By Edwin Muhumuza
Bank of Uganda has been granted more powers by parliament to regulate all financial services after the National Payment Systems Bill, 2019 was passed into law.
According to the parliamentary Committee on Finance, Planning and Economic Development chaired by Rubanda East MP Musasizi Henry, the previous absence of a national payment systems law, has led to uncertainty, where service providers who are not financial institutions engage in electronic and digital financial payments and as such, there has been inadequate protection of money across all digital platforms.
The amendments grant Bank of Uganda more powers of regulation and not Uganda Communications Commission as has been.
The passing of the bill ensures that the legal framework for the financial sector does include non-financial institutions like MTN, Airtel, Uganda Telecom, PayWay, SafeBoda and Uber that provide payment systems.The move, parliament said would address the regulatory gaps that have affected users of these payment systems for some time.
Among other concerns of the bill was to provide for the safety and efficiency of payment systems; to prescribe the rules governing the oversight and protection of payment systems; to provide for financial collateral arrangements; to regulate payment services providers; to regulate issuance of electronic money; to provide for the oversight of payment instruments and for other related matters.
Observations made previously was that the law regarding payment systems was not comprehensive enough since Bank of Uganda relies on Article 162 (1) of the Constitution which provides that Bank of Uganda shall encourage and promote economic development through effective and efficient operations of the banking and credit system to develop the payment and securities settlement systems.
Such payment systems include the Real Time Gross Settlement System (RTGS) for interbank transfer, the Automated Clearing House (ACH) System for the clearance of cheques, and the Electronic Fund Transfers (EFT). The securities settlement systems, including the Central Securities Depository (CSD) system operated by Bank of Uganda and Securities Central Depository System operated by Uganda Securities Exchange have been implemented.
However, these developments by the central Bank have been surpassed by a growing and developing economy which has seen a shift from traditional payment systems to the evolution of new systems such as electronic and mobile money.
This has exposed gaps in certain aspects such as licensing, regulation and supervision of the providers of the emerging payment systems thus posing a danger to users of the payment systems, a predicament, that the new law seeks to solve.