Billions Sent Home, But to Whose Benefit? The Remittance Riddle Facing Ugandan Banks With remittance inflows reaching USD 1.4 billion, banks are sharpening their focus on this channel, not just as a revenue stream, but as a catalyst for economic transformation.

Every month, tens of thousands of Ugandan households receive life-sustaining  remittances from family members living abroad. 

These funds, estimated at over USD 1.4 billion annually according to the Bank of Uganda figures, are crucial for household consumption, school fees, health care, and small-scale investments.

Willy Mutenza, a UK-based Ugandan entrepreneur argues that despite their economic weight, the remittance market in Africa is dominated and tightly controlled by an ecosystem of foreign players such as Western Union, WorldRemit, and MoneyGram. While they provide scale, their profits are largely repatriated, limiting domestic reinvestment and innovation.

These operators, while efficient in speed and reach, often charge steep fees and rarely link recipients to broader financial services such as savings, credit, or insurance. That is now beginning to change.

Ugandan commercial banks are now launching aggressive strategies to claim their stake in the remittance economy.

By integrating digital platforms, mobile wallets, and agency banking networks, banks are positioning themselves as viable, lower-cost alternatives. Their edge? 

The ability to link remittances with interest-bearing savings accounts, micro loans, and even SME financing products.

Banks are viewed to create competitive pressure, leading to lower fees, increased remittance volumes, and greater welfare for both senders and recipients.

Despite these gains, banks still face a credibility challenge. Many Ugandan migrants particularly those in the Middle East and Europe perceive local banks as bureaucratic, slow, and overly regulated.

This reluctance, influenced by past concerns over service delivery and reliability, has discouraged senders from routing money through banks, even when the fees are lower.

To address this, some banks have partnered directly with diaspora organizations and fintech firms to build trust and simplify the onboarding process. 

With the adoption of digital transfer networks such as mobile money, digital currencies, and distributed ledgers; digital remittance is projected to reduce the dependency on cash agents in both the send and receive countries, which currently contribute toward sustaining high transaction fees. 

It is projected to address many risks, barriers, and costs associated with know-your-customer (KYC),  security and significantly lower costs than traditional over-the-counter services, increasing penetration of digital remittance across the globe.

A deeper dive 

The remittance discussion was central at the just concluded Annual Bankers’ Conference that convened top industry players at Serena Hotel under the umbrella of Uganda Bankers Association. 

The conference was held under the theme; “Harnessing the Potential & Maximising the Impact of Remittances on Development.”

While  delivering a keynote address,  Dr Michael Atingi-Ego noted  that remittances are not just a statistic; it represents the resilience, sacrifice, and unwavering commitment of our diaspora, who, from distant lands, continue to build bridges of hope and prosperity back home.

These inflows have consistently demonstrated remarkable resilience and growth, even amidst global pandemics and economic downturns. 

The Governor presented key data noting that from USD 902 million in 2015, remittances surged to USD1.42 billion in 2019. 

While the Covid-19 pandemic caused a temporary dip to USD 1.1 billion in 2020, they rebounded strongly since 2021, averaging USD 1.4 billion annually since then. 

“This sustained inflow stands as a testament to their stability, often surpassing other foreign exchange earners like coffee export revenue and tourism earnings, providing a steady stream of foreign currency even when other sectors faced headwinds,” the Governor said. 

Furthermore, between 2014 and 2016, when Foreign Direct Investment declined from about USD 1.03 billion to USD 626 million due to falling global oil prices; remittances rose from USD 886 million to USD 1.145 billion, playing a critical role in exchange rate stability despite the stronger US dollar. 

“This countercyclical nature makes remittances a powerful stabiliser for our economy during external shocks,” the Governor remarked. 

He noted that this sustained inflow has elevated remittances to become Uganda’s most critical source of external financing.  

While delving into more data, Dr Atingi-Ego presented another interesting comparison. 

For instance, between 2001 and 2023, remittance inflows have consistently exceeded coffee export revenue and tourism earnings, providing a steady stream of foreign currency that has become more reliable than traditional export sectors. 

Most remarkably, these flows have surpassed foreign aid and support from international institutions such as the IMF, World Bank, and bilateral partners, making them Uganda’s most dependable source of external financing.

Challenges and opportunities

As remittances remain a vital source of income for millions of Ugandan households, Dr. Michael Atingi-Ego draws the fine line between the promise and persistent challenges of Uganda’s remittance landscape.

The average cost of sending US$200 to Uganda stood at 11.3% in 2021, meaning if someone abroad sent $200 to Uganda using typical remittance channels in 2021, they paid $22.60 in fees on average. 

This cost is nearly four times the UN Sustainable Development Goal (SDG) target of 3%. 

“These high transaction costs erode the value received, especially for low-income families,” he said, warning that such costs often discourage larger or more frequent transfers. 

The Governor pointed to limited digital access in rural areas, regulatory bottlenecks, and stringent KYC requirements as drivers of informal remittance channels. 

About 30% of Ugandans still lack national IDs, while NIRA’s current Application Programming Interface only offers basic Yes/No verification, making customer onboarding for regulated financial services complex and expensive.

Agent banking regulations, including the need for costly printing devices, coupled with mobile money taxes, have further discouraged the use of formal channels. 

In rural areas, the lack of electricity, internet, and point-of-sale devices has created stark access gaps.

Beyond domestic barriers, geopolitical factors loom large. 

Proposed remittance taxes such as the U.S. federal government’s 1% tax on cash transfers, and increasingly restrictive immigration policies in major sending countries pose a real threat to formal inflows, potentially reducing them by 1.6%.

Yet amidst these challenges, new corridors are emerging as sources of resilience.

 Dr. Atingi-Ego pointed out the Middle East, especially the Gulf Cooperation Council countries—Saudi Arabia, UAE, and Qatar—now account for 35% of Uganda’s total remittances. 

These countries have shown stability during global crises and continue to demand Ugandan labour amid large-scale infrastructure investments.

However, he stressed, Uganda must now improve the quality and protection of its labour exports, learning from Asia’s successful labour-sending countries. 

This includes investing in vocational training, developing robust legal protections, and ensuring dignity and safety for workers abroad.

The Governor championed digital transformation as the next frontier for remittances. 

Fintech platforms, mobile money, and stablecoins offer a chance to slash costs, bypass correspondent banking delays, and settle cross-border transfers within minutes at less than 1% cost.

Citing Kenya’s M-Pesa success, which doubled financial inclusion in five years, he said Uganda’s resilient mobile money ecosystem is primed to replicate that impact, if enabled by smart policy and infrastructure.

Dr. Atingi-Ego challenged banks to innovate beyond transfers to develop remittance-linked savings products, credit facilities, and microinsurance tailored for remittance recipients. 

He called for diaspora bonds, remittance-backed mortgages, and collective investment schemes like diaspora cooperatives to channel inflows into national development.

He emphasized the need for gender-inclusive financial services, pointing out that women-led households are often the main recipients of remittances. 

Banks, he argued, must lead the way in structuring smart, compliant KYC-lite accounts, particularly for the unbanked.

What top bankers say 

Remittances are emerging as one of Uganda’s most significant sources of foreign exchange, now rivaling foreign direct investment (excluding oil and gas), according to Julius Kakeeto, Uganda Bankers Association Chairman and Managing Director of PostBank. 

With remittance inflows reaching USD 1.4 billion, banks are sharpening their focus on this channel, not just as a revenue stream, but as a catalyst for economic transformation. 

“Remittances will soon catch up with FDI, and we must position ourselves to tap into this growth,” Kakeeto noted.

Kakeeto notes that the remittance space is seeing increased collaboration between banks and fintechs. 

While fintechs lead in developing digital infrastructure, banks are now looking beyond basic transfers to build ecosystems that maximise value for both senders and recipients. 

These ecosystems include investment opportunities, access to financial services, and tools that enable remittance-driven economic empowerment. 

“We need to go beyond just moving money, we must create solutions that help diaspora funds drive impact at the household and national level,” Kakeeto emphasized.

PostBank Uganda is rethinking its diaspora engagement strategy by moving from generic offerings to targeted, user-centric solutions.

The bank has integrated platforms like Transfast (now under Mastercard) and Western Union with its Wendi mobile wallet, allowing seamless transfers from global cities to  far-flung districts such as= Yumbe.

 Additionally, PostBank plans to support the pre-departure journey of migrant workers including financing for medical checks and insurance, positioning them as long-term clients with broader financial needs beyond remittances.

 As the global remittance ecosystem undergoes sweeping transformation, banking executives in Uganda are urging for innovation, strategic partnerships, and regulatory alignment to harness the full potential of diaspora inflows.

“The game of remittances is changing globally at an immense pace,” says Sanjay Rughani, CEO at Standard Chartered Bank Uganda.

 “Remittances have become a core part of economic growth. Traditional models are evolving, new players are entering the space, and the entire system has become increasingly dynamic.”

Mr. Rughani praised Uganda’s central bank for establishing sound regulations, laying the groundwork for the country to position itself more prominently on the remittance map.

“This means more transparency and more security. Ugandans should be able to transfer funds at a much cheaper rate,” he noted.

He emphasized the importance of collaboration in this rapidly changing space.

 “You can’t do it alone. There’s greater encouragement for local and global partnerships. We must stick to the core of our business but also optimize the opportunities that come from regional collaboration.”

“Remittances shouldn’t be a cost burden, they should be a capital resource and an economic enabler,” Rughani added.

Echoing these sentiments, Fabian Kasi, Managing Director of Centenary Bank, noted that remittances are no longer viewed as a luxury but rather a necessity with tangible economic impact.

“They are contributing significantly to the economy, and for us as banks, it is crucial to recognise this and support Ugandans in the diaspora with safe, affordable channels to send money home,” Kasi said.

Cost remains a critical issue. “Managing the cost of remittance is key,” he emphasised. “We believe technology and innovation will help us drive down these costs. While banks use channels like SWIFT, which come with certain unavoidable costs, increasing competition is pushing financial institutions to reassess their pricing models.”

At Diamond Trust Bank, Chief Executive Officer Godfrey Sebaana revealed that the bank processes over 800,000 remittance transactions annually, signaling the sheer scale of activity. But he stressed the need to elevate operational standards.

“We’re at a point where we must take things a notch higher by investing in anti-money laundering and counter-terrorism financing capabilities,” Sebaana said. “Our systems need to be secure, robust, and designed to make remitting easier and safer.”

He pointed to shifting diaspora behavior: “Research shows that while some remittances are used for consumptive purposes, a majority are intended for investment.” 

That trend, he said, presents a huge opportunity for banks to guide diaspora clients into structured investment options.

“Let’s sensitise the masses,” he urged. “With internet and online banking capabilities, diaspora Ugandans can now invest directly in government securities, unit trusts, or other options provided by banks.”

Shehryar Bakht Ali, the Senior Vice President and Country Manager for Mastercard East Africa, delivered a comprehensive address on the evolution and efficiency of global remittance solutions, emphasizing the critical pillars of cost, transparency, and seamless integration.

Ali noted that digital remittances, now averaging 5% compared to 6% globally, present a cost-effective alternative to traditional methods. 

He cited Wise and Remitly as key platforms demonstrating rapid growth and ease of use. 

He underscored the fact that cash transactions remain the highest cost due to legalities, further reinforcing the need to scale digital methods.

Delving into Mastercard’s footprint in the remittance space, Ali highlighted that Mastercard connects into 95% of the global population, and is now the largest remittance player in Saudi Arabia. The introduction of Mastercard Diaspora Send, a service enabling cost-effective remittances, was positioned as a flagship initiative aimed at uniting stakeholders—from regulators to fintechs—to collectively address remittance challenges.

Ali stressed the importance of transparent and seamless platforms that integrate with various stores of value, including neobanks and fintechs, noting that 47% of people in India and similar numbers in the US and UAE face issues with cross-border payments.

Willy Mutenza, a seasoned expert with over two decades in the global remittance industry, emphasises the urgent need for cost transparency, local innovation, and structured investment pathways. 

He calls for the implementation of a “One Fee Transparency Policy” that mandates remittance providers to fully disclose transaction fees and foreign exchange markups mirroring successful EU regulations. 

This, he argues, would significantly lower costs for African diaspora communities and enhance trust in formal remittance channels.

To reduce overreliance on foreign platforms, Mutenza advocates for regulatory incentives and R&D support to scale local fintechs like Yo Uganda and MTN MoMo.

 He urges governments to create diaspora-targeted investment vehicles such as diaspora bonds and to adopt policies like Pakistan’s fee-waiver strategy for small transfers hence encouraging formal remittance flows. 

In addition, he highlights the need for integrated remittance-mobile money systems to promote financial inclusion, especially in rural Africa where most people remain unbanked.

Finally, Mutenza recommends appointing Diaspora Investment Officers in embassies, launching centralised online portals for verified investment opportunities, and holding regular Diaspora Investor Forums.

He also calls on institutions like Uganda’s NSSF to introduce voluntary diaspora pension schemes, modeled on India and Kenya’s initiatives, to provide long-term financial security for diaspora populations committed to contributing back home.