Will new cash limits accelerate Uganda’s digital payments drive?

KAMPALA — The Bank of Uganda (BoU) has defended its decision to impose limits on over-the-counter cash withdrawals and cheque payments, saying the move is intended to accelerate the country’s transition to a digital payments economy rather than restrict access to money.

Under the new regulations, which take effect on January 1, 2027, individual account holders will be limited to cash withdrawals and cheque payments of up to Shs50 million per day and Shs250 million per week. Corporate entities and business account holders will face a daily limit of Shs500 million and a weekly cap of Shs2.5 billion.

Commercial banks have been given six months to prepare their systems and customers for the transition.

The announcement has sparked public debate, with some customers questioning the reasons behind the limits and expressing concerns about the cost and security of digital payment channels.

However, Bank of Uganda officials say the restrictions are part of a broader strategy to promote a cash-lite economy, where digital payments become the preferred mode of transaction while cash remains available when necessary.

Mr Andrew Kawere, the Director of the National Payments Systems Department at BoU, said the decision was informed by findings showing that over-the-counter cash transactions are steadily declining.

According to the central bank, such transactions now account for only about 20 percent of all banking transactions, although they still represent nearly 60 percent of transaction value.

“We looked at transaction patterns and realised that most customers are already using digital channels. The limits are intended to encourage greater use of those platforms while reducing the risks associated with handling large amounts of cash,” Mr Kawere said.

He emphasised that the measures should not be interpreted as restrictions on access to personal or business funds because alternative payment channels remain available without transaction limits.

Customers will continue to access funds through Real Time Gross Settlement (RTGS), Electronic Funds Transfer (EFT), mobile money platforms and digital banking services.

For customers who need to withdraw amounts exceeding the prescribed limits, BoU has provided for exceptions. The regulator has issued guidance to financial institutions on handling waiver requests in special circumstances.

“If you need to withdraw cash above the limit, please contact your bank for guidance,” the central bank said in its guidelines.

Financial institutions will also be required to assess customer risk profiles and may impose lower withdrawal limits depending on their internal risk management frameworks.

The regulator says the six-month transition period will be used to sensitise the public about available digital payment options and how to protect themselves from fraud and cybercrime.

Mr Kawere acknowledged that concerns about digital security remain one of the biggest barriers to adoption, but maintained that electronic payment systems are safe when customers properly safeguard their personal information, passwords and personal identification numbers (PINs).

“Most risks arise when customers share their credentials or fail to protect their PINs. The systems themselves are secure, but users must remain vigilant,” he said.

The new framework also allows customers with multiple accounts to make withdrawals from each account, provided the amount withdrawn from any single account does not exceed the prescribed limit.

The Uganda Bankers Association has welcomed the move, arguing that reduced cash handling will improve security and lower operating costs for financial institutions.

Industry players, however, note that the high cost of electronic transactions remains a major challenge to wider adoption of digital payments. Mobile money operators have repeatedly called for government intervention to reduce taxes and transaction charges that are ultimately passed on to customers.

BoU argues that increased use of digital channels will eventually lower transaction costs through economies of scale. The regulator also points to ongoing efforts under the National E-Payments Strategy and the development of shared payment infrastructure aimed at improving interoperability between banks and mobile money operators.

According to the central bank, greater integration of payment systems will reduce transaction costs, improve efficiency and support Uganda’s long-term digital transformation agenda.