Ugandans remain loyal to cash as credit cards lose out

Almost three years after the first commercial bank introduced the credit card facility in the market to ease payment for goods and services, the method of payment is yet to gain popularity as most Ugandans still prefer transacting using cash and cheques.

Credit card – a non-cash payment form – which was first introduced in 2009 in the local market by Stanbic Bank, is still being shunned by most Ugandans.

According to Bank of Uganda, cash is the most widely spread payment system in the country, accounting for about 85 per cent of retail transactions.

Mr Sam Bulenzi, the Head of Personal Loans, East Africa at Standard Chartered Bank says the slow pace in the adoption of credit cards in the market is because the local market is used to a spend-now-pay-now mode, yet credit cards allow one to spend-now and pay later.

“Uganda being a peculiar cash economy, people are yet to fully warm up to the concept of ‘spend now, pay later’, although signs of opening up are now showing in a few places,” he says.

Unlike debit cards which are common with most people who own bank accounts where funds are withdrawn directly from the cardholder’s bank account to physically pay for the goods and services, credit cards don’t require the holder to withdraw money from the account, rather, the bank pays for the goods and services on behalf of a customer up to a pre-established credit limit.

Each month, the credit card user receives a statement indicating the amount owed and must pay the bill by a due date, or may choose to pay a higher amount up to the entire amount owed.
The other difference between credit cards and debit cards is that with a debit card you use your money to transact while with a credit card, you can go way above your balance up to a given limit as discussed with your banker.

Ecobank Uganda managing director, Mr Michael Monari, who estimated the rate of credit card usage in the country to be at about 0.1 per cent of the banked population, in an email exchange said that the limited uptake is mainly because the product targets high-end customers, who are the smallest percentage in the country.

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