The era of unregulated fintechs in Uganda has ended. This is as a result of the country’s new law — National Payment System (NPS) Act 2020 — and the gazetting of the NPS Implementing Regulations on 5th March 2020, requiring every fintech company in the East African country to procure a fintech license to remain in operations. To that effect, Bank of Uganda (BoU), the country’s central bank, has issued the country’s first ever fintech licenses to both MTN Mobile Money Uganda Limited and Airtel Mobile Commerce Uganda Limited.
“Pursuant to Section 9 of the National Payment Systems Act, 2020 and Regulation 3 of the National Payment Systems Regulations, 2021, Bank of Uganda has issued licences to the following entities:
Airtel Mobile Commerce Uganda Limited.
MTN Mobile Money Uganda Limited.
In addition, M/s Wave Transfer Limited received the Bank of Uganda’s approval to operate under the Regulatory Sandbox Framework, pursuant to Section 16 of the National Payment Systems Act, 2020 and Regulation 5 of the National Payment Systems (Sandbox) Regulations, 2021.
The Bank of Uganda will continue to support the development of a vibrant and resilient payments eco-system that promotes economic growth,” a statement released by the bank reads in part.
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- Uganda’s largest telecom firms have been providing mobile financial services without a license for years.
- The National Payment System Department of the Bank of Uganda is in charge of overseeing the country’s payment system in order to ensure its overall effectiveness and credibility.
A Set Of Sweeping Regulations
Uganda’s National Payments Systems Act of 2020 demands that no one can provide a payment service, operate a payment system, or issue a payment instrument without first obtaining a license from the central bank.
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Any person who defies this risks an imprisonment period of not more than four years, including having to immediately stop offering such payment services. The person will also be barred from ever obtaining a license again from the central bank.
| S/N | License Category | License Class | Minimum Capital Requirement |
|---|---|---|---|
| 1 | Payment Systems Operator | Funds transfer systems:Large funds transfer systems whose transaction value exceeds one hundred billion shillings per month | 1bn Shillings ($282k) |
| Medium funds transfer systems whose transaction value exceeds one billion shillings per month and does not exceed one hundred billion shillings per month | 500m Shillings ($141k) | ||
| Small funds transfer systems whose transactions value does exceed one billion shillings per month | 100m Shillings ($29k) | ||
| Clearing systems or switches | 500m Shillings ($141k) | ||
| Settlement systems | 250m Shillings ($71k) | ||
| Third party systems | 100m Shillings ($29k) | ||
| 2 | Payment Service Provider | Electronic money issuer Large electronic money issuer whose total trust account value exceeds exceed two hundred billion shillings. | 10bn Shillings ($2.8m) |
| Medium electronic money issuer whose total trust account value exceeds five hundred million but does not exceed two hundred billion shillings. | 5bn Shillings ($1.4m) | ||
| Small electronic money issuer whose total trust account value does not exceed five hundred million shillings. | 250m shillings ($71k) |
What Activities Are Eligible For Grant of License Under The New Law?
Under the new law, if a fintech company meets one or more of the following criteria, its application for a license may be approved by the central bank. The activities include:
- Clearing payment instructions between financial and non-financial institutions;
- Settling obligations resulting from clearing payment instructions.
- Using an electronic system to move funds from one account to another;
- Electronic money transfer from one electronic device to another;
- Provision of technological services for or on behalf of a payment system provider to facilitate switching, routing, clearing, or data management;
- Provision of electronic payment services to the unbanked and underbanked population;
- Provision of financial communications networks;
- Ordering or transmitting payment instructions;
- Fulfilling payment obligations at points of sale, merchantoutlets or over the internet.
The central bank is mandated to grant the license within sixty days from the date of the application for a licence.
The law also created a regulatory sandbox regime, for those who want to test-run innovative financial products or services without obtaining a license.
Uganda fintech license Uganda fintech license
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer