The Bank of Uganda has introduced new over-the-counter cash withdrawal limits, effective January 1, 2027. Individuals will be subject to a Shs50 million daily cash withdrawal limit and a Shs500 million weekly limit, while corporate and business accounts will have a Shs250 million daily and Shs2.5 billion weekly limit. These limits apply to over-the-counter withdrawals and do not affect electronic payment channels such as Real Time Gross Settlement and Electronic Funds Transfers.
Despite the growing use of digital financial services, Uganda remains a predominantly cash-based economy. According to the 2023 FinScope Uganda Survey, 70 percent of adults still prefer cash over digital payments. However, the same proportion indicated a willingness to learn how to use new technology. Mobile money and Village Savings and Loan Associations (VSLAs) remain important components of financial inclusion, with 66 percent of adults using mobile money and 36 percent using VSLAs.
The International Monetary Fund (IMF) reports that Uganda's economic activity remains largely informal, with 91 percent of adults receiving income in cash. Only 5 percent receive payments through bank accounts, and 3 percent through mobile money. The IMF also notes that Uganda has a relatively high share of financially excluded adults and relatively low use of formal banking services.
The new cash withdrawal limits may have significant implications for agricultural trade and small and medium-sized enterprises (SMEs). For example, a produce dealer in Kabale who needs Shs200 million to settle payments on a market day may be able to withdraw the funds, but may face challenges when attempting to replace cash payments with digital transactions.
The Bank of Uganda has introduced an exception-management framework for sectors that remain heavily dependent on cash. However, the effectiveness of this framework will be critical to ensuring that legitimate cash-intensive businesses are not unduly burdened. If businesses must repeatedly seek exceptional approval, the resulting administrative burden could increase transaction costs and disrupt normal business operations.
The move to reduce the maximum value of an interbank shilling cheque from Shs10 million to Shs5 million is also intended to encourage electronic payments. While electronic payments can provide faster settlement and stronger transaction records, the transition must account for existing commercial practices. Businesses that have traditionally accepted larger-value cheques will need alternative payment arrangements.
Financial inclusion experts emphasize that access to financial services is not enough; effective use of these services is also crucial. The 2023 FinScope survey found that almost six in ten adults reported a mobile-money agent within one kilometre of their home or workplace, but 70 percent of adults continued to prefer cash. Restricting or discouraging cash before addressing underlying constraints such as low financial literacy could create unintended exclusionary effects.
Key points
- The new cash withdrawal limits aim to promote digital payments in Uganda.
- Uganda remains a predominantly cash-based economy, with 70 percent of adults preferring cash over digital payments.
- The effectiveness of the exception-management framework will be critical to ensuring that legitimate cash-intensive businesses are not unduly burdened.
