Payment System instruments

In a quest to achieve the mission of developing and maintaining efficient, reliable, and secure payment systems for Uganda, the National Payment Systems Department of Bank of Uganda is currently engaged in operating and improving the following instruments.


Currently, amounts written on cheques are limited to a maximum value of UGX 10 million per transaction for exchange of instruments by commercial banks in the clearing house. The clearing house clears and settles cheque transactions daily.

Effective 1st July 2009, BoU and commercial banks implemented a local clearing of items denominated in foreign currency. Consequently, local clearing of cheques and EFTs were also capped to the equivalent of UGX 20 million. To encourage a shift away from cash and to promote more efficient electronic and digital payment systems, this limit was revised downwards to 10 million in January 2022.

Electronic Funds Transfer (EFT)

To provide a variety of adequate payment instruments to the growing corporations and the corresponding increase in their transactions, Bank of Uganda in August 2003 implemented the Electronic Funds Transfer (EFT) for both credit transfers and direct debits. The EFT system provides fast, convenient, reliable, and secure domestic payment and collection of funds.

Credit Transfers are predominantly being used by government and corporate customers to transfer salary payments to the employees’/beneficiary’s account. Payment instructions using this channel have picked up both in volumes and values especially after revising the capping on the cheque limit to UGX 10 million in January 2022, and a decision by government to stop issuing cheques to its suppliers and employees in favor of EFTs and other efficient e-payment methods.

Electronic Banking

Online banking allows a user to execute financial transactions via the internet. Online banking is also known as "internet banking" or "web banking." Online banking offers several advantages which include speed, efficient and effective; it is also convenient because you can transact business at anytime and anywhere in the world.  It is also secure because it uses modern encryption and electronic signature technology. The biggest challenge with online banking is identity theft or fraud.

Card based systems

There is a growing array of card-based electronic payment systems available for retail use.  Historically, these payments have been linked to a payee's or payer's existing account relationship with a financial institution.  Card-based electronic payments can be defined in three ways, depending on the timing of the payment:

  • "Pay Later" payments occur after receiving the goods or services and typically refer to credit payments.  A credit card enables a consumer to access a credit line account at a financial institution.
  • "Pay Now" payments occur when the goods or services are received and generally are associated with debit payments.  Debit card payments are related to an existing transaction account at a financial institution.
  • "Pay Before" refers to payments for goods or services with prepaid or stored-value cards, which are loaded with buying power before the purchase of goods or services occurs.  The account associated with the pre-paid debit card may be the liability of a financial institution.

Both credit and signature-based debit card transactions are typically processed in batch mode at the POS, and settlement is delayed until the batches are processed at the end of the day.  PIN-based debit card transactions, although processed in real time at the POS, typically settle at the end of the day using the ACH.  Merchants often prefer that customers use PIN-based debit cards due to the lower costs associated with these transactions over the costs for signature-based credit and debit cards.  With PIN-based transactions, the consumer must apply the pre-established PIN to validate the transaction.  Each of these types of card payments is described below.

Cards are either magnetic striped based or chip embedded or a hybrid of both. The computer-chip-based systems have more security features than the magnetic strip systems; therefore, more financial institutions and merchants are adopting chip processing infrastructure.  Consumers have welcomed recent initiatives with chip-based contactless cards so, the growth in these chip-based-cards is expected to continue.

In general, credit cards have revolving credit arrangements that allow consumers to make purchases and be billed later.  Most credit card accounts allow the consumer to carry a balance from one billing cycle to the next and make a minimum payment in each billing cycle (e.g., two to three percent of their total balance) rather than requiring payment of the full balance.

A charge card is a specific kind of credit card that has a short-term, fixed-period credit arrangement.  The balance on a charge card account is payable in full when the statement is received and cannot be rolled over from one billing cycle to the next.  This arrangement exposes the issuing institution to less credit risk than open-ended accounts.

Financial institutions are important participants in various credit card systems.  They issue and distribute cards, clear, and settle the associated payments, and act as, or sponsor, merchant acquirers.