Uganda Caps Cash Withdrawals in Push Toward Digital Payments

Uganda will impose limits on over-the-counter cash withdrawals from Jan. 1, 2027, in one of the country’s biggest financial reforms in decades, as the central bank seeks to accelerate the shift toward digital payments while reducing reliance on physical cash.

The new policy by the Bank of Uganda (BoU) will cap daily cash withdrawals at bank branches to $13,600 (50 million Ugandan shillings) for individuals and $136,000 (500 million Ugandan shillings) for businesses. Weekly limits will be $68,000 (250 million Ugandan shillings) for individuals and $680,000 (2.5 billion Ugandan shillings) for corporate entities.

The restrictions apply only to over-the-counter cash withdrawals and will not affect electronic payment channels, including Real Time Gross Settlement (RTGS), Electronic Funds Transfers (EFT), internet banking, mobile banking and mobile money.

The central bank says the policy is intended to encourage digital payments while reducing the costs and security risks associated with transporting and handling large volumes of cash. A six-month transition period will allow banks and customers to prepare before the measures take effect.

The move comes as Uganda records steady gains in financial inclusion but continues to rely heavily on cash, particularly in agriculture, wholesale trade, construction and the informal economy.

According to the Bank of Uganda’s 2023 FinScope survey, financial inclusion rose to 81% of adults in 2023 from 77% in 2018, while formal financial inclusion increased to 68% from 58% over the same period. Mobile money is now used by 66% of adults, although only 9% actively use internet or mobile banking services.

Banks welcome the move

Commercial banks said the policy would accelerate customers’ migration to digital banking platforms after years of investment in electronic payment systems.

Stanbic Bank Uganda said it was ready to implement the changes.

“Stanbic Bank is fully aligned with the Bank of Uganda’s national digitisation agenda and is well prepared to implement the new over-the-counter cash withdrawal limits effective January 1, 2027. We have already embedded real-time compliance monitoring into our core banking systems, ensuring a smooth transition for both individual and corporate clients,” Kenneth Agutamba, the bank’s Country Manager for Corporate Communication, said.

“We foresee a positive structural change in how businesses and individuals manage liquidity. Corporate and SME clients, in particular, will increasingly move away from bulky cash transactions towards faster, safer digital alternatives such as RTGS, EFTs and mobile wallet integrations. Over time, this transition will accelerate the digitisation of supply chains, enhance financial inclusion and reduce operational risks associated with cash handling,” he said.

Stanbic said much of its transaction volume already passes through self-service channels, including internet banking, mobile banking, agency banking, self-service ATMs and cash deposit machines.

NCBA Bank Uganda also backed the reforms, saying digital banking rather than branch expansion would shape the future of financial services.

“The future of banking is not about the number of branches a bank has. It is about how easily customers can transact wherever they are. Customers should be able to check balances, pay utility bills, transfer money and access services directly from their phones without coming to the branch,” Chief Executive Mark Muyobo said.

“This solution does not limit customers. You can log into the app and set the transaction limits that suit your needs. If you want a limit of Shs50 million, you can set it yourself and transact accordingly without having to visit the bank.”

“We have to be honest about where the world is going,” he said. “Holding large amounts of cash offers no real advantage today. In fact, cash has become a liability because it exposes individuals and businesses to unnecessary security risks.”

“If you can access your money instantly through your account and make payments electronically, there is really no reason to continue carrying large amounts of cash.”

Economists urge caution

Economists said the policy could improve transparency by shifting more high-value transactions onto digital platforms but warned that implementation would be critical.

Emmanuel Erem, a research fellow at the Economic Policy Research Centre (EPRC), said the withdrawal caps would fundamentally change how businesses conduct large transactions.

“Mobile money has already transformed retail payments, but many large businesses still rely heavily on physical cash. By capping corporate withdrawals at $136,000 (Shs500 million) a day and individual withdrawals at $13,600 (Shs50 million), the Bank of Uganda is effectively forcing high-value transactions onto digital channels,” Erem said.

“Cash is anonymous, but digital money leaves a trail. By forcing large transactions through electronic channels, the policy creates an auditable record that strengthens anti-money laundering efforts and gives the Uganda Revenue Authority greater visibility into actual business transactions.”

“Handling physical cash is expensive. Banks spend heavily on cash transportation, insurance, vault management and security. Reducing large over-the-counter withdrawals lowers those costs considerably.”

“The criteria for exceptional withdrawals must be published well before implementation. Businesses need certainty instead of discovering at the last minute that they cannot access the liquidity required to operate.”

“The average Ugandan will rarely be affected by these limits. That message needs to be communicated consistently to avoid unnecessary panic.”

Infrastructure test

“If a company’s chief financial officer cannot authorise a $272,000 (Shs1 billion) digital payment because an application has failed, business operations grind to a halt. Reliability will become just as important as regulation,” Erem said.

He cited Nigeria’s 2023 cash withdrawal restrictions as an example of how reforms can outpace digital infrastructure.

“The biggest lesson from Nigeria is that digital infrastructure must be ready before cash restrictions take effect. Banking applications crashed, electronic transfers were delayed and payment systems became overwhelmed because millions of people shifted online almost overnight.”

“In Nigeria, withdrawal limits severely affected point-of-sale merchants because they could not access sufficient cash to rebalance their operations. While the Bank of Uganda is targeting corporate ‘whales,’ it must create special liquidity corridors or distinct regulatory classifications for mobile money agents and bank agents. Otherwise, the policy could unintentionally constrain the rural and informal economy,” Erem said.

“The Bank of Uganda will eventually need to leverage the National Identification Number system and interbank data-sharing mechanisms to monitor cumulative withdrawals across the financial system. Otherwise, the intended impact of the policy could easily be diluted.”

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