Digitization is key to increase rural financial inclusion in Uganda

A growing population, changing food patterns, and sustainable production within planetary boundaries necessitates a transformation of global food systems. Governments, households, agribusinesses and SMEs in emerging markets however lack the means to invest in such transformation. People can often only borrow from family and the local community, not from banks. The possibility to transfer money, save or get loans is crucial for personal growth and rural and business development.

From Rabobank’s mission to Grow a Better World Together, Rabo Partnerships contributes to this transformation by addressing issues that matter for the future – such as financial inclusion, rural development and agrifinance. Since 2014, dfcu, a leading bank in Uganda, has been working together with Rabo Partnerships and the Dutch Government in a Public Private Partnership on structural improvements in the access to financial services and financing the agricultural sector in a sustainable way. A recently published study explores the effects that the partnership achieved within a five-year period.

dfcu Limited is a listed company in Uganda and has been in existence for the last 55 years with a strong background in Leasing and Development Finance. The bank’s Commercial Banking business is mainly broken down into Personal, Business, Development & Institutional Banking and Treasury, serving the salaried, youth & students, informal, enterprise, commercial and corporate customer segments. Guided by their vision “to be the preferred financial institution”, their ambition and purpose is to make more possible. dfcu achieves this vision by providing innovative financial solutions to their chosen segments, maintaining the highest level of service standards to their customers, and enhancing the well-being of their customers and society.

In 2014, a Public Private Partnership (PPP) program was set up including dfcu, Rabo Partnerships and the Ministry of Foreign Affairs of the Netherlands with the goal of increasing financial inclusion and food security in Uganda. The initial program, combined with a five-year strategic plan by dfcu, lasted until 2019. Over these years, it was dfcu’s goal to transform from a niche bank into a universal bank and into one of the leading market players within the Ugandan banking system. One of the dominant themes within the topics addressed has been digitalisation. In 2020, the parties agreed to a continuation of the program. The objectives for the program remained clear: promoting digital transformation and financial inclusion in Uganda by promoting agricultural value chains, banking services, and strengthening the internal organization of dfcu through modernization and customer intimacy.

The partnership with dfcu has been effective in building the capacity of the bank in a number of challenging areas including IT, risk management, compliance, data analytics, customer segmentation and branch reform. Over the period between 2014 and 2019, several key milestones were reached. With the support of Rabo Partnerships, dfcu improved their understanding of customer segments, which resulted in tailored product offerings: for example, different products were created for students, retail and SME customers with a key focus on agri clients.

At the same time, dfcu and Rabo Partnerships worked on enhancing the skills of the bank’s data analytics team that has been able to improve cross selling of products to customers, for example by adding pop-up suggestions in the core banking system. Rabobank’s vast experience in the transformation of banking in the digital age also supported the reimagining of the customer experience both within and outside of branches to focus less on transactions and more on customer intimacy.

Between 2016 and 2019, dfcu increased lending to the agricultural sector to Ugx 292 billion, the equivalent of 104 million euros. The number of borrowing clients in the sector increased by 88%, and dfcu also deepened lending volumes in the agribusiness value chain as well as to cooperatives. Rabo Partnerships provided significant support to agribusiness and trade financing, allowing, for example, dfcu to access trade finance through Rabobank Nairobi.

Another important project was the development of the strategic plan for growing alternative channels, aimed at making dfcu the market leader for digital solutions. The plan included steps such as the improvement of the bank’s mobile platform to offer mobile lending, modernization of the bank’s infrastructure, extension of technology to a digital payments platform for the agri sector and the ability to open accounts electronically.

Together, in the midst of the Coronavirus pandemic in 2021, dfcu Bank and Rabo Partnerships have worked to enhance the bank’s hybrid remote working policy to ensure business continuity and increase staff productivity as the staff adjusted to a new operating model.

“The partnership with Rabobank has enabled dfcu Bank make significant strides in our novel development initiatives. Rabobank has provided a “big brother” approach by the provision of advisory and consultative services. This means that we can access expert support as we work to become a bank that focuses on excellence in the areas of agriculture, technology, big data and digital transformation”, explains Veronica Sentongo, Chief Change and Innovation Officer of dfcu.

dfcu’s pro-active approach of combining the Public Private Partnership framework with a strategic plan has clear advantages. The bank is eager to leverage the technical assistance to improve and expand, which has played a vital role in the successes of the partnership. The unique characteristic of the cooperation with Rabo Partnerships is the consultants’ experience in rural and retail banking, in other emerging markets and with other partner institutions. The hands-on and long-term support with consultants being embedded directly at the partner bank has shown positive effects on knowledge transfer. With the renewal of the PPP program up until 2023, dfcu, Rabo Partnerships and the Ministry of Foreign Affairs will continue to work on implementing change in the years to come.