70 9.8 Summary ....................................................................................................................70 4 10.0 Children (16 to 17 years) ..............................................................................................71 10.1 Sources of income ......................................................................................................71 10.2 Financial Access .........................................................................................................72 10.3 Savings .......................................................................................................................73 10.4 Summary ....................................................................................................................74 11.0 Conclusion....................................................................................................................75 5 A. ACRONYMS AMFIU Association of Micro-finance Institutions in Uganda ATM Automated Teller Machines ASCA Accumulating Savings & Credit Association BOU Bank of Uganda CI Commercial Institutions EA Enumeration Area GTZ German Technical Cooperation MDI Micro Deposit Institution MFI Micro Finance Institution MFPED Ministry of Finance Planning and Economic Development NGO Non Governmental Organisation NSSF National Social Security Fund PPS Probability Proportional to Population Size PSFU Private Sector Foundation Uganda PSU Primary Sampling Unit ROSCA Rotating Savings & Credit Association SACCO Saving and Credit Cooperative SPSS Statistical Package for Social Scientists UBA Uganda Bankers Association UBOS Uganda Bureau of Statistics UIA Uganda Insurers Association USAID United States Agency for International Development VSLA Village Savings and Loan Associations WB World Bank 6 B. GLOSSARY Banked (BOU regulated): Use of Commercial banks, Credit institutions and Micro finance deposit taking institutions. Formal others: Using SACCOs and other microfinance institutions, formally registered insurance companies and NSSF1. Also included are the non-banking financial institutions like foreign exchange bureaux, money transfer services like Western Union, Money Gram and mobile money services. Informal: Use of money lenders, ROSCAs, ASCAs VSLAs, NGOs, investment clubs, saving clubs, services by employers and other village groups like burial societies and welfare funds. Others included under informal are saving in a shop and investing through property like houses for rent, livestock and crop produce to be sold later or farm inputs to use at a later date. Financially excluded: Un-served: non-usage of neither BOU regulated nor other formal or informal institutions e.g. saving in a secret place or friends/relatives; borrowing from friends or family members; or money transfers using individuals. Saving: Savings' was defined as putting money aside to use in the future irrespective of where one actually saves the money Investing: While investment as putting money aside or putting money into an activity or a financial institution so that it yields returns. Borrowing/credit: Taking money in cash from a financial institution, group or from any person to be paid back later or taking goods or services on credit to pay back in cash at a later time in the future. Access In this study the term financial service was used as a proxy to access. 1 NSSF is Uganda's national saving scheme mandated by Government to provide social security services to employees in Uganda. 7 C. EXECUTIVE SUMMARY Introduction FinScope studies are national geographic and demographic surveys on the demand for, access and usage of financial services. The studies cover the demand, usage and access to all types of financial institutions from commercial banks, village groups to informal financial facilities like borrowing from shops etc. These studies are carried out in Uganda, Kenya, Tanzania, Rwanda, Nigeria, Ghana, Mozambique, Malawi, South Africa, Botswana and Zambia in addition to being piloted in Lesotho and Swaziland. FinScope studies are valuable as they inform the public and the different stakeholders in the financial sector about the access and usage of financial services and products. Their value is increased by conducting them on a regular basis hence providing trends on usage of financial products. Following the publication of the FinScope I survey results, there was a need to follow up on the developments in financial markets in Uganda. Uganda Insurers Association (UIA) was chosen as the implementing agent for the FinScope II Project and the financing for the project was channeled through Private Sector Foundation Uganda (PSFU). UIA set up a Project Office within its organization structures. An advisory committee was formed, whose role was to formulate the questionnaire and oversee the project implementation. The committee constituted representatives from Bank of Uganda, Uganda Bureau of Statistics (UBOS), Synovate Uganda, United States Agency for International Development (USAID), German Technical Cooperation/ Financial Sector Deepening (GTZ/FSD) programme, Association of Micro-finance Institutions in Uganda (AMFIU), Makerere University (faculty of economics and management), Uganda Bankers Association (UBA), Private Sector foundation Uganda (PSFU), Ministry of Finance Planning and Economic Development (MFPED), Uganda Insurers Association. Steadman Now Synovate conducted the fieldwork, data processing and report writing with technical assistance from Uganda Bureau of Statistics, FinMark Trust and Uganda Insurers Association (UIA). The FinScope II survey 2009 was a follow up to FinScope I conducted in 2006. The 2009 study aimed at indicating any changes or impact that has been achieved in the financial sector in the past three years. The 2009 FinScope study differed slightly from that conducted in 2006 but the objectives remained the same and where possible comparisons have been made with the findings of 2006. Unlike in 2006 where the target respondents were aged 18 years and above, in 2009 household members aged 16 and above were also included in the sample frame from which only one respondent was randomly selected. There was also a change in developing the access strand as some attributes where included in the financially served category i.e. borrowing from schools, shops, employers etc while others were dropped e.g. in-kind savings and investments on farm land. This aimed at having a uniform definition and description of the access strand that is applied in other countries. A total of 3001 successful interviews were conducted from 56 districts that existed during the 2002 National Population Census. Furthermore, the interviews were obtained from 499 Enumeration Areas (EAs) that had been selected from the 56 districts by the Uganda Bureau of Statistics (UBOS). Fieldwork was conducted for approximately two months between late November 2009 and early January 2010. 8 Main findings Demographic characteristics The respondents comprised of Ugandan's aged 16 years and above of which 55 percent were females and 45 percent were males. Forty three percent were household heads while the majority (52%) were self employed, and 7 in 10 are able to read and write in a given language. About 9 in 10 had ever attended school. Household characteristics Three quarters of the households are headed by males, majority of whom are married (80%). The main source of income for most households and individuals are agricultural based at 47 percent and 37 percent respectively. This is followed by running own businesses at 18 percent. Almost all (98%) of those who earn an income receive it in cash while a tenth get it in-kind. With regards to access to selected amenities, approximately 8 in 10 Ugandans walk to the nearest market, main road or health center. For those who use formal financial institutions, most use public means while for the informal ones majority just take a walk. At least 80 percent of Ugandans are within a distance of 5 kms to the nearest market, main road or health center while only a half access formal institutions within the same distance. Wood, a main source of fuel for cooking is used by 97 percent of households, while majority (79%) use paraffin for lighting. Eighty percent of households have access to safe drinking water, where most use a borehole (30%) followed by piped water (26%) and protected well springs (21%). Seventy three percent of the households use covered pit latrines and 5 percent go to the bush. The most owned asset for transportation is the bicycle (37%) while that for communication is the radio (78%). Financial literacy Perception: less than half of the respondents aged 16 and above have trust in other people when dealing with financial matters. Saving is perceived by most people (71%) as an insurance against poverty hence securing the future and also reduces poverty levels (83%). Attitude: regarding financial control, 60 percent would rather depend on their knowledge and experience than seeking advice from other people while 75 percent deal with people they know well. Fifty seven percent trust the commercial banks. Knowledge: saving was defined by most people (73%) as 'putting money aside to avoid being spent immediately'. Insurance is known as one of the ways through which risks can be managed or mitigated (69%) and is for the rich (39%). Almost half (48%) know that insurance is a form of saving. 9 Financial Access Seventy percent of the population aged 16 years and above are financially served with 21% using banking services while most of them use informal financial services and 30% are un- served. In comparison to 2006, there is an increase in the proportion of those using financial services from 57% to 72% in 2009 for the 18+ years population. Savings Seventy one percent of Ugandans are currently saving or investing while 20% have never saved. Seventeen percent save with banking products while the majority (31%) uses informal products. The most used savings product is the secret place (64%) followed by being a member of an informal group (40%) and voluntary savings account (30%). The most common reason for saving is to meet basic household needs (67%) and emergencies (58%) while that for not saving is lack of money (88%). Risk Management and Insurance The most common unpleasant events experienced in the last 12 months before the interview were serious illness of a household member (46%), crop failure (37%) and increase in basic commodity prices (28%) and these are still the main perceived major risks. Mainly, people will turn to friends and relatives in case they face a major risk. The major benefit of having insurance is to guard against unlikely events or uncertainties (53%). Twenty three percent use some form of insurance and with only 3 percent accessing policies with formal institutions with 2 percent being registered with National Social Security Fund (NSSF). Twenty percent and 4 percent are members of burial and welfare informal insurance groups respectively. The main reason for joining these groups is that it is easy to become a member (40%) because many cannot afford the formal insurance (40%). Borrowing and loans Almost half of the adult Ugandans are currently borrowing (45%), 20 percent have ever saved but stopped and 35 percent have never saved. There are more borrowers in the eastern (56%) and western regions (57%) as compared to other regions. The most common sources of credit are shops (54%), friends (25%) and informal groups (24%). Seven percent use commercial banks, 3 percent MDIs and 2 percent SACCOs. The main reason for borrowing for the majority of borrowers is to meet day to day needs (67%). Money transfer Thirty five percent of Ugandans are engaged in money transfer using mainly informal channels (78%) and commercial banks (25%) within Uganda. Those who send or receive money from abroad mostly use informal channels (42%), commercial banks (18%) and money transfer services (33%). Most of the money transfer activities are within Uganda (88%). 10 D. QUESTIONNAIRE COMPARISON FinScope 2006 FinScope 2009 Length 46 pages 40pages Average interviewing 1 1/2 hrs 60 minutes time Sections Area identification particulars Area identification particulars Respondent screening section Respondent screening section Respondents demographics Respondents demographics Financial decision making Physical access to amenities General money matters & income General money matters Usage of financial products & services Saving Financial savings and investments Investment Credit and loans Borrowing and credit Agricultural financing and fishing module Usage of formal financial institutions Product penetration(formal financial institutions) Semi-formal financial Institutions Informal groups and organizations Informal groups and organizations Risk management and insurance Risk management and insurance Money transfer and remittances Money transfer and remittances Knowledge attitude and practices Knowledge attitude and practices Numeracy skills Housing conditions and household assets Household facilities and conditions (Welfare indicators) The 2009 questionnaire was constructed from that used in 2006. This was done in order to incorporate best practices learnt from FinScope studies administered in other countries, and to make regional comparisons between Tanzania and Kenya easier. In the 2009 FinScope, the agricultural section that was present in the 2006 questionnaire was streamlined and incorporated into a general questionnaire. Usage of financial products and services was changed and included under product penetration for formal financial institutions. New areas of interest that were included in the 2009 questionnaire were financial literacy, financial decision making and physical access measures. 11 1.0 Introduction 1.1 Background Financial inclusion has become a contributing pillar to the achievement of Uganda's Poverty Eradication Action Plan (PEAP), as lack of access to suitable financial services is one of the biggest obstacles to development. Conducting the FinScope survey is part of the programme that supports the development of Uganda's financial system as it analyses bottlenecks in the financial sector to determine which measures have the greatest impact on the country's poor. The FinScope II survey 2009 is a follow up on the FinScope I study that was conducted in Uganda in 2006. The surveys aim at providing reliable data on access, demand and usage of financial services in Uganda on a regular basis. Other countries in which these studies are conducted are Kenya, Tanzania, Rwanda, Nigeria, Ghana, Mozambique, Malawi, South Africa, Botswana; Zambia and Pakistan. In addition, FinScope has been piloted in Lesotho and Swaziland. It is important to note that FinScope studies provide information only on demand and usage of financial services and products and hence excludes the supply aspects. Since 2006, the financial sector in Uganda has experienced rapid changes and growth notably 2 An increase in the number of commercial banks; from 15 in 2006 to 22 as at December 2009. Mergers and buy offs which have seen some micro deposit or finance institutions being bought by commercial banks Innovation of financial products and services and increase in number of branches being operated by commercial banks; 3the number of branches increased from 301 as at December 2008 to 363 as at December 2009. Upgrading of MDIs to commercial banks Increased implementation of the Village Savings and Loan Associations (VSLA) and Savings and Credit Cooperative (SACCO) programs by both Non-Governmental Organisations (NGOs) and the central government (under the Prosperity for All program) Introduction of mobile money services Therefore, the main objective of FinScope II survey was to show any changes or impacts that have been realised in the past three years. The data collected allows stakeholders to benchmark current usage patterns across all types of financial service providers in both the formal and informal sector and across the four categories of products; transactions, savings, insurance and credit. The FinScope steering committee recommended Uganda Insurers Association (UIA) to host and implement the FinScope II study. Services of Synovate Uganda were contracted to conduct data collection, process the data and write the report; Uganda Bureau of Statistics (UBOS) for survey design and household listing; and FinMark Trust, a South African based organisation, to provide technical assistance and ensure FinScope Uganda apt in FinScope Africa. These were all closely monitored by the steering committee. 2 Source: Background to the Budget 2010/2011 Fiscal Year, MFPED Page 32 3 Source: Background to the Budget 2010/2011 Fiscal Year, MFPED Page 32 12 Stakeholders are encouraged to review the data available to see how it can help them to address financial and development questions that are significant to them. The database is available from Uganda Insurers Association, Uganda Bureau of Statistics and Bank of Uganda's research department. 1.2 Research Objectives Similar to FinScope I, FinScope II generated comprehensive, nationally representative information on: Household socio-economic and demographic characteristics Household economic, financial and risk management Financial discipline and knowledge Attitudes and perceptions to, as well as preference for financial service providers Usage of and attitude to technology Psychographics and lifestyles Rural and agriculture issues Remittances Asset accumulation patterns (including all forms of assets) Consumer financial literacy issues, including perception of transparency, knowledge of products and services available, and understanding of rights and responsibilities of clients or members of financial institutions 1.3 Organisation of the report The report comprises eleven chapters. In chapter one, the introduction, background and methodology used in the FinScope II survey are presented. Chapter two discusses the demographics, household conditions and sources of livelihood; chapter three focuses on financial access and chapter four examines savings and investment. Chapter five describes access to credit while chapter six covers banking and transactions, with risk management and insurance considered in chapter seven. In chapter eight money transfer and remittances is presented followed by financial literacy and the youth (16-17years) in chapter nine and ten respectively. Chapter eleven provides conclusions on FinScope Uganda 2009. The findings are presented using charts and tables with the relevant narrations and comments. The reporting domains are mainly by gender, region and urban-rural settings. Comparisons have been made with the 2006 results for selected sections. 1.4 Survey methodology 1.4.1 Survey administration Synovate conducted the survey in close liaison with UIA, FinMark Trust and UBOS. This included a number of review meetings with all programme stakeholders, particularly during the formative/planning stages (questionnaire development) and throughout the data collection process. In executing the survey, Synovate received technical assistance from UBOS at the stage of survey design: sampling frame, provision of enumeration area (EA) maps and listing of 13 enumeration areas. UBOS further randomly selected the households visited and validated and weighted the data. Synovate's responsibilities were recruiting and training of field teams, conducting data collection, data capturing and reporting. The reporting structure was developed in close collaboration with FinMark trust. 1.4.2 Survey design The study employed a face to face approach to data collection. A structured questionnaire was used to administer interviews to randomly selected respondents aged 16 years and above in the sampled households. The questionnaire used was almost similar to that used during the FinScope I study with a few changes. It was modified to incorporate best practices learnt from FinScope studies conducted in other countries and to make regional comparisons between Tanzania and Kenya easier. The sample size, jointly determined with UBOS, was distributed across the 56 districts in both rural and urban areas. A three - stage stratified sampling design was employed to draw the sample. At the first stage, probability proportionate to size sampling (PPS) approach was used to select the Enumeration Areas (EA). The next stage involved the random selection of six households per selected EA using Simple Random Sampling (SRS). These households were selected from a complete list of all households compiled during the listing exercise conducted by UBOS. The selection of EAs and households was done by UBOS. The third and last stage involved selecting a respondent among the household members using the Kish grid method. 1.4.3 Survey areas Similar to FinScope I, the survey was carried out in all the 56 districts covered during the 2002 Uganda Housing and Population Census. The districts created after 2002 were not reflected independently but captured from their original districts. The primary units were the demarcated EAs and the urban areas were those gazetted during the 2002 census. 1.4.4 Survey instrument The instrument used was similar to that administered in 2006 with a few changes. The changes in the design aimed at capturing more and relevant information than what was collected in 2006. Steadman Now Synovate in close collaboration with the steering committee reviewed the multiple versions of the draft questionnaire before a final version was agreed upon. The final version was translated into 7 local languages: Luo, Luganda, Lumasaba, Runyoro, Runyankole, Lugbara and Ateso. During the translation exercise, each language was back- translated into English for validation purposes, hence clearing any inconsistencies before the final version was printed. The questionnaire was administered in the local language using the translated versions to avoid losing the meaning as a result of translating from English during the interview. The interviewers, who were recruited and trained, were able to speak the local languages fluently and were able to deal with the different dialects. 14 1.4.5 Training Training of the field teams was done in three phases; Training of supervisors by UBOS: This was done to enhance capacity of the field supervisors and team leaders on issues related to Listing. The training was also done to help the teams familiarize themselves with the listing process, which would allow them to make some key decisions, where necessary. Like in 2006, the Synovate team did not participate in the actual listing exercise. National training of supervisors and team leaders: This was done in two phases. The first phase of the training was conducted between 7th and 11th September and 10th November 2009. This was facilitated by the technical teams of Steadman Now Synovate, UIA, FinMark Trust and UBOS. Regional training: The training program for the national training was adopted for the regional training program. Trainers in the regional training comprised the Synovate technical teams who were assisted by the supervisors and team leaders that were trained during the national training. A similar training program was adopted for the regional training, except that the regional training was facilitated only by Synovate executives assisted by the supervisors and team leaders. 1.4.6 Fieldwork Listing of households in the selected EAs by UBOS teams preceded the main data collection exercise. The main data collection was conducted in approximately two months between November 2009 and early January 2010. The districts under study were divided into 10 centres with two teams per centre. Each team comprised of a team leader and five interviewers. The teams were always supervised by the Synovate executives and boosted by UBOS, FinMark and UIA teams occasionally. Supervision by the technical teams aimed at maintaining the quality control measures put in place. During field work, the field teams encountered a number of challenges, notably absence of selected respondents, refusals by would be respondents and village authorities, poor road networks and long distances to the selected EAs that would derail work, complaints about the length of the questionnaire and language barriers in some areas. For some households, the identification numbers written on houses during the listing exercise were erased off either intentionally or by rainfall, hence making it difficult to ascertain the actual sampled household. Furthermore, insecurity especially in Karamoja and selected northern Uganda areas, made it difficult to accomplish the exercise on-time and because of this, two of the 505 EAs were not surveyed; both in Kaabong district. Also, interviewers experienced hostility as a result of land wrangles and evictions within some EAs such as in Mubende and Kibaale districts. 15 1.4.7 Data management Immediately after each interview, the interviewer edited the questionnaire while still in the presence of the respondent before handing it over to the team leader who further scrutinised it. Questionnaires were further scrutinised and coded at a central place in Kampala. After thoroughly checking and tallying, questionnaires were scanned using the formic software, and the data was exported to SPSS for cleaning and analysis. The data was weighted and validated by UBOS taking into account the probabilities of selection and non-responses. All the tabulations and graphs presented herein the report are based on the weighted data. 1.5 Summary A total of 3001 respondents aged 16 years and above were successfully interviewed for the FinScope II study. The study was conducted between the 25th November 2009 and 05th January 2010. The survey design was done by Uganda Bureau of Statistics, data collection conducted by Synovate (formerly the Steadman Group) with technical assistance from FinMark Trust and the FinScope steering committee. 16 2.0 Demographics and household characteristics FinScope captures a large spectrum of information including the demographics and quality of housing. This section presents the findings of demographic and household characteristics. It discusses the profile of individuals aged 16 years and above in relation to gender, education, literacy levels, employment status and income sources. In relation to household conditions, results are presented on assets owned, incomes, access to amenities and wealth indicators. 2.1 Demographic characteristics The proportion of females (55%) was higher than that of males (45%). This is close to the national gender estimates which are at 52% to 48%4. Sixty two percent (including those cohabiting) reported being married and 27% said they are single. Fourteen percent of the 18years+ never attended school and 77% stopped at primary level. Those below 18 years recorded higher incidence of attending school. Despite the low levels of education attainment, 68% reported the ability to read and write, with a higher proportion in the central region (79%) and the western (70%) compared to other regions. About 8 in every 10 reported having some form of employment. Slightly over half reported being self employed. The highest level of unemployment is among those of the younger age (16-17years). 4 Population projections year book - 2009 17 Table 2.1: Demographic characteristics Total 16-17 years 18+years Northern Eastern Central Western 14,112,506 1,233,267 12,879,239 2,067,582 3,435,651 4,796,134 3,813,139 Total Weighted base % % % % % % % Gender Female 55 56 55 50 57 58 52 Male 45 44 45 50 43 42 48 Marital status Married (Monogamy/polygamy) 56 7 61 59 57 54 58 Cohabiting 6 1 6 6 8 3 6 Divorced/Separated 5 5 4 3 7 4 Widowed 6 2 6 7 5 6 6 Single 27 89 21 24 26 30 27 Highest level of education Never attended school 13 2 14 21 11 9 16 Primary 50 56 50 53 57 42 53 Secondary 30 41 29 20 26 41 25 Specialised training or certificate 2 2 3 3 3 2 2 Specialised training or diploma 3 0 3 3 1 3 3 Completed degree and above 2 0 2 1 1 3 1 Literacy Neither able to read nor write 25 12 26 37 35 14 24 Able to read only 4 4 4 4 4 4 2 Able to read and write 68 83 67 55 59 79 70 Able to write, not read 3 1 3 4 2 3 4 Status of employment Self employed 52 13 55 49 46 49 62 Public employee 2 0 3 3 4 3 2 Private employee 6 0 6 3 6 9 4 Casual laborer 8 6 8 5 9 10 5 Unpaid for household work 13 15 13 19 13 10 12 None 19 65 15 21 22 20 14 18 2.2 Household characteristics 2.2.1 Type and ownership of dwelling unit This is a useful indicator that can contribute to poverty ranking if desired. According to FinScope, about two thirds of the households that took part in this survey lived in detached houses and majority of these were in the rural areas. Those who lived in other types of dwelling units had semi-detached (19%) and tenements (23%). At least 7 in every 10 households owned the houses that they live in. Twenty two percent rented houses of private owners, 3% rented public houses and 2% lived in free public houses. Ownership of houses was higher in the rural (85%) than the urban (33%). Table 2.2: Housing characteristics Total Urban Rural Est. No. of H/H 6,067,172 1,654,909 4,412,263 Characteristics % % % Type of dwelling Detached house 58 26 70 Semi-detached house 19 17 20 Flat 0 1 0 Tenement (Muzigo) 23 56 11 Dwelling ownership Free public 2 3 2 Free private 71 33 85 Subsidized public 1 1 1 Subsidized private 0 1 0 Rented public 3 7 2 Rented private 22 54 10 2.2.2 Housing structure and construction materials A relatively small proportion (36%) of the households has only one room used for sleeping followed by 26 percent who have two. With the overall average household size being five persons per household, the results indicate a high degree of congestion for most households. Use of only one room is most common in urban (43%) as compared to those in rural areas (33%). Iron sheets are the most common roofing material (73%), followed by 25% who use grass or papyrus. Close to two thirds of the households (57%) have rammed earth floors. The highest proportion of these is in the northern region (82%). Concrete stone (with cement) are used by about two thirds of the households in the urban areas (58%) while across the regions, the central has the highest proportion at 49%. 19 Two in every five dwelling units have walls made of burnt bricks with cement and these are most common among the urban areas (66%) and the central region (65%). The central region and urban areas seem to have more permanent structures as compared to rural and other regions where the incidence of temporary or semi-permanent structures is high. Table 2.3: Construction materials used Total Central Eastern Western Northern Urban Rural Est. No. of H/H 6,067,172 2,353,917 1,402,350 1,496,264 814,641 1,654,909 4,412,263 Materials % % % % % % % Type of floor Rammed earth 57 28 72 76 82 21 71 Concrete stone 31 49 26 20 10 58 21 Bricks 10 21 2 3 8 20 7 Others 1 2 0 0 0 1 1 Type of roof Iron sheets 73 92 65 82 16 89 67 Grass/ papyrus 25 5 34 17 83 9 31 Others 0 1 1 1 0 2 0 Type of wall Burnt/stabilized 38 65 32 16 11 66 28 bricks with cement Mud and poles 36 18 40 69 19 12 45 Un-burnt bricks with 13 3 15 3 57 7 15 mud Burnt stabilized 8 8 11 7 9 7 9 bricks with mud Cement blocks 1 2 1 1 0 3 1 Un-burnt bricks with 1 1 0 1 2 2 1 cement 2.2.3 Household facilities The most common source of fuel for lighting is paraffin (used by almost 8 in 10 households). The highest proportion of paraffin users are in rural areas (91%) compared to 49% in the urban areas. Electricity is commonly used in the urban areas (44%), with the central region accounting for the highest proportion at 31%. Almost all households (97%) are dependent on wood as the main fuel used for cooking, with 67 percent using firewood and 30 percent charcoal. 20 Table 2.4: Fuel for cooking and lighting Total Central Eastern Western Northern Urban Rural Weighted base 6,067,172 2,353,917 1,402,350 1,496,264 814,641 1,654,909 4,412,263 (households) % % % % % % % Fuel for lighting Electricity 16 31 9 7 4 44 6 Paraffin (Lantern) 18 25 15 11 18 24 16 Paraffin (Tadooba) 61 41 73 79 64 25 75 Candle wax 2 3 2 2 1 5 1 Firewood 2 0 1 1 10 0 2 Fuel for cooking Firewood 67 46 79 82 80 19 85 Charcoal 30 50 19 16 18 75 13 Paraffin 2 3 1 2 2 4 1 Majority of households (80%) have access to safe drinking water. Safe water is defined as water from the borehole, tap/piped, and protected well springs or gravity flow schemes. The most common source is the boreholes (30%) followed by piped water (26%) and protected wells/springs (21%). It is also notable that 7 in 10 households in urban areas have access to tap/piped water, while in rural areas the most common is the borehole (37%) and open water wells (25%). Majority of the households (73%) use the covered pit latrine as a toilet facility. Overall 9 in every 10 households have access to pit latrines though there are some households using the bush (5%) with relatively significant proportions in the northern region (24%). Use of shared toilet facilities is most common in urban areas and this can be attributed to the fact that most households live in rented premises. 2.2.4 Access to services Overall, most households (81%) access a health centre within 0-5 km reach. The 0-5km reach of a health centre is higher in urban areas (96%) than in rural areas (77%). Access to a health centre within 0-5km distance is lowest in northern region (76%) compared to other regions which are above 80%. A 0-5 km access is higher for informal financial institutions at 86% compared to the formal financial institutions at 57%. 21 Table 2.5: Distance to nearest facility Total Urban Rural Central Eastern Western Northern 14,112,506 3,527,284 10,585,222 4,796,134 3,435,651 3,813,139 2,067,582 Weighted base % % % % % % % Nearest health centre Less than 1 Km 39 61 32 51 39 33 25 1-5 Km 42 35 45 34 45 45 51 5-10 Km 14 3 18 10 14 17 17 Over 10 Km 4 1 4 4 2 5 5 Don't Know 1 0 1 1 1 0 1 Nearest formal/semi-formal financial institution Less than 1 Km 19 35 6 18 24 11 34 1-5 Km 38 50 28 45 27 36 35 5-10 Km 24 11 34 24 26 28 12 Over 10 Km 17 2 29 10 22 23 17 Don't Know 2 1 3 2 1 2 2 Nearest informal financial institution Less than 1 Km 63 65 62 49 59 70 65 1-5 Km 23 29 21 34 23 18 24 5-10 Km 9 3 11 12 12 7 4 Over 10 Km 2 2 3 2 3 2 3 Don't Know 3 1 3 3 2 3 4 2.3 Income and livelihood Questions regarding the way people earn and spend their money were included in the survey. The questions were intended to establish the way people earn money and the channels through which they receive it. 2.3.1 Sources of income Results indicate agriculture as the main source of income with 37% dependant on the sales of food crops and 6% dependant on selling cash crops. Three percent work on other people's farms and 2% sell live stock and products of live stock. Eighteen percent depend on running personal businesses and 5% are employed in the formal sector. 22 Figure 2.1: Main source of income Sell produce from ow n farm 37 Running ow n business 18 Getting money from family 13 Working for an individual in a private business 7 Sell produce from ow n farm (cash crop) 6 Employed in the formal sector like in an office 5 Working on other peoples' farms 3 Sell ow n livestock 2 Sell product from ow n livestock 2 Base: All Weighted population 16 years and above, 2009 2.3.2 Main source of income by gender and location Similar to other national household surveys conducted by UBOS, dependence on agriculture (of any form) as a source of livelihood is highest in rural areas compared to the urban areas (see table 2.6). In urban areas, there is high dependence on personal businesses (31%) and employment in other people's businesses (16%). Dependence on donations from family members is highest in the urban areas (11%) compared to the rural areas. By gender both male and female tend to rely on crop farming almost equally (36% and 35% respectively), while a slightly higher proportion of females (18%) than males (17%) reported running a business as their main source of income. Results also indicate a higher incidence of depending on other household members among females (13%) compared to males (5%). 23 Table 2.6: Main source of income by gender and location Female Male Urban Rural 3,527,28 10,585,22 7,740,603 6,371,903 Weighted base: 4 2 % % % % Sell produce from own farm (food crops) 35 36 9 44 Running own business 18 17 30 13 A household member (e.g. spouse, parent, child etc) 13 5 14 8 pays my expenses Sell produce from own farm (cash crops) 5 7 1 8 Working on other people's farms 4 4 2 5 Working for an individual in a private business 4 9 15 4 Employed in the formal sector like in an office 4 6 9 3 Sell products from own livestock 2 2 1 2 Sell own livestock 1 2 1 2 Money from friends (but not members of the family) 0 1 1 1 2.3.3 Frequency of earning by source of income There is a relationship between the source of income, the frequency of receiving income, and method of receiving money. As indicated in table 2.7 below, almost 9 in every 10 individuals' main source of income is selling of produce from personal farms (either food or cash crops), earned on a seasonal basis. This is attributed to the seasonality of agricultural harvest. For those running their personal business, over half (57%) earn on a daily basis and about 2 in every 10 (19%) earning from the same activity receive an income at least weekly. Incomes from household members tend to be irregular with limited defined patterns for most earners. Similarly, incomes from working on other people's farms are mostly irregular (31%) and this could be attributed to the seasonality of agricultural business. It is also evident and not surprising that most formally employed people (86%) earn on a monthly basis. 24 Table 2.7: Frequency of receiving income Daily Weekly Monthly Seasonally Annually Irregularly Don't now % % % % % % % Sell produce from own 1 2 4 83 3 4 3 farm (cash crops) Sell produce from own 2 3 3 86 1 3 2 farm (food crops) Sell product from own 21 8 5 26 4 33 3 livestock Sell own livestock 2 1 5 21 8 60 4 Trading in agricultural produce bought from 20 10 6 46 0 18 0 others like crops Trading in livestock products bought from 21 8 6 35 7 20 3 others Working on other 11 24 8 20 1 36 1 people's farms Working in other people's homes, doing 18 35 9 4 3 30 1 domestic work Working for an individual in a private 30 23 30 4 0 11 1 business Employed in the formal sector like in an office – 4 8 86 0 0 1 1 public or private) Running own business 58 19 4 7 1 11 2 2.3.4 Method of receiving income Virtually all respondents who reported receiving an income on a daily basis receive their income in cash (98%), with only a tenth who reported receiving an income in kind and less than 1% received an income in cheques or mobile money. Table 2.8 below shows that the highest proportion of those who receive income in cash are those involved in selling produce (food crops) from their own farm (55%) followed by those engaged in running personal businesses (27%) and those who depend on household members to pay their expenses (18%). The proportion that earns through selling produce from farms is highest in the rural areas (66%) than the urban areas (19%). There are no differences with regards to receiving cash income across gender. 25 Table 2.8: Incidence of receiving income by cash Total Female Male Urban Rural Weighted base 13,917,621 7,618,751 6,298,870 3,449,239 10,468,382 Sell produce from own farm (food 55 54 56 19 66 crops), Running own business, 27 27 26 39 23 A household member (spouse, parent, 18 24 10 26 15 child etc) pays for your expense Sell produce from own farm(cash 16 13 19 2 20 crops), Depend on a household member 15 23 5 22 12 ( spouse, children etc) to give money, Sell livestock (goat, sheep, cattle), 14 13 16 5 17 Sell product from own farm/livestock 11 11 12 5 14 (chicken, eggs, milk, cattle), Working on other people's farms, 9 8 9 4 10 Working for an individual in a private 8 6 11 18 5 business, Friends (but not members of the 6 6 7 7 6 family) Employed in the formal sector like in 5 3 7 9 4 an office-public or private, 2.4 Summary Of the respondents 55% were women while 45% were males, 68% are able to read and write while half have their highest level of education as primary. Half of the respondents are self employed while 135 are unpaid household workers. Six in ten live in detached houses and 71% own the structures of residence. Majority of the dwellings have floor made of earth (57%), 73% are roofed with iron sheets and 60% have walls built with bricks. The main source of lighting is paraffin for 80% of the households while almost all (97%) depend on wood for cooking. Fifty seven percent of the households access formal financial institutions within a distance of 5 km while 86% are within the same distance of the informal institutions. The main source of income for most individuals is selling of food crop produce from own farm (35%) followed by running own businesses (17%). Almost all (98%) those earning some income receive it in cash. 26 3.0 Financial access and practice FinScope uses the Financial Access Strand to compare financial access across countries. The Financial Access Strand focuses on the financial system in its broadest sense and categorising all adults into one of three broad segments namely formally included, informally served or financially excluded as described by the diagram below Figure 3.1 The Financial Access Strand – Formally Included Source: FinMark Trust The formally included segment is split into the formally banked and the formal other. The formally banked includes any user of a bank product (formally banked). Formal other includes those who use products from legally recognised financial institutions, including insurance companies and formally established Micro Finance Institutions. 27 Figure 3.2 The Financial Access Strand – Informally Served and Financially Excluded Formally Informally Financially included served excluded "Informal" products have no legal Any respondent currently governance e.g. ROSCAs, ASCAs or VSLAs not using either "formal" or "informal" products is Informally served is currently exclusive use categorised as financially of any "informal" - if use any "formal" excluded / unserved products, then categorized as formal other Source: FinMark Trust FinScope Uganda II describes the access strands as follows: Banked (BOU regulated): This category includes usage of formal institutions being directly supervised and regulated by Bank of Uganda (BOU). These are commercial banks (CB), credit institutions (CIs), microfinance deposit-taking institutions (MDIs) and mobile banking if under commercial banks or credit institutions. Formal others: this includes institutions like SACCOs and other microfinance institutions, formally registered insurance companies and NSSF. Also included are the non-banking financial institutions like foreign exchange bureaux, money transfer services like Western Union, Money Gram and mobile money services. Informal: this includes money lenders, ROSCAs, Accumulating Savings & Credit Association (ASCAs), VSLAs, NGOs, investment clubs, saving clubs, services by employers and other village groups like burial societies and welfare funds. It is important to note that whoever belongs to ROSCA like circles or Nigiina groups is assumed to be saving informally. Others included under informal are saving in a shop and investing through property like houses for rent, livestock and crop produce to be sold later or farm inputs to use at a later date. The 2009 access strand also includes informal borrowing such as credit from a shop, school, health centre and individuals. However, it is important to note that such kind of borrowing is used as an alternative to borrowing from formal financial institutions and informal institutions or groups. 28 Financially excluded (un-served): this refers to non-usage of neither BOU regulated nor other formal or informal institutions. Financially excluded services or products includes saving in secret place, shops or friends/relatives; borrowing from friends or family members; or money transfers using individuals. For comparison, the 2006 financial access strand was reconstructed in line with the definitions of 2009. Results are compared for only the population aged 18 years and above. 3.1 Uganda's Financial Access Strand The access strand categorises the population as banked (blue), formally included (blue and yellow), financially served (formal and informal – blue, yellow and green) and financially excluded (red). The Financial Access Strand for Uganda indicates that the overall level of formal financial access for adults is 28%, with 21% of adult Ugandans aged 16 years and above reported to be banked, whilst 7% have formal financial access through other formal institutions, such as MFIs; SACCOs and insurance. Overall results indicate that 70% of Ugandans aged 16 years and above are financially included. The 70% figure of financial access is expanded by 42% of those using only informal providers. Figure 3.3: Financial Access Strand (16 years and above) 70% Financially included 30% Financially excluded 28% Formally served 21 7 42 30 Banked Formally served Informally served Excluded Base: All Weighted population 16 years and above, 2009 29 Figure 3.4: Financial Access Strand (18 years and above) 2009 22 7 43 28 2006 18 10 29 43 Banked Formally served Informally served Excluded FinScope Uganda 2006 and 2009 In comparing the 2006 and 2009 results, it is observed that there is an increase in financial inclusion among Ugandans 18 years and above. Usage of banking products increased by a margin of 4% while other formal products reduced by 3%. Although there is a general increase in the level of financial inclusion, large variations are realised among the informally served and the financially excluded. Usage of informal financial products increased by 14% whereas the financially excluded reduced by 15%. 3.1.1 Financial access by gender and setting Results indicate that more men (31%) than women (26%) are formally served and more males (24%) than females (17%) are banked. A slightly higher proportion of females (8%) than males (7%) use other formal financial institutions. Thirty one percent of the female respondents reported being financially excluded compared to 28% of the male respondents. With reference to location, the usage of banks is higher in the urban (38%) than in the rural areas (15%). Similarly, higher proportions of people in urban (9%) than in the rural areas (7%) use other formal financial institutions that are not banks. However, the rural population (47%) use more informal financial services than those in urban areas (28%). 30 Figure 3.5: Financial Access Strand by gender and location Access by Gender Male 24 7 41 28 Female 18 8 43 31 Banked Formally served Informally served Excluded Access by Location Rural 15 7 47 31 Urban 38 9 25 28 Banked Formally served Informally served Excluded Base: Weighted base 16 years and above, 2009 3.1.2 Financial access by region The eastern region recorded the highest level of financial inclusion (banked, other formal and informal) with 81%, while the northern region the lowest at 43%. Although the eastern region had the highest level of financial access, the central region had the highest level of formal financial inclusion at 32% followed by the eastern region at 29%. The northern has the largest proportion of the financially excluded (57%) population as compared to other regions. 31 Figure 3.6: Access strand by region Central 26 6 34 34 Eastern 22 7 52 19 Western 18 8 54 20 Northern 14 7 22 57 Banked Other formal Informal Excluded Base: All Weighted population 16 years and above, 2009 3.1.3 Financial access by highest level of education There is a relationship between financial inclusion and level of education. Incidence of being banked is highest among those that have completed tertiary education (69%), followed by secondary level (34%). Two in five of those who have never attended school are financially excluded. Figure 3.7: Access strand by level of education Tertiary Education 69 10 12 9 Attended Secondary 34 9 28 29 school Attended Primary 12 6 51 30 Did not complete P1 6 5 56 33 Never attended school 4 5 50 41 Banked Other formal Informal Not served Base: All Weighted population 16 years and above, 2009 32 3.1.4 Financial access by employment status By employment status, full-time and part-time public employees most commonly use formal institutions. Incidence of being banked is highest among those with formal employment as recorded; full time public (80%), full time private (45%) and part time public (46%). Unique to the retired people is that all were formally served with 48% being banked and 52% in other formal financial institutions. Figure 3.8: Access strand by employment status Full-time public employee 80 4 7 9 Retired 48 52 Part-time public employee 46 6 25 23 Full-time private employee 45 10 21 24 Part-time private employee 30 12 28 29 Self employed 20 8 48 24 Casual labourer 15 4 46 35 Unpaid for householdwork 11 8 47 34 Banked Other formal Informal Excluded Base: All Weighted population 16 years and above, 2009 3.1.5 Financial access by main source of income Figure 3.9 shows the distribution of the access strand by main source of income for the population aged 16 and above. Earlier, it was observed that the main source of income for most people is the selling of produce from one's own farm. Within this category of the population, over a half is informally financially served while less than a fifth uses formal products. It is also noted that financial exclusion is most prevalent among those who mostly depend on help from household members and casual labourers working on other people's farms. The population that mainly depends on earnings from formal employment or running one's own business is most likely to use banking products because the former is required by the employer to have a bank account while the latter needs to make regular deposits primarily to keep money generated from the business on a regular basis. 33 Figure 3.9: Access strand by source of income Employed in the formal sector - 73 6 9 9 public or private Running ow n business 33 8 32 27 Getting money from family 20 6 25 49 members Working for an indivisual in a 19 10 39 32 private business Sell produce from ow n farm 11 7 57 25 Working on other people's 4 3 48 45 farms Banked Other formal Informal Excluded Base: All Weighted population 16 years and above, 2009 3.1.6 Financial Access Strand Country Comparison Figure 3.10 provides an overview of the comparison of Access Strand of African countries where the FinScope survey has been conducted. With 21% of adult population being banked, Uganda fares well in comparison to other nations. Figure 3.10: Access strand by country (ranked by % of population banked) RSA '09 60 4 10 26 N amibia '07 45 2 2 52 Botswana '09 41 18 8 33 Kenya '09 23 18 27 33 Uganda '09 21 7 42 30 Nigeria '08 21 2 24 53 Malawi '08 19 7 19 55 Rwanda '08 14 7 26 52 Zambia '09 14 9 14 63 Tanzania '09 12 4 27 56 Mozambique '09 12 1 10 78 Formal - Bank Formal - Other Informal Financially excluded 34 The picture is even more impressive when we rank countries in terms of the proportion of the adult population being financially included (i.e. using either formal or informal financial products). Here Uganda ranks high in the table given the small percentage of the 'financially excluded'. The rate of inclusion in Uganda is being pushed high by the role of the informal sector, which by no doubt minimizes restrictions of financial access. Further analysis should give us an indication if Uganda needs to increase the number of adults using formal products, from the informal base. Figure 3.11: Access strand by country (ranked by % of population financially excluded) RSA '09 60 4 10 26 Uganda '09 21 7 42 30 Botswana '09 41 18 8 33 Kenya '09 23 18 27 33 N amibia '07 45 2 2 52 Rwanda '08 14 7 26 52 Nigeria '08 21 2 24 53 Malawi '08 19 7 19 55 Tanzania '09 12 4 27 56 Zambia '09 14 9 14 63 Mozambique '09 12 1 10 78 Formal - Bank Formal - Other Informal Financially excluded 3.1.6 Usage of formal institutions Results are further analysed to understand the incidence in usage of formal institutions by the population aged 18 years and above. Findings indicate that overall 22% are served with banking products with majority being those using commercial banks (17%). Comparative analysis shows that there are marginal increases in usage of overall banking products, commercial banks, Micro Finance Institutions (MFIs) and Credit Institutions. 35 Figure 3.12: Formal access by institution 22 18 17 16 3 3 3 3 3 2 BOU regulated Commercial bank SACCO MDI MFI 2009 2006 Base: All Weighted population 18 years and above 3.1.7 Multiple usage of institutions Figure 3.13 highlights the extent of overlap amongst the various segments of the Financial Access Strand. The most significant points to note here are: 1. Only 3% of Ugandan adults rely on banking products alone, a further 13% also use other formal products 2. Even though 42% of adults use informal services only, 61% of adults use the informal sector in total. Service providers within the informal category include ROSCAs, ASCAs and Savings clubs. 3. There is a cross-over of 19% between formal and informal product usage 4. Nine percent of the adult population use all forms of financial services available in Uganda Figure 3.13: Financial Access Overlap Banked (21%) Formal Other (20%) 3% 4% 2% 9% 5% 5% 42% Informal (61%) Excluded (30%) 36 3.2 Summary Overall 70% of the population aged 16 years are financially included. At least a fifth is banked, 7% use other formal products and 42% are informally financially served while 30% are financially excluded. Compared to the 2006 results, there is an increase in the financially included population aged 18 years and above from 57% to 72% in 2009. Use of banking institutions is high among the males (24%) and urban areas (38%) than in females (18%) and rural areas (15%) while the reverse is true for informal institutions (females-43% males-41%; urban-25%, rural-47%). People with a higher education level (tertiary-69% or secondary-34%) are more likely to use banking institutions than those who have never gone to school (4%) that are mainly financially excluded. The incidence of using banking institutions is also high among the public and private formal employees than those that are self employed. There are multiple usages of financial institutions. A proportion of 49% of those using commercial banks also use informal financial institutions while 80% who access informal institutions also use commercial banks. 37 4.0 Savings and investment This chapter presents findings on how and where Ugandans save and invest. The savings strand has been included to show formal, informal and financially excluded components. The formal category includes savings and investment options in the Bank of Uganda regulated financial institutions, SACCOs and MFIs; informal – informal financial groups (VSLAs, ASCAs, ROSCAs), shops, investing in agricultural production (livestock, crop, farm inputs) and money lending; while financially excluded includes friends and secret places. In this study savings and investment have been grouped into one category indicating 'savings'. This is because many people do not easily differentiate between saving and investing. 'Savings' was defined as putting money aside to use in the future irrespective of where one actually saves the money while investment as putting money aside or putting money into an activity or a financial institution so that it yields returns. 4.1 Savings-investment status Seventy one percent of all Ugandans aged 16 years and above claimed to be currently saving and/or investing while 20% have never saved. The incidence of saving and investing is relatively higher among male (73%) and urban areas (74%) as compared to female (69%) and rural areas (70%). However, the rural (21%) and female (21%) populations have comparably higher proportions of those who have never saved than their urban (18%) and male (19%) counterparts. Figure 4.1: Incidence of saving 71 69 73 74 70 20 21 19 18 21 9 10 8 8 9 Total Female Male Urban Rural Currently save Use to save but stopped Never saved Base: All Weighted population 16 years and above, 2009 A comparative analysis shows that there is a slight decline of 1% in the incidence of saving between 2006 and 2009 for the population 18 years and above. However, the proportion of people who have never saved increased from 12% to 20%. 38 Figure 4.2: Incidence of saving –comparison of 2006 and 2009 2009 72 8 20 2006 73 15 12 Currently saving Previously saved Never saved Base: All Weighted population 18 years and above, 2009 and 2006 4.2 Savings strand 4.2.1 Overall savings and investment strand Figure 4.3 shows the financial sophistication by saving and investing (mutually exclusive). Overall, 17% of the population aged 16 years and above save/invest with BOU regulated institutions (banked) while only 4% use other formal institutions such as SACCOs and MDIs. Most save or invest using informal institutions or products (31%). Almost 3 in every 10 do not save. Figure 4.3: Savings/investment strand (mutually exclusive) 2009 17 4 31 19 29 Bank products Products w ith other formal institutions Informal products Saving at home/give to family member/friend No claimed savings mechanisms Base: All Weighted population 16 years and above, 2009 Figure 4.4 shows a comparison of the savings strand for 2006 and 2009 for the population aged 18 and above. There is a 2% increase for bank saving products. However, there is a decline in usage of formal products for saving and/or investing. Usage of informal products realised the biggest positive change of 14% in the last three years. This can partly be attributed to the huge decline in the proportion of people saving in a secret place and with friends. Generally, there has been a slight increase in excluded population from 27% in 2006 to 28% in 2009. 39 Figure 4.4: Savings/investment strand (Comparison) 2009 18 4 32 18 28 2006 16 8 18 31 27 Bank products Other formal Informal Secret place/giving to family/friend Excluded Base: All Weighted population 18 years and above, 2009 and 2006 4.2.2 Savings/investment strand by education Similar to the general access strand in chapter three, people with higher education levels save mostly with banking institutions as observed by 62% and 26% of those who completed tertiary and secondary levels respectively. Incidence of using formal products is high among those who only have primary education while most of those who have never attended school (46%) do not save. Figure 4.5: Savings strand by education (mutually exclusive) Tertiary Education 64 5 15 6 9 Attended Secondary school 26 4 23 22 25 Attended Primary 9 4 37 21 29 Did not complete P1 4 2 42 19 33 Never attended school 3 2 35 14 46 Bank products Other formal Informal Secret place/giving to family/friend Excluded Base: All Weighted population 16 years and above, 2009 40 4.2.3 Savings/investment strand by employment Results on the savings strand by employment indicate that self employed people mostly use informal products for savings while those who are formally employed by public and private employers are most likely to use banking products. Incidences of not saving are high among those who are casual labourers or who are unpaid family workers. Figure 4.6: Savings strand by employment (mutually exclusive) Full-time public employee 75 2 10 4 9 Part-time public employee 46 6 16 9 23 Full-time private employee 41 3 15 23 18 Part-time private employee 22 10 20 13 35 Self employed 18 5 39 16 22 Casual labourer 11 3 27 24 35 Unpaid for householdw ork 5 4 30 21 40 Bank products Other formal Informal Secret place/giving to family/friend Excluded Base: All weighted population 16 years and above 4.2.4 Savings/investment strand by main source of income The type of saving product used directly correlates with the main source of income. Individuals who mainly depend on household members to pay for their expenses will most likely use non- financial saving or investment products or will not save. The proportion of individuals whose main source of income is from agricultural activities will save more with informal products or institutions. Formal employees and business persons are most likely to use banking institutions. Figure 4.7: Savings strand by source of income (mutually exclusive) Employed in the formal sector - public or private 70 4 8 9 9 Running ow n business 27 4 26 22 21 Sell produce from ow n farm 16 5 41 14 24 Working for an indivisual in a private business 14 5 21 36 24 Getting money from family members 11 15 33 41 Working on other people's farms 2 3 24 22 49 Bank products Other formal Informal Secret place/giving to family/friend Excluded Base: All weighted population 16 years and above 41 4.3 Savings/investment by place Among those who are currently saving or investing, the most commonly used places or institutions are the informal (62%) and the secret place (60%). About a quarter uses BOU regulated institutions. Figure 4.8: Place of saving/investing 22 17 3 3 3 Informal institutions Savings kept in a Banking institutions Other formal Keeping money secret place institutions with friends/relatives Base: All those who are currently saving/investing 16+ years 2009 Across gender, more of the men (27%) than women (21%) save or invest with banking institutions. This is the same trend in relation to usage of other formal institutions. There is a small difference of 2% between proportions of females and males who use formal institutions or friends/relatives with higher incidences among the women. Use of secret place is almost a similar trend across gender. By location, use of formal institutions is high among the urban population than rural while the latter has larger proportions using informal institutions and the financially excluded category. Across regions, the central and northern population have comparably larger proportions using formal institutions while at least 7 in 10 in eastern and western regions use informal ones. Table 4.1: Savings/investment by place of saving Female Male Urban Rural Central Eastern Western Northern Place % % % % % % % % Banked (BOU regulated) 21 27 42 17 32 23 16 23 Other formal 16 22 30 15 19 17 17 26 Informal institutions 63 61 43 69 44 70 75 59 Keeping money with 8 6 5 8 5 11 7 5 friends/relatives Savings kept in a secret place 60 59 59 60 59 58 62 57 Base: All those who are currently saving/investing 16+ years 2009 42 4.4 Savings/investment products used The most commonly used product for saving or investing is the secret place by 6 in every 10 people who save with small deviations across gender and location of residence. This is followed by those who belong to informal financial groups (38%), voluntary savings accounts in a financial group or institution (29%) and keeping items like produce that can be sold later (27%). Membership to informal financial groups and keeping items like produce to sell later is comparably higher among the rural than urban population while voluntary savings are mostly used by those in urban areas. Table 4.2: Savings/investment by product (multiple responses) Total Female Male Urban Rural Place % % % % % Savings kept in a secret place 60 60 59 59 60 Belongs to an informal financial group 38 38 37 23 43 Voluntary savings account in any financial institution or group 29 26 32 41 24 Keeping items like produce that you can sell later 27 26 29 14 32 Investment through an informal group 17 17 16 13 18 Savings/ Investment account in a financial institution 15 13 19 27 11 Buying farm input for use at a later date 7 7 8 3 9 Keeping money with friends and/or relatives 7 8 6 5 8 In kind savings in a shop 6 7 4 9 5 A house/rooms/property that I can rent/hire out 5 4 6 7 4 Compulsory savings account/ any financial institution or group 5 4 5 6 4 Base: All those who are currently saving/investing 16+ years 2009 4.5 Multiple usage of financial institutions Results reveal that many people who save or invest use more than one institution or product. Table 4.3 shows that a third of the population that saves with banking institutions also saves or invests in a secret place, while over a half use formal or informal financial institutions. Furthermore, 51% and 58% who use a secret place and friends/relatives respectively also use informal institutions. However, it is important to note that the incidence of using formal institutions among those who are saving or investing with friends and in a secret place is very low. Among the financially included population, it is those using informal institutions or products that have a higher proportion of using a secret place (49%). 43 Table 4.3: Multiple usage of financial institutions to save Banked (BOU Other Formal Informal Secret Institution regulated Friend/Relatives Institutions Institutions Place institutions) Banked (BOU regulated 100 71 22 11 12 institutions) Other formal Institutions 56 100 20 13 9 Informal institutions 58 67 100 58 51 Friend/Relatives 3 5 7 100 6 Secret place 31 28 49 49 100 Base: All those who are currently saving/investing 16+ years 2009 4.6 Reasons for saving It is important to understand why people save. In doing so, financial institutions will create products that are suitable and complement with the needs of those who save. Table 4.4 indicates that most people currently save because they want to meet household basic necessities (68%) followed by guarding against any emergency situations such as death and medical services (58%). Saving for emergencies is most common among the females (61%) and those living in rural areas (59%). Other common and significant reasons for saving are safety of the money, buying property e.g. land, and education. Incidence of saving for day to day needs and emergency is higher in rural areas than in the urban areas, while saving for education is equal for both female and male population. Both male and females are equally conscious about keeping money safe through saving. Table 4.4: Reasons for saving Total Female Male Urban Rural Reason % % % % % For meeting household basic needs such as food, clothing, 68 69 67 66 68 health services, etc For emergency (burial, medical) 58 61 56 56 59 For education of children or siblings or others 32 32 32 33 31 To keep money safe 29 29 29 27 30 For buying land 12 11 13 12 12 For starting or expanding your business 12 11 12 19 9 For purchase of livestock /cattle 11 9 13 5 14 Base: All those who are currently saving/investing 16+ years 2009 44 4.7 Reasons for not investing Those who have never invested in any kind of activity were asked to mention the reasons why they do not invest. There is a general perception that investment requires a lot of money (28%) with a proportion who mentioned that they do not have money to invest (69%). Other than money the lack of fixed assets and skills was another reason for not investing (19%) together with time and commitment (12%). Table 4.7: Reasons for not saving/investing Total Female Male Urban Rural Reason for not saving or investing % % % % % I have no money to save 85 86 83 86 84 Don't have money to invest 49 51 46 57 47 Requires a lot of money to set up or start 21 20 23 20 21 I do not have adequate knowledge about savings 13 14 13 10 14 Don't have what is needed to do it – e.g. no land to build, no 12 14 10 14 11 skills, etc Requires a lot of time/commitment 9 11 6 17 6 Don't know how to go about it 8 7 9 11 7 I have no place to save my money 6 6 5 4 6 I do not benefit from saving 5 5 6 5 5 Base: All those not saving or investing 16+ years 4.8 Summary Findings for 2009 indicate that 71% of Ugandans aged 16 years and above are currently saving or investing and 52% use either formal or informal savings products. The population that has attended and completed tertiary or secondary level of education and those that are employed by public institutions are most likely to use formal products for saving. Majority of people saving use the secret place (60%) and informal institutions (62%). The most common reason for saving is to meet household basic needs (68%) and emergencies (58%). 45 5.0 Credit This section presents findings on the borrowing/credit experience of Ugandans aged 16 years and above. Borrowing is defined as taking money in cash from a financial institution, group or from any person to be paid back later or taking goods or services on credit to pay back in cash at a later time in the future. This section of the report focuses on the proportion of people who acquire credit, sources of credit, services offered and the reasons for borrowing. Furthermore, the borrowing incidence and strand are compared for 2006 and 2009 based on the population aged 18 years and above. 5.1 Incidence of borrowing At least 6 in every 10 Ugandans aged 16 years and above have ever borrowed and 45% who have borrowed have a loan/debt that they are servicing. Across gender, an equal proportion of males and females (45%) currently have a loan though there is a slight difference of 2% of more females (36%) than males (34%) who have never borrowed. By location, the incidence of borrowing or having debt is higher among the rural population (46%) than that in the urban areas (43%). Figure 5.1 Credit status 45 45 45 46 43 35 36 35 35 34 21 22 20 19 19 Total Female Male Urban Rural Currently Borrowing Used to borrow but stopped Never borrowed Base: All Weighted population 16 years and above2009 Comparing the results in 2006 and 2009 for the population aged 18 years and above, the proportion of those who claimed to have never borrowed has reduced by 15% from 2006 while that of borrowers has increased by 12% and those that have borrowed in the past but stopped have increased by 3% as evidenced from figure 5.2. It is important to note that the borrowing incidence of 2006 has been re-constructed to correlate with that of 2009. Within the different gender, the females realised a larger margin of 14% in the increase of those who are currently borrowing compared to 12% for the males. Similarly, the incidence of borrowing in rural areas increased by 13% compared to 9% in urban areas between 2006 and 2009. 46 Figure 5.2 Comparison of borrowing Status- 2006 and 2009 2009 46 20 34 2006 34 17 49 Currently borrowing Previously borrowed Never borrowed Currently borrowing 47 45 44 47 36 36 34 33 Female Male Urban Rural 2009 2006 Base: All Weighted population 18 years and above 5.2 Borrowing strand 5.2.1 Overall borrowing strand Figure 5.3 indicates that at least half of the population aged 16 years and above do not have any debt they are servicing. Only 5% of Ugandans are borrowing from institutions regulated by Bank of Uganda while majority of the borrowers are using informal financial sources (32%). Figure 5.3 Borrowing strand (mutually exclusive) 2009 5 1 32 7 55 Bank loan products Products w ith other formal institutions Informal products Borrow ing from friends/family Excluded Base: Weighted base all 16 years and above2009 47 Compared to 2006, there has been an increase in the access and use of formal and informal institutions by the population aged 18 years and above as observed in figure 5.4 below. The proportion of people borrowing from BOU regulated institutions (banked) increased by 1%, a 7% rise is observed for those using informal sources while those servicing a debt from friends or family increased by 4%. There is a decrease in the proportion of people who are not borrowing. Figure 5.4 Borrowing strand (mutually exclusive) 2009 5 2 32 7 54 2006 4 2 25 3 66 Bank loan products Products with other formal institutions Informal products Borrowing from friends/family Excluded Base: All Weighted population 18 years and above 5.2.2 Borrowing strand by gender and location Access and use of Bank of Uganda regulated institutions is high among the male (5%) and urban (6%) populations while informal sources are most commonly used by females (32%) and within rural (33%) areas. Figure 5.5 Borrowing strand (mutually exclusive) by gender and location Rural 4 1 33 7 55 Urban 6 2 28 7 57 Male 5 1 31 8 55 Female 4 2 32 6 56 Bank loan products Products with other formal institutions Informal products Borrowing from friends/family Excluded Base: All weighted base 16 years and above2009 48 5.2.3 Borrowing strand by education Similar to the savings strand by education, banking institutions are most likely to be used by the population with tertiary (17%) or secondary (5%) as the highest level of education. In addition, borrowing from friends/family is most common among those who have attended at least primary education. Those who have never attended school are most likely not to borrow and if they do, informal institutions will be their main source. Figure 5.6 Borrowing strand (mutually exclusive) by highest level of education Tertiary Education 17 1 25 7 50 Attended Secondary school 5 2 27 8 58 Did not complete P1 4 1 37 3 55 Attended Primary 3 2 36 8 52 Never attended school 21 31 3 64 Bank products Other formal Informal Secret place/giving to family/friend Excluded Base: All Weighted base population 16 years and above2009 5.2.4 Borrowing strand by employment At least half of the population employed in public institutions or that is self employed is most likely to borrow or is currently servicing a loan/debt. Those who are full time public employees mostly borrow from BOU regulated institutions (45%). This can be attributed to the fact that in the past 3 years, such institutions have intensified marketing of loan products among both the public and private employers. However, the self employed and private employees mostly use the informal sources for credit. The retired population rarely get credit. Figure 5.7 Borrowing strand (mutually exclusive) by employment status Full-time public employee 46 19 3 32 Full-time private employee 9 2 29 3 57 Part-time public employee 6 36 9 49 Casual labourer 4 1 36 6 54 Part-time private employee 4 3 29 8 56 Self Employed 4 2 36 8 50 Unpaid for household work 1 2 20 7 70 Retired 100 Bank products Other formal Informal Family/friend Excluded Base: All weighted population 16 years and above 2009 49 5.2.4 Borrowing strand by source of income The population whose main source of income is from agricultural activities is most likely to use informal sources for credit as shown in figure 5.8. Similar to savings, the formally employed population mostly borrows from banking institutions (25%). Those depending on other members of the household or relatives will most likely not borrow or acquire a loan. Figure 5.8 Borrowing strand (mutually exclusive) by source of income Employed in the formal sector - public or private 25 1 22 4 9 Running ow n business 9 3 30 6 52 Sell produce from ow n farm (cash crop) 9 2 32 8 49 Working for an indivisual in a private business 4 41 6 49 Sell produce from ow n farm (food crop) 4 37 8 51 Getting money from family members 14 10 76 Working on other people's farms 1 37 5 57 Bank products Other formal Informal Family/friend Excluded Base: All Weighted base population 16 years and above2009 5.3 Sources of credit Generally, the most common sources used by those who are currently borrowing are institutions providing goods or services on credit i.e. shops; clinics etc (60%). This is followed by those borrowing from friends/family (33%) and informal financial groups (24%). Females (65%) and the urban population (61%) are most likely to have credit of goods and services. Use of banking institutions is higher among the male (12%) and urban population (13%). Table 5.1: Sources of credit (multiple sources) Total Female Male Urban Rural Source % % % % % Banked 10 9 12 13 9 Other formal institutions 4 6 2 6 3 Trade goods/services 60 65 54 61 59 Informal financial groups 24 24 25 15 27 Family/Friends 33 30 36 30 33 Base: Currently borrowing 16 years and above 2009 Detailed analysis in figure 5.8 indicates that the most common source for credit are the shops (54%) followed by friends (25%) and informal financial groups (24%). Among the banking institutions, it is the commercial banks (7%) that are mostly used while other informal financial sources such as the services from schools or clinics are obtained on credit. It should be noted that the place of borrowing determines the nature of credit that the borrower gets and whether it will be paid with interest or not. 50 Figure 5.9 Sources of credit Goods obtained in credit e.g. from shops 54 Friends 25 informal groups 24 Services obtained on credit e.g. school, hospital 16 Family members 12 Commercial bank 7 MDI 3 Money lenders 3 MFI 2 SACCO 2 CI 1 Base: All respondents currently borrowing 16 years and above 5.4 Multiple usage of sources Table 5.2 below shows that people borrow from multiple sources. At least a fifth of those having credit with banking institutions also borrow from informal financial groups and trading institutions. Those borrowing from informal financial groups and family and friends are also most likely to get credit in the form of goods and services (38% and 40% respectively). Table 5.2: Multiple usage for borrowing Informal Other Formal Trade Banked financial Family/Friends Sources Institutions goods/services % groups % (%) % % Banked 100 12 4 9 3 Other formal 4 100 2 5 3 institutions Trade goods/services 26 26 100 38 40 Informal financial 22 29 16 100 13 groups Family/Friends 10 22 22 17 100 5.5 Product usage The source of credit highly correlates with the type of loan product used. Similar to the most common source of credit, the most common credit product accessed and used are goods obtained on credit from shops (54%) and money owed to friends (25%). The results might imply that these are the products that are closer and most easily accessed by the population. Goods obtained on credit are mostly used by females (58%) than the males (49%) whereas it is the opposite for money owed to friends (male -30% female -21%). 51 Table 5.3: Borrowing products Total Female Male Urban Rural % % % % % Goods obtained on credit e.g. from shop, agro vet, wholesale 54 58 49 56 53 Money owed to friends 25 21 30 26 25 Personal loan 21 22 20 26 19 Services obtained on credit for e.g. school, hospital 16 16 16 15 16 Money owed to family members 12 12 11 8 13 Money owed to money lenders 3 3 2 2 3 Money from employer 1 1 2 2 1 5.6 Agricultural credit Agriculture is one of the main economic activities for majority of Ugandans though it is mostly practised on a subsistence level. Many farmers would like to employ better production techniques that can lead to increased output but are being faced with challenges of accessing capital to re-invest. However, one of the ways through which capital could be raised is obtaining credit. The FinScope II results indicate that one of the reasons why people borrow is to re-invest in agricultural production. Of the people currently having credit, only a tenth obtained it for use in agricultural production. This proportion is relatively high among the rural (13%) areas and the males (15%) as shown in figure 5.6. Figure 5.10 Proportion borrowing for agricultural use 15 13 11 8 4 Total Female Male Urban Rural The most common sources of agricultural credit are friends and family (27%) and commercial banks (23%) as indicated in figure 5.11. It is important to note that the incidence of acquiring loans from formal institutions is relatively still low. This might be an indicator that formal financial institutions need to develop customised agricultural loan products that will attract farmers hence re-investing in agricultural activities which will lead to commercial farming. The incidence of obtaining agricultural credit from friends and family or financially excluded sources is high among the rural borrowers. 52 Figure 5.11 Source of agricultural credit 43 30 25 27 27 23 21 21 16 13 12 7 7 6 8 6 7 8 7 6 2 Total Female Male Urban Rural Commercial banks MDIs ASCAs SACCOs Friends/family Base: Weighted population 16 years and above who borrowed for agricultural purposes Agricultural credit is mostly used to buy seed (35%). In addition, just a tenth uses it to buy agrochemicals, land for agricultural purposes or hire of labour. Figure 5.12 Use of agricultural credit Buy seed 35 Buy pesticide/herbicide 13 Hire of labour 11 Buy agricultural land 11 Buy fertilizers 10 Buy livestock 5 5.7 Summary A proportion (45%) of Ugandans aged 18 and above is currently borrowing. A comparative analysis between 2006 and 2009 shows a significant increase (8%) in the proportion that is borrowing for the population aged 18 years and above. The incidence of borrowing is higher among the females (47%) and rural areas (46%). Of the borrowers, 10% have debt with BOU regulated institutions (mainly for personal loans) while the majority obtain goods or services on credit (60%). Eleven percent of the borrowers obtain credit primarily for agricultural purposes. The most common sources for such loans are friends and commercial banks. 53 6.0 Banking and other formal transactions Presented herein this chapter is the banking incidence and products used in formal institutions i.e. Bank of Uganda regulated institutions, SACCOs, MFIs and money transfer institutions like Western Union, money gram etc. 6.1 Banking and overall formal financial Inclusion status Overall 28% of Ugandans 16 years and above are formally financially included. The incidence of formal financial inclusion is high among the males (32%) and the urban (47%) population. Specific to usage of banking products, 21% of the population (16 and above) is banked. These are the people accessing and using at least one of the Bank of Uganda regulated financial institutions i.e. commercial banks, credit institutions or microfinance deposit-taking institutions. By gender, more men than women are banked. Similarly, higher proportions of the banked population are found in urban areas (38%). Figure 6.1 Banking Status Figure 6.2: Formal financial inclusion 82 85 79 76 78 72 74 69 62 53 47 38 28 31 24 26 21 22 18 15 Total Female Male Urban Rural Total Female Male Urban Rural Banked Unbanked Formally served Formally unserved Only 4 percent of the population 16 years and above use someone else's bank account. The main reason cited is lack of money to open and make an initial deposit (39%) and it is far cheaper to use someone's account (29%). 6.2 Banking and overall formal financial inclusion by employment From table 6.1 it is evident that the population using formal financial products or institutions are mostly the self employed, contributing a proportion of 50%. This can be related to the increase in branches of several banks and other formal institutions within towns where there is high prevalence of businesses owned by individuals. 54 Table 6.1: Formal financial inclusion by employment Banked Other Formal institutions Employment status 2,976,170 2,890,429 % % Self employed 50 51 None 17 16 Unpaid for household work 7 9 Casual laborer 5 5 Full-time private employee 8 7 Full-time public employee 8 7 Part- time private employee 3 3 Part- time public employee 1 1 6.3 Banking and other formal products used Table 6.2 shows products used by the population using banking and other formal institutions. Overall, the most common product is the voluntary savings account owned by 63% of formally financially included persons. There is a big difference in usage of voluntary savings and other products. Other significant and notable transactions made are money transfer services- excluding mobile money (38%), use of ATM cards (30%) and having personal loans (20%). A similar distribution of products exists within the banking and other formal institutions. However, use of someone else's account is much higher within the banked population than that of using other formal financial products. Table 6.2: Banking and other formal transactional products used Banking Total Other formal institutions institutions 3,783,489 2,976,170 2,684,344 % % % Voluntary savings account 63 70 66 Money transfer (exclude mobile money) 38 43 47 ATM card/Debit card 30 38 - Personal loan 20 22 24 Mobile money transfer services 16 - 23 Use of someone else's account 16 20 9 Joint account 11 11 13 Compulsory saving account 9 9 10 Fixed deposit account 4 5 4 Base: Weighted population 16 years and using banking or other formal financial institutions 55 6.4 Transactions conducted People conduct different transactions while at the financial institutions. It is observed from table 6.3 that majority make transactions at banking halls especially for cash deposit (72%) and withdrawal (54%). Similarly, ATM machines are mainly used for making cash withdrawals (54%). These two activities are the most frequently done while other significant activities are opening and requesting information about one's account. Table 6.3: Transactions conducted Banking Hall ATM machine Mobile money point Transactions made % % % Cash withdrawals 54 54 3 Cash deposits 72 14 1 Cheque deposits 7 1 - Draw a cheque 3 - - Bank transfer 3 - - Cell phone banking 1 0 3 Money transfers between bank accounts 4 - - Credit card payments 2 - - Request information about my account 20 9 - Apply for a new service e.g. taking a loan 16 - - Open an account for the first time 24 - 1 To receive money sent to me 20 12 8 To send money 18 2 6 None 19% 46% 88% Base: Weighted population 16 years and above formally financially served 6.5 Summary Overall 21% of the population aged 16 and above are banked (use BOU regulated institutions) with incidences high among the men (24%) and urban areas (28%). Formal financial products most commonly used are voluntary saving accounts (63%), money transfers (38%), ATM/debit cards (30%) and acquisition of personal loans (20%). Most of the transactions, which include mainly cash withdrawals (54%) and deposits (72%) are conducted in banking halls. 56 7.0 Insurance and risk management 7.1 Risk Management Risk is defined as unexpected events that can happen to someone, such as loss of property, injuries, fire, theft, accidents, among others. However, there are several ways through which such risks are mitigated by people in different communities. In this study respondents were asked to mention the common risks that affect their communities and the mitigation measures taken by different people should the risk occur. 7.1.1 Perceived major risks The key risks that were perceived to affect the families financially were serious illness of a household member (39%), crop failure (33%) and serious illness of main income earner (29%). There were no differences by gender regarding how people are affected by these risks. However, the people in the rural areas appear to be affected more (40%) by crop failure than the urban areas (14%). This could be attributed to their high dependency on agriculture for income. Table 7.1: Perceived risks 2009 Urban Rural Female Male % % % % % Serious illness of member of household 39 36 41 39 40 Crop failure through e.g. pests, drought, fire, floods, poor yields 33 14 40 31 36 Serious sickness of main income earner 28 27 28 29 27 Loss of a family member 22 16 24 24 19 Increase in basic commodity prices 21 25 20 22 20 Loss of household items owing to fire, flood, destruction, theft 16 23 14 15 17 Death of main income earner 14 11 15 16 12 Failure of agricultural activity/business/bankruptcy/poor sales 13 9 15 13 14 Loss of livestock owing to theft, drought or disease 12 6 14 11 13 Destruction of the physical home, house owing to fire, floods, demolition 8 9 8 7 10 Civil strife 7 10 6 7 8 Loss of a large amount of money for the business owing to theft, 4 8 3 5 3 changing prices, misuse etc Loss of business equipment or stock owing to theft, floods, destruction or 3 5 3 3 3 fire Loss of income of main wage earner 3 5 2 3 4 57 7.1.2 Ways of dealing with risks People mostly turn to friends or relatives when they are faced with unpleasant events such as serious illness of a household member (33%), illness of the main income earner (29%) and loss of a family member. Also sale of household assets like land and cattle would be used to offset costs related to illnesses of a member of household (24%) and the main income earner (29%). There is likely to be a reduction in consumption (54%) as a result of increase in commodity prices and crop failure. Table 7.2: Ways of dealing with risks Serious illness of Crop failure Serious sickness Loss of a family member of through e.g. of main income member household pests, fire, floods earner Weighted base 5,489,179 4,626,857 3,870,858 3,062,608 % % % % Ask neighbours, relatives, and friends to 33 19 29 37 give you a donation of money Sell assets e.g. land, 24 13 29 19 livestock Withdraw savings you 19 10 18 8 had kept aside Take a loan from friends 15 7 12 12 and family Don't know what you 8 12 10 21 would do to cope Ask for government 7 23 6 4 assistance Look for more work to supplement one's 6 15 9 5 income Take a loan from an 4 7 5 6 informal organization 7.2 Insurance Insurance is defined as a risk management tool primarily used to offset any costs that would be incurred by the occurrence of an unpleasant event. For this survey, insurance was categorised into formal (policies supplied by licensed insurance companies) and informal (being members of village burial and welfare groups). Figure 7.1 shows that 23 percent of Ugandans aged 16 years and above have some form of insurance. Although results show a high usage of insurance, the proportion that are formally insured remains at 3% counting three years back, while informal insurance is at 20%. Informal insurance is most prevalent among the rural population since burial and welfare groups are most common in such areas. Formal insurance is mainly found in urban areas and its usage is three times that in rural areas. 58 Figure 7.1: Incidence of having Insurance 85 77 77 76 74 20 20 21 24 6 9 3 3 3 2 Total Female Male Urban Rural Formal insurance Informal Insurance Other Base: Weighted population 16 years 7.2.1 Insurance by product Membership to burial groups (87%) is the major insurance policy owned by those having some form of insurance. Almost half of formal insurance users are registered members of NSSF (National Social Security Fund). Another form of policy that is highly used is the statutory motor third party (30%), followed by term life (13%) and loan protection (12%). About 10% have medical insurance by health care service providers. These results could mean that majority of people are taking up insurance by default because the two biggest categories of the insurance covers are both mandatory. Figure 7.2: Insurance by product Figure 7.3: Formal insurance by product Member of burial group 87 NSSF 49 18 Motor Third Party Liability 30 Term Life 13 NSSF 6 Loan protection 12 4 Regulated provider like UgaMed 6 Term Life 2 Trading goods 5 2 Unregulated provider like AAR, Bupa 4 Regulated provider like UgaMed 1 House building or contents 3 1 Other occcupational pension scheme 2 Base: All those with insurance 16 years Base: All those using formal insurance 16 years 59 7.2.2 Perceived benefits of insurance Over half of Ugandans 16 years and above think that insurance is important for guarding against uncertainty and 14% think it is important for guarding against financial loss. It is also important to note that 14% do not know any benefit of insurance indicating knowledge gaps that exist within the public. Figure 7.3: Benefits of insurance Guard against unlikely 53 events Prevent financial losses 15 Look after my family 8 Prestige/status symbol in 6 society To have a peace of mind 3 don't know 16 Base: All weighted population 16 years and above 7.2.3 Reasons for not taking insurance Affordability is still cited as one of the key reasons for not taking up formal insurance as indicated by 56% in 2006 and 55% in 2009. Results also point to a general lack of awareness about insurance and how to buy it. Forty five percent do not know how insurance works, 19% do not know how to buy insurance and 6% do not know where to buy insurance. Table 7.3: Reasons for not having insurance 2006 2009 Reason for not having insurance % % Can't afford it 56 55 Don't know about insurance or how it works 45 36 Never thought about insurance 14 25 Don't know how to go about buying insurance 19 15 Don't want it 9 11 Don't know where to buy insurance from 6 8 Don't believe in insurance 4 6 Some insurance companies con people for their money 3 2 Claim processes are too bureaucratic (too long) 2 Base: Weighted population 18 years and above not having an insurance policy 60 7.3 Summary The commonly perceived major risks that would negatively impact on the household's finances are serious illness of a household member (39%), crop failure (33%) and loss due to sickness of main income earner (28%). The mitigation measures for such instances will be to ask neighbours, relatives and friends for money, selling household assets or withdraw savings kept aside. Three percent of the population 16 years and above have a formal insurance policy while 20% are members of burial societies or welfare groups. 8.0 Money transfer and remittances Money transfer in this survey was defined to include transfer of money either in cash or other forms within Uganda and remittances from abroad. A notable addition to the 2009 FinScope study is the mobile money transfer services. 8.1 Incidence of transfers Thirty five percent of Ugandans aged 16 years and above reported to have currently been involved in money transfers. Likelihood to send and receive money is highest in the urban (48%) than in the rural (31%) areas. A higher proportion of males (37%) than females (34%) reported being engaged in money transfer services of any form. Figure 8.1 Incidence of transfers 51 64 65 68 68 1 1 1 1 1 48 35 34 37 31 Total Female Male Urban Rural Currently use Used to but stopped Never used 8.2 Sources of money Of those who are currently engaged in money transfers, majority (88%) send or receive it within Uganda with high incidences among the rural population. Europe and North America are the most common sources of money from abroad contributing to 28 percent and 25 percent of the people receiving money. Other East African countries also contribute significantly to source of remittances. 61 Table 8.1: Sources of money received Total Urban Rural Weighted base 641,048 279,367 361,681 Uganda 88 79 93 Europe 28 35 23 North America (USA or Canada) 25 12 34 East Africa (i.e. Tanzania, Kenya including Rwanda & Burundi) 14 11 17 Southern Sudan 12 19 7 No answer 10 6 13 The middle East –Arab country 3 8 0 Another African country 3 1 4 8.3 Transfers within Uganda Several channels of sending and receiving money are used depending on the origin and destination of the transfer. Within Uganda, the channels mostly used for transferring money are informal (78%) such as buses, people travelling to or from the intended destination of transfer etc. Among the formal means of transfer, commercial banks (25%) recorded the highest incidence followed by mobile money transfer services (13%). Informal channels are used more in rural areas (85%) than urban (65%) while the latter has high proportions of those who use commercial banks (36%) and mobile money services (23%). Table 8.2: Channels for money transfer within Uganda Total Female Male Urban Rural Channels 3,439,852 1,874,044 1,565,808 1,085,740 2,354,112 % % % % % Informal services e.g. taxis 78 77 79 65 84 Commercial bank 25 21 29 35 20 Mobile money 13 12 14 21 9 Post office 3 2 5 4 3 Money transfer services (e.g Western Union, money 2 3 1 5 1 gram) Base: Weighted population 16 years and above all involved in money transfer 8.4 Remittances Remittances refer to the amount of money that is sent to or received from outside Uganda by Ugandans living and working in other countries respectively. The study sought to understand the different channels through which money is sent or received. Among those who send money abroad, commercial banks is the most common channel used for almost 4 in every 10 people. Sending money to outside Uganda through commercial banks is almost entirely done by people in urban areas. Other notable channels are mobile phone money transfer services (22%) and informal service –taxis and friends (23%). 62 Table 8.3: Channels for sending money outside Uganda Total Female Male Urban Rural 56,287 25,142 31,145 36,609 19,678 Weighted base % % % % % 38 38 38 58 - Formal commercial bank 7 12 3 - 20 Money transfer services e.g., Western Union, Money Gram etc 10 - 19 - 29 Post office 22 27 18 34 - Mobile phone money transfer services (e.g. M-pesa) 23 24 22 8 50 Informal services e.g. taxi, friend, relatives. Base: all those sending money outside Uganda (16 years and above) Most of those who receive money from outside Uganda get it through informal channels like friends and relatives (42%). This is followed by a third who use other formal money transfer services like Western Union etc. Use of informal services is high among the rural population (56%) while the urban population mostly receive the remittances through money transfer services (35%). Table 8.4: Channels for receiving money from outside Uganda Total Female Male Urban Rural 647,297 346,866 300,431 302,473 344,825 Weighted base % % % % % Formal commercial bank 15 15 16 19 12 Money transfer services e.g., Western Union, Money 34 34 34 35 32 Gram etc Post office 4 3 6 4 5 Non –banking financial institutions e.g. forex bureaus 5 5 6 4 6 Mobile phone money transfer services (e.g. M-pesa) 7 5 10 15 0 Informal services e.g. taxi, friend, relatives. 42 45 39 26 56 Base: all those receiving money outside Uganda (16 years and above) 8.5 Form and frequency of receiving money Results indicate that money is most often sent and received unsystematically whenever there is a need (37%). Less than a fifth receives money at least once a week (18%) or once every three months (17%). 63 Figure 8.2 Frequency of sending and receiving money 37 18 17 10 8 6 When a need At least once a At least once At least once a At once every six Can't remember arises month every three year months months Most money is received or sent in cash form as indicated by 85% who mentioned so. Slightly over a tenth (11%) said they receive money through direct debt on their accounts, 2% used money orders and 1% receives money by sending airtime. Figure 8.3 Form of sending and receiving money 85 8 6 2 1 1 Cash Direct deposit Money orders Airtime Cheque/Bank Can't remember draft 8.6 Use of money received People send or receive money for different purposes. Majority (63%) use money received for home consumption (food, clothing, rent). Generally, money received is used to cater for basic household necessities like health (34%), educating others (14%) and other household members (24%) or taking care of children (19%). Relatively fewer people receive money for investing in income generating activities like farming (15%) or in businesses (12%). Table 8.5: Use for money received Total Urban Rural Female Male Weighted base 3,720,694 1,190,039 2,530,654 2,000,816 1,719,878 Home consumption (e.g. food, clothing, rent) 63 63 64 69 57 Health 34 29 36 36 31 Education for others 24 24 24 26 21 Child Care 19 17 19 21 15 Farming 15 5 20 14 16 Education for self 14 14 14 9 20 Business 12 19 9 11 13 Travel 8 6 9 8 9 Building works 5 6 5 5 4 Ceremony 4 6 3 5 3 Purchase of land 4 4 4 3 5 64 8.7 Summary Thirty five percent of Ugandans 16 years and above are currently engaged in money transfer with larger proportions among the urban (47%) than the rural population (31%). Majority of the transfers are done within Uganda (88%) followed by remittances from or to Europe (28%) and North America (25%). The most common channels for money transfers within Uganda are informal (79%) i.e. use of relatives or taxis while 13% use mobile money. At least 8 in 10 of those engaged in money transfers send or receive it in cash. Money sent outside Uganda is mostly through commercial banks (38%) and informal channels (23%) while the latter is the most used channel for receiving money from abroad (42%) followed by money transfer services like Western Union (34%). 9.0 Financial literacy and decision making In this section financial literacy refers to people's knowledge, perception and attitude towards access and use of financial institutions, products and services. It explains barriers to the use of financial services and products by the different people. 9.1 Decision making The FinScope studies seek to understand the different persons who make decisions related to finances of the household. Such decisions are related to purchasing of goods and services; when, how and where to save or invest; and expenditures. Figure 9.1 reveals that 8 in every 10 people interviewed participate in making financial decisions for the household either solely or in consultation with other members. There is a slight difference in decision making across gender with more of the males (83%) participating in decision making than females (77%). Figure 9.1 Decision making in a home 80 83 77 20 23 17 Total Female Male Makes decision in home Does not make decisions Base: Weighted population 16 years and above Further analysis indicated in table 9.2 shows that financial decisions are made mostly in consultation with partners or spouses (42%). A fifth of the population aged 16 and above make financial decisions alone with a relatively higher prevalence among the males (24%) than the females (17%). Majority of those who participate in making financial decisions do so after consultations. 65 Table 9.2: Decision making in household Total Female Male 14,112,506 7,740,603 6,371,903 Weighted base % % % I make the decision in consultation with partner/spouse 42 43 42 I make the decisions alone 20 17 24 I make the decision in consultation with other family 16 15 17 Household head makes the decision 14 18 10 My parents or other elders in the family make the decision 5 5 6 I make decisions with extended family members 1 1 1 My spouse (wife/husband) makes the decisions alone 1 1 1 My children make the decisions 0 0 0 Other members (not listed) make decisions 0 0 0 9.2 Effective literacy About 7 in every 10 Ugandans aged 16 and above are able to read and write and these are most prevalent among the males (76%) than females (62%). About 8 in every 10 people displayed a level of functional literacy i.e. able to read or write. Figure 9.2 Effective literacy 68 76 62 31 25 18 4 4 3 3 3 3 Neither able to read nor Able to read only Able to read and write Able to write, not read write Total Female Male Base: Weighted population 16 years and above 9.3 Numeracy skills Having basic numeracy skills like adding, multiplying and dividing numeric figures helps someone understand how much they earn or spend in a given time. Such knowledge helps in planning and ascertaining future expenditures and incomes, among other things. Majority of Ugandans 16 years and above have the basic numeracy skills though many still have difficulties with division of numeric figures, especially the women. Almost all are able to carry out additions while 7 in 10 can multiply figures. Challenges in multiplying and dividing numeric figures are most prevalent among the females as compared to the males. 66 Figure 9.2 Numeracy skills 98 98 98 79 70 65 63 57 52 Addition Multiplication Division Total Female Male Base: Weighted population 16 years and above 9.4 Sources of information The main sources of information about financial services are the media (radio-74%, newspapers – 12%, television – 9%). Over half of the population 16 years and above use informal sources such as friends and neighbours and 12% said they get information from their informal group. Only 9% get information from their bank and 1% from a SACCO. This might imply that the level of seeking financial advice is low among users, hence the likelihood to take any information they get from the media. It also gives an insight that the media could be used for financial education. Table 9.1: Sources of information on financial matters Total Urban Rural Female Male 14,112,506 3,527,284 10,585,222 7,740,603 6,371,903 Weighted base % % % % % Radio 74 75 73 71 77 Friends and relatives 55 59 53 54 56 Church or Mosque 15 10 16 15 14 Newspapers 12 24 8 10 15 Informal group 12 8 13 12 11 Don't have access to such information 10 7 11 11 8 Television 9 26 4 10 8 My bank 9 15 8 8 11 Colleagues at work 7 9 6 6 8 Internet 3 4 2 2 3 SACCO 1 1 2 2 1 Employer 1 2 0 1 1 67 9.5 Knowledge of financial services and institutions There are several services and products being offered by financial institutions. These services are either known or unknown to the people and if known, the description and understanding differs from person to person. This section discusses the awareness levels and understanding by Ugandans of the different services and terminologies used in the financial sector. 9.5.1 Definition of saving Similar to the study in 2006, FinScope II sought to find out how Ugandans 16 years and above understand the concept of savings. A number of statements were read to the respondents where they had to choose one with the best description of savings. Table 9.2 shows that most people know that putting money aside constitutes saving. Equal proportions of 30 percent understand saving as 'putting money aside in a special place or account for it to be safe' and 'putting money aside to stop it being spent immediately'. A slightly smaller proportion of 26 percent defines saving as putting money away so that the total amount increases overtime as more is saved implying that money kept aside generates interest. Table 9.2: Defining savings Total Female Male Urban Rural 14,112,506 7,740,603 6,371,903 3,527,284 10,585,222 Weighted base % % % % % Putting money in a special place or account for the 30 29 30 35 28 money to be safe Putting money aside to stop it being spent 30 31 28 28 30 immediately Planning spending so that money lasts through the 14 14 14 10 15 week or month Putting money away so that the total amount 26 26 26 27 26 increases over time as more is saved 9.5.2 Knowledge of insurance as a risk management tool Having an insurance policy is one of the ways through which risks can be managed or mitigated. In assessing the awareness of Ugandans about insurance being a risk management tool, close to 7 in 10 Ugandans 16 years and above believe that having insurance is a protective measure whenever one has a problem. Close to half view insurance as a way of saving on a long term basis. Significant proportions of 29% and 39% perceive insurance as a government tax and for the rich people respectively. Such results indicate that many are ignorant of the advantages of insurance or it is being envisaged as being expensive. 68 Figure 9.3 Understanding insurance 69 48 43 39 37 37 27 24 29 28 15 4 Having insurance Insurance is for the rich Insurance is a way of Insurance is a protects you when you people saving on a long term government tax have a problem basis True False Don't know Base: Weighted population 16 years and above 9.6 Perceptions towards products of financial institutions There are mixed feelings towards services and products of financial institutions. Majority agree that saving regularly is an insurance against poverty and other risks. This is evidenced in figure 9.4 by 715 respondents who agree that saving regularly secures the future and 835 respondents who think that having a place to save helps people get out of poverty. Seven in 10 agree that small loans will help people get out of poverty. Majority (78%) would like to start their own businesses but cannot get enough money which further implies that savings and loans are viewed to be important in starting up income generating activities. Seven in 10 Ugandans agree that a loan from a financial institution being lent by a government institution should be paid back. Figure 9.4 Perception towards financial products Having a place to save helps people get out of poverty 83 81 I often think I w ould like to start my ow n business but I can't 78 get enough money to do this 71 If I save regularly, eventually the small amounts w ill mount up 71 and I'll be secured 37 If the government lends to my financial institution and I get a 26 loan, then I think I don't need to pay back… 23 I know how to use an ATM 18 Base: Weighted population 16 years and above 69 9.7 Understanding financial terminologies Awareness of financial terms is very low among Ugandans 16 years and above. At least 6 in 10 people know about the budget and what it means. About 30% know about shares and pension and 20% know about leasing. Majority of the respondents have never heard about a number of terminologies especially the credit reference bureau, mortgage and USE. This indicates the level of usage of such services and the need for financial education. Figure 9.5 Knowledge of financial terminologies 12 21 40 40 57 75 78 85 24 24 66 20 36 15 14 25 24 10 10 8 5 Budget Shares Pension Leasing Mortgage Uganda Stock Credit Exchange Reference Ever heard of and know what it means Ever heard of but don't know what it means Never heard of Base: Weighted population 16 years and above 9.8 Summary About 7 in 10 people are able to read and write in a certain language. Nine in 10 are able to carry out additions of numeric figures, 7 are comfortable with basic multiplications while 6 correctly conduct divisions. Eighty six percent of Ugandans aged 16 and above define saving as putting money aside to prevent it being spent immediately. Insurance is mainly perceived as a way of being protected whenever one faces a problem (70%) while some people think it is for the rich (40%). The most known and understood financial terminology is the budget by 66% of Ugandans. 70 10.0 Children (16 to 17 years) Unlike 2006, the current survey included respondents who are 16 years and above similar to the current FinScope studies being conducted in other countries. The 16-17 year age group are perceived to have different characteristics from the 18 years and above hence the decision to have a separate section of 16-17 years. 10.1 Sources of income Majority of the people in the age group 16 to 17 years (71%) depend on a household member to pay for their needs and the services they access. Another major source of income is agriculture involving selling of food crops from personal farms (33%), working on other people's farms, selling of personal livestock products (9%), from personal farms and working on other people's farms (15%). Figure 10.1: Sources of income for the age group 16 to 17 years Getting money from family members 71 Sell produce from ow n farm (food crops) 33 Working on other people's farms 15 Running ow n business 12 Sell produce from ow n livestock 9 Money from friends (not family members) 7 Working for an individual in a private business 6 Selling produce from ow n farm (cash crop) 6 Fishing - catching, rearing and selling fish 5 Sell ow n livestock (goat, sheep, cattle, chicken) 4 Working in other people's homes, doing domestic 4 The major sources of income are closely linked to the employment status. At least 6 in every 10 of the 16-17 year population are not employed in any form. This explains why the most common source of income is from other household members. 71 Figure 10.2: Employment status None 65 Unpaid for 15 householdwork Self employed 13 Casual labourer 6 10.2 Financial Access Half of the children (16-17years) are financially excluded. In relation to financial inclusion, most use informal products (27%) followed by those who are banked (15%). Figure 10.3: Financial access strand (mutually exclusive) 49% financially included 51% financially excluded 23% formally served 2009 15 8 26 51 Banked Formally served Informally served Excluded Both the rural and the urban areas have a high proportion of the financially un-served youth, however, the proportion is greater in the rural (73%) than urban areas (60%). The urban areas recorded a higher proportion of those that are banked(33%) compared to only 9% in the rural areas, while the proportion of those that are informally served in the rural areas is 10 times more than that of the urban areas. It is also noted that more females (75%) than men (64%) are un-served. However the proportion of male and female youth that are banked is equal at 15%. The proportion of males that are served through informal and formal means is twice as high as that of women. 72 Table 10.1: Financial Access Strand by gender and location Female Male Urban Rural 695,582 537,686 296,811 936,456 Weighted base % % % % Un served 75 64 60 73 Banked 15 15 33 9 Informally served 5 11 1 10 Formal Others 5 10 7 8 10.3 Savings Some of the questions in this survey are about the saving habits of different kinds of people. Fifty seven percent of the population 16-17 years claimed to be currently saving. Higher proportions of those who said they are currently saving were recorded in the rural (59%) than the urban areas (50%). With regards to gender there are more males (61%) than females who claimed to be saving. Table 10.2: Saving status Total Urban Rural Female Male Weighted Base 1,233,267 296,811 936,456 695,582 537,686 % % % % % Currently save 57 50 59 54 61 Never saved 27 37 24 29 24 Ever saved but stopped 16 13 17 17 15 Those currently saving use a secret hiding place as their main place of saving (76%). Only 13% said they have a voluntary savings account and of these 31% are in the urban areas. In the rural areas, keeping money with friends is four times higher than the proportion in urban areas (4%), while the proportion that saves in informal groups is almost equal for both urban and rural areas (17% & 18% respectively). Table 10.3: Savings product used Total Urban Rural Female Male 703,653 147,463 556,190 375,367 328,286 Weighted base % % % % % Savings kept in a secret place 76 77 76 72 81 Informal financial group or organization 17 17 18 13 23 Keeping money with friends and/or relatives 14 4 16 16 11 Voluntary savings account 13 31 8 13 12 In kind savings in a shop 3 4 3 6 0 73 Top 5 reasons for saving among the youth The reasons for saving among the youth do not differ from those who are 18 years and over. Considering the top five reasons, majority of the youth save in order to meet day to day basic necessities e.g. food, clothing and health care. Table 10.4: Reasons for saving Total Urban Rural Female Male 697,661 147,463 550,197 375,367 322,294 Weighted base % % % % % For meeting household basic needs such as food, 59 75 55 63 54 clothing, health services, etc For emergency (burial, medical) 37 30 39 47 25 To keep money safe 31 31 31 21 42 For education of self 16 17 16 12 20 Purchase of livestock /cattle 8 3 9 3 13 10.4 Summary The main source of income for majority of children aged 16 and 17 years is the household member (71%) and sale of produce from own farms (33%). Fifteen percent use BOU regulated financial institutions while 51% are financially excluded. Fifty seven percent are currently saving mainly in a secret place (76%). The major reason for saving is to meet household basic needs such as food (59%). 74 11.0 Conclusion FinScope Uganda 2009 highlights a number of issues about access to the financial sector that could be used to support the development of Uganda's financial system:- The results indicate an increase in the proportion of Ugandans aged 18 years and above that are financially included between 2006 and 2009. This increase is mainly attributed to the informal financial service providers whose users rose to 43 percent in 2009 from 29 percent in 2006. Usage of banking and other formal financial products increased marginally to 29 percent in 2009 from 28 percent in 2006. Further analysis reveals that the use of formal financial products was minimal due to the fact that a number of individuals were either unable to afford these services or their low and irregular incomes did not merit the use of these services. This highlights the need to extend the scope of activities of the organised financial system to include low income earners through the development of low cost financial products suited to the cash flow patterns of this segment of the population. The results also show that about 20% of Ugandans are using both formal and informal financial products. This may imply that although formal financial products are thought to be best suited for financial inclusion, they do not fully meet the needs of their users. This gap/needs have been covered by the informal financial sector, which is a key source of financial services including credit, savings, payments, insurance and remittance facilities especially in areas where access to banks and other formal financial services is limited. The urban concentration of bank branches and formal financial providers together with reluctance to provide certain services required by the low income earners have led to an increased use of informal financial products. Therefore, programs designed to increase access to formal financial services may prompt a reduction in the use of informal products. Results show that the northern region has the highest number of financially excluded people of 57% as opposed to 30% in the whole country. Much as the low level of access has most likely been caused by the insurgencies that hit the area for quite some time, the region is now relatively peaceful and if more financial services are provided to the people then we are likely to see a sharp decrease in the un-served population. The results also indicated a relationship between financial inclusion and the level of education with financial exclusion being more evident among the un-educated people. 75 A large proportion of adults are saving in some way, either through informal institutions or keeping money in a secret place. However, people mainly save for meeting basic household needs such as food, clothing, and healthcare. Both formal and informal savings are mainly short-term cash deposits used to smoothen the household cash flow. With regard to access to credit, nearly half of the adult population in Uganda is borrowing, making Uganda a saving and credit oriented consumer demand. The data also revealed a preference for short-term rather than long-term borrowing. This highlights the need for policy measures that will help instil a culture of long-term savings and emphasize the need to access credit so as to acquire assets rather than borrowing to meet basic household needs. The study revealed that the current use of formal insurance products is low. Although most of the adult population (69%) believe that 'having insurance protects you from having a problem, only 23 percent of these have some form of insurance with only 3 percent using formal insurance channels. There is urgent need to design formal insurance products that can be afforded by the majority of Ugandans who appreciate the fact that insurance can protect them from risks. In summary FinScope 2009 has shown an increase in number of Ugandans using financial services compared to the previous study carried out in 2006. The shift has mainly been attributed to the informal financial service providers. Although this is a move in the right direction, it carries a risk as informal service providers are not regulated. Therefore there is need for the formal institutions to work towards serving more people and this does not necessarily mean putting up more branches or outlets but creating systems/products that are going to help people better access credit, take their children to school, increase on their investment portfolio and better protect themselves against risks among others. 76
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