Uganda’s central bank, the Bank of Uganda (BoU), has revealed that a growing number of financial institutions are leveraging the National Identification and Registration Authority (NIRA) database for digital Know Your Customer (KYC) verification. As of June 2023, 74 financial institutions, including commercial banks, microfinance institutions, and fintech companies, had access to the NIRA database.
The move aligns with the Registration of Persons Act 2015, which mandates the use of national ID cards or identification numbers for accessing certain services, including financial services. The implementation of this provision began in 2020.
Accessing the NIRA database enables financial institutions to efficiently verify and authenticate customers’ identities, streamlining KYC checks. This not only enhances security and facilitates seamless access to financial services but also promotes financial inclusion in Uganda.
In an effort to bolster security and combat financial fraud, the BoU issued a directive in April requiring ID verification for financial transactions exceeding one million Ugandan shillings. While this move faced some criticism, it underscores the importance of strengthening security measures in the financial sector.
The partnership between national ID systems and the financial sector is gaining traction globally. Somalia recently formed a similar partnership, with the World Bank playing a crucial role in supporting the implementation of its national ID system. The initiative aims to address the lack of legal identification among 85% of Somalis, which has limited their financial opportunities.
In Somalia, the government is currently exploring the role of the biometric national ID card in its National Transformation Plan. The integration of the ID system with the banking sector is expected to play a significant role in integrating Somalia’s economy with the global financial system. Additionally, the government plans to launch a Tax Identification Number linked to the national ID to streamline the taxation process.
