Financial services risks – Uganda 2024

1. Anticipated FATF grey list removal. The country has complied with most recommendations such as establishment of a beneficial owners register.

2. Evolving nature of cyber risks & fraud. There were a few notable successful negligence claims against banks in 2023. Regulators, group structures, local boards, management, and the Uganda Bankers Association have put cyber risk and fraud on top of the agenda. More customer sensitization drives are expected.

3. OFAC sanctions watch list. Political contestation and human rights challenges have persisted. Both internal and external profiling and screening of sanctioned individuals will spill over from 2023. The US and the EU have indicated that they will continue enforcing the respective economic and political sanctions regimes.

4. New business models e.g Buy Now Pay Later, Banking as a Service, open banking, etc will continue to scale as consumers, merchants, service providers, etc look for more options to innovate and gain market share.

5. Fintechs & ‘Techfins’ integration, with mobile money, cross-border payments, remittances, and e-government functions will continue to drive a large segment of retail finance. Financial firms will increasingly rely on their digital and self-service channels for their retail operations.

6. Litigation risk will remain hovering over large exposures, debt recovery, insolvencies and special situations. There is a visible push to Alternative Dispute Resolution/ADR, particularly arbitration but it is anticipated that the commercial court will remain an option for parties seeking injunctive relief and contesting lender-borrower enforcement actions.

7. Green financing products will receive more attention as lenders, borrowers and regulators have had time to study their risk profiles and pricing dynamics. Blended financial instruments tied to clean energy, climate adaptation and ESG concerns will be key ingredients of lenders’ fundraising strategies and deployment metrics.

8. Tax considerations will further evolve as the financial services sector is at the heart of economic activity. There will be increased tax scrutiny of offshore structures, forex transactions, private wealth and large multinational banking in key regulated sectors such as oil and gas, mining, telecoms, breweries, betting and gaming, NGO sector, and fast moving consumer goods.

The banking sector will remain the major fulcrum of the financial services sector alongside e-money issuers. Most financial institutions remain adequately capitalised in line with the Ugandan Central Bank’s recent core capital enhancements. There is also notable growth in insurance, capital markets and pension products. More action is anticipated in Islamic finance, with its recent operationalization.

Do not hesitate to reach out should you have specific needs around new-age financial services, fintech, cyber risk management, dispute resolution and ESG scoping.

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