Inevitably, however, there are often tradeoffs to be considered when innovations are proposed by the private sector which have the potential to promote financial inclusion. The approach which we have adopted in Uganda is to avoid placing regulatory restrictions on innovations in the financial sector provided that these innovations do not conflict with the primary objectives of prudential regulation.
In some cases, this has meant that innovations have had to be designed to incorporate safeguards to protect the public’s savings, as is the case with mobile banking, which I will discuss later. In other cases, such as with small informal financial institutions, we have to recognise that it is not practically possible to provide effective prudential regulation.