The Central bank of Kenya, Nairobi on Thursday, October 15, 2020. PHOTO DENNIS ONSONGO.
The Bank of Uganda (BoU) recently issued guidelines, capping cash withdrawals at UGX 50 million per day (UGX 500 million weekly) for individual accounts and UGX 250 million per day (UGX2.5bn) for corporate/business accounts, effective 1 January 2027.
BoU also revealed a downward revision of the interbank cheque value limits for the currencies currently handled in the Automated Clearing House effective 1 January 2027. The new limits are as follows; UGX5 million from UGX 10 million; USD 1,375 from USD USD 2,750; Euro 1,125 from Euro 2,250; GBP 1,100 from GBP 2,200; and KES 150,000 from KES 300,000.
BoU says this is part of the financial sector’s e-payments strategy.
“Effective 1 January 2027, interbank cheques whose value is above the new thresholds will not be honoured. The limits do not apply to intra-bank cheque payments where both the drawer and the payee maintain accounts within the same institution. The public is urged to embrace the alternative payment options such as the Real Time Gross Settlement System, Electronic Funds Transfers, Mobile Money among others,” BoU said in a statement.
However, the National Entrepreneurs and Traders Association (NETA) Uganda, an association representing thousands of traders and entrepreneurs across Uganda, says while they appreciate BoU’s efforts to promote digital payments and financial sector stability, transaction limitations will have unintended consequences on the real economy and cripple small and medium businesses that still operate largely in cash.
Dr. Thadeus Musoke Nagenda, the President, NETA Uganda, says the move will adversely affect cash-dependent sectors.
“Wholesale trade, agriculture, construction materials, transport, and cross-border trade still rely heavily on cash for same-day settlement, supplier payments, and wages. A UGX 50M daily cap disrupts business cash flow and increases transaction delays,” Musoke says.
He adds that the new move raises a risk of financial exclusion.
“When cash access is restricted, many traders will resort to keeping money outside the banking system. This reverses years of financial inclusion gains and increases risks of theft, fraud, and a larger informal economy,” he argues.
He further notes that it will lead to increased cost of doing business.
“Forcing businesses to split large payments across multiple days or use expensive digital alternatives raises operational costs. This cost will be passed to consumers through higher prices at a time of inflation pressure,” Musoke says, adding that MSMEs will bear the brunt.
He says while the guidelines allow financial institutions to seek exceptions, the process is unclear.
“Most MSMEs lack the time, legal capacity, or connections to apply for exceptions, leaving them at a disadvantage compared to large corporates, he says, adding: ““We are not against digitalization. In fact, NETA Uganda actively trains youth and traders on digital payments, mobile money, and AfCFTA e-commerce. But digital adoption must be gradual, inclusive, and backed by infrastructure that works for every trader…BoU’s own data shows digital payments are growing because consumers trust efficiency. That trust will erode if businesses cannot access their own money when needed. Policy should enable, not restrict.”
Recommendations
NETA Uganda urges BoU to raise the threshold to reflect real business transaction sizes, or exempt registered MSMEs with verified turnover; publish a transparent, fast-track exception process with clear timelines so traders are not locked out; intensify stakeholder consultation with business associations before implementation to avoid economic shocks; and invest in digital infrastructure reliability – uptime, interoperability, and rural access – before limiting cash.
