What does ‘full monetisation of the economy’ mean?
Full monetisation of the economy refers to a situation where all individuals, households, and businesses conduct most of their economic activities through money and formal financial channels rather than through subsistence production, barter arrangements, or informal transactions.
Monetisation occurs when people earn income in monetary form, save through formal or semi-formal institutions, make payments through financial channels, access credit, and participate in markets beyond immediate household consumption.
It is linked to the broader process of economic transformation. It involves moving people from subsistence activities into market-oriented production, integrating them into the financial system, and enabling them to participate more fully in the formal economy.
Full monetisation does not imply that every transaction must pass through a bank account. Rather, it means that economic activity is increasingly market-based, financially connected, and visible within the broader economy. This creates opportunities for savings mobilisation, investment, productivity growth, and efficient revenue mobilisation by the government, as well as better targeted interventions for improved livelihoods.
What is the Bank of Uganda doing to support monetisation of the economy?
The Bank of Uganda is supporting monetisation through policies and initiatives aimed at expanding access to financial services, strengthening payment systems, and maintaining macroeconomic stability.
First, the Bank is modernising the national payments ecosystem. Through the National Payments Systems framework and the development of interoperable payment infrastructure, individuals and businesses can transact seamlessly across banks, mobile money platforms, and other financial service providers.
This reduces transaction costs and makes digital financial services more accessible. For instance, the modernised financial architecture is currently supporting the delivery of Government funds such as Parish Development Model funds to the intended beneficiaries who are targeted to join the money economy.
Second, the Bank promotes financial inclusion. Access to formal and semi-formal financial services has expanded significantly over the past decade, supported by mobile money, agent banking, microfinance institutions, and digital financial innovations. Increased access enables more Ugandans to save, borrow, invest, and transact through formal channels.
Who participates in the monetary economy, and who is still outside it or only partially included?
Uganda Bureau of Statistics (UBOS) defines the households within the subsistence economy as those unable to satisfy their basic needs that encompass both food and non-food items. The assessment of a household’s capacity to fulfil these basic needs is crucial in identifying those within the subsistence economy.
This category includes households involved in subsistence farming, those receiving wages that fall short of meeting basic needs, businesses generating insufficient returns, and households that are economically inactive and unable to meet their basic needs.
Conversely, households classified outside the subsistence economy belong to the money economy. These households are characterised by their ability to adequately meet their basic needs and remain with savings. The 2024 Uganda National Population and Housing Census report indicated that one third (33.1 percent) of households were in the subsistence economy while two-thirds of households (66.9 percent) were in the money economy.
Using available data on financial inclusion, employment, urbanisation, census and economic activity, we can identify those who are substantially integrated into the money economy and those who remain only partially integrated.
Those in the money economy include:
81 percent of Ugandan adults have access to formal or informal financial services, according to the 2023 Finscope survey). These individuals are likely to save, borrow, make payments, and receive income through monetary and financial channels.
More than 59 million registered mobile money accounts facilitate millions of daily transactions and have become the primary entry point into the financial system for many Ugandans.
Individuals employed in the formal private sector and public sector, who receive regular monetary incomes and routinely use financial institutions.
Uganda has an estimated 686,700 business establishments, of which about 18.3 percent sit in the formal bracket with clear corporate governance, fiscal status (filing corporate income tax, Pay As You Earn (PAYE), VAT registered), labour structures, credit lines and full legal formalisation.
Most urban households which are generally more connected to markets, financial services, and digital payment platforms.
Those not yet fully in the money economy include:
Approximately 3.5 million households (33.1 percent of all households 2024 census vs 39 percent in 2019) remain predominantly in the subsistence economy, producing largely for their own consumption with limited engagement in formal markets and financial services.
Although financial inclusion has improved significantly, a sizeable number of adults remain financially excluded and therefore have limited access to savings, credit, insurance, and digital payment services.
A large proportion of Uganda’s business sector remains informal. According to available enterprise statistics, approximately 18.3 percent operate in the formal sector, while 81.7 percent operate in the informal sector (micro enterprises: kiosks, retail shops, downtown wholesalers that do not keep audited financial books, lack structured employment contracts, and do not separate owner’s personal and business money). The predominance of informal enterprises highlights the significant scope for further monetisation and formalisation of economic activity
Individuals in remote and underserved areas still face challenges in accessing financial infrastructure despite the expansion of mobile money, agent banking, and digital financial services.
Children and youth below working age, who constitute a substantial share of Uganda’s population, are not yet active participants in the economy and therefore remain outside the money economy, according to the 2025 Labour market survey.
While Uganda has made progress in monetisation and financial inclusion, a large segment of economic activity remains only partially monetised. The challenge is therefore not a lack of economic activity, but ensuring that more households, farmers, and enterprises are integrated into formal markets and financial systems.
The key point is that monetisation should be viewed as a continuum rather than a binary condition. Many Ugandans already participate in the money economy to some extent. But the depth of participation varies significantly across regions, sectors, and income groups.
Why does full monetisation matter for Uganda’s economy as a developing country?
Monetisation enables economic activity to be transformed into higher productivity, greater incomes, and broader prosperity.
Monetisation mobilises savings. When households participate in the financial system, their savings can be intermediated into productive investments that support business expansion, job creation, and economic growth.
Second, monetisation improves access to credit. Individuals and businesses with transaction histories, savings records, and financial identities are better positioned to access financing to invest, expand production, and improve productivity.
Third, monetisation enhances monetary policy. Financially connected households and firms respond more readily to monetary policy signals, strengthening the transmission of policy actions to the broader economy.
Fourth, monetisation supports domestic revenue mobilisation. As economic activity becomes increasingly market-based and formalised, it becomes easier to measure, document, and incorporate into the tax system, thereby broadening the resource base available for public investment.
Fifth, monetisation promotes resilience and inclusion. Households that can save, access credit, make digital payments, and use insurance products are better able to manage economic shocks and invest in their future.
Most importantly, monetisation is a critical ingredient in attaining Uganda’s ten-fold growth program. Achieving sustained high growth and transforming Uganda into a prosperous upper-middle-income economy will require the full participation of households, farmers, entrepreneurs, and businesses in an increasingly formal, market-based, and financially connected economy.
Therefore, monetisation should not be viewed merely as a financial sector objective. It is a national development objective that supports productivity growth, structural transformation, job creation, and economic prosperity.