Uganda is increasingly embracing digital financial services, but the country remains heavily dependent on cash. This reality is important when assessing the Bank of Uganda’s decision to introduce new over-the-counter cash withdrawal limits from January 1, 2027.
According to the Bank of Uganda (BoU), 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.
The limits apply to over-the-counter withdrawals and do not cover electronic payment channels such as Real Time Gross Settlement and Electronic Funds Transfers. BoU has also provided for exceptional approvals for sectors and transactions that remain heavily dependent on cash.
The policy is therefore not, strictly speaking, a blanket restriction on businesses withdrawing more than Shs50 million. A properly classified business account, for instance, can withdraw substantially more.
Nevertheless, the policy raises a broader question: Is Uganda’s financial ecosystem sufficiently developed and affordable to support a rapid transition away from cash?
Uganda remains a cash-based economy
Available evidence suggests that the transition to digital finance is far from complete.
The 2023 FinScope Uganda Survey found that 70 per cent of adults still preferred cash over digital payments, although the same proportion indicated a willingness to learn how to use new technology.
The survey also found that mobile money and Village Savings and Loan Associations (VSLAs) remain important components of financial inclusion. Mobile money was used by 66 per cent of adults, while VSLAs and ROSCAs reached 36 per cent.
More recent International Monetary Fund (IMF) analysis presents an even clearer picture. The 2026 IMF Article IV assessment reports that Uganda’s economic activity remains largely informal and that 91 per cent of adults receive income in cash, compared with five per cent receiving payments through bank accounts and three per cent through mobile money.
The IMF also reports that Uganda has a relatively high share of financially excluded adults and relatively low use of formal banking services.
These figures demonstrate that cash dependence is not merely a matter of consumer preference. It is closely linked to the structure of Uganda’s economy, particularly informal employment, small businesses, agriculture and self-employment.
Implications for agriculture and SMEs
Consider a produce dealer in Kabale who purchases agricultural produce from farmers and needs Shs200 million to settle payments on a market day.
Under the new framework, a properly classified business account would technically accommodate the withdrawal because the daily business-account ceiling is Shs250 million.
The more fundamental issue, however, is what happens when the dealer attempts to replace cash payments with digital transactions.
Agricultural markets often involve numerous small payments to farmers. Digital payment requires recipients to have access to appropriate accounts or wallets, reliable connectivity, sufficient digital literacy and an affordable means of accessing the money received.
The existence of a digital payment channel does not automatically mean that it is the most practical option for every participant.
This is particularly significant because BoU itself acknowledges that some sectors remain heavily dependent on cash and has consequently introduced an exception-management framework.
The effectiveness of this framework will therefore be critical. If legitimate cash-intensive businesses must repeatedly seek exceptional approval, the resulting administrative burden could increase transaction costs and disrupt normal business operations.
For small and medium enterprises (SMEs), the issue is particularly important because their operations depend heavily on cash flow. Increased payment costs, delays or additional administrative requirements could reduce margins and increase the cost of doing business.
Cheque reduction and the cost of transition
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.
There is a reasonable policy rationale for this. Electronic payments can provide faster settlement, stronger transaction records and reduced reliance on physical instruments.
However, the transition must take existing commercial practices into account.
Landlords, schools, motor-vehicle dealers, contractors and other businesses that have traditionally accepted larger-value cheques will need alternative payment arrangements.
The central issue, therefore, is not whether electronic payments exist. They do.
The question is whether they are universally accessible, reliable and affordable.
If a policy makes one payment method less accessible without ensuring that alternative channels are sufficiently affordable and dependable, the cost of transition may simply be transferred from banks and payment systems to businesses and consumers.
Financial inclusion: access versus effective use
The financial-inclusion implications deserve particular attention.
Uganda has made substantial progress in expanding access to financial services. The 2023 FinScope survey found that mobile-money agents were the closest financial-service access point for many customers, with almost six in 10 adults reporting an agent within one kilometre of their home or workplace.
Nevertheless, 70 per cent of adults continued to prefer cash.
This suggests that financial inclusion should not be measured only by whether a person has access to a mobile phone, mobile-money agent or bank account.
It should also consider whether the person can use the service conveniently, affordably and confidently.
This concern is particularly relevant to rural communities, elderly customers, smallholder farmers and members of informal savings groups.
The IMF’s 2026 assessment identifies low financial literacy as another constraint on financial deepening and notes that informal income and cash payments limit the use of formal financial products.
Consequently, restricting or discouraging cash before addressing these underlying constraints could create unintended exclusionary effects.
The policy needs broader reforms
The objective of encouraging electronic payments is consistent with Uganda’s broader financial-sector development agenda.
The IMF notes that BoU is pursuing financial deepening through regulatory reforms, market infrastructure improvements and increased use of digital platforms.
The challenge is ensuring that digitalisation does not become more expensive than the cash system it is intended to replace.
Several measures would help.
First, cash-intensive sectors should have a transparent and efficient exception mechanism. Agriculture, produce trading and other legitimate sectors that require substantial cash should not face unnecessary administrative obstacles.
Second, digital transaction costs should be reviewed, particularly for high-value legitimate commercial transactions. If businesses are required to shift from cash to electronic payments, the financial cost of that shift should not become an additional burden on already constrained SMEs.
Third, Uganda should continue investing in rural connectivity, agent liquidity, digital literacy and consumer protection.
Finally, implementation should be accompanied by monitoring of its impact on SMEs, farmers, SACCOs and financially excluded groups. The policy should be adjusted where evidence demonstrates significant unintended consequences.
The Bank of Uganda’s cash-withdrawal policy represents an important step in Uganda’s attempt to modernise its payment system. However, the country’s economic realities suggest that the transition from cash to digital finance will require more than regulatory limits.
The available evidence shows that 70 per cent of adults still prefer cash, while the IMF estimates that 91 per cent receive income in cash. These figures indicate that cash remains deeply embedded in Uganda’s economic structure.
The policy should therefore be assessed not simply by how effectively it reduces cash withdrawals, but by whether it helps create a financial system that is accessible, affordable, reliable and inclusive.
Uganda should continue its journey towards digital payments. But digitalisation will be sustainable only when the digital alternative is sufficiently convenient and affordable for the farmer in Kabale, the small trader, the landlord, the school, the SACCO member and the ordinary consumer.
The policy challenge is therefore not simply to reduce the use of cash, but to ensure that the alternative financial system is ready for everyone who is expected to use it.
The writer, Atusasire Edmund, commonly known as ‘Researcher’, holds an MBA and BCom from Makerere University and a PGD-FM from Uganda Management Institute (UMI).
