Legislative Brief



Payment systems are an integral part of commercial and financial transactions in Uganda and they include Real Time Gross Settlement System for inter-bank transfers, automated clearing house systems for clearing cheques and the electronic funds transfers and lastly the securities settlement systems such as the central securities depository which is operated by the Bank of Uganda and the Securities Central Depository system operated by the Uganda Securities exchange.

There are certain laws in place which are relevant to the regulation of payment systems however, these laws do not offer comprehensive protection in terms of regulating payment systems across the board. The National Payment Systems Act, 2020 seeks to bridge this gap by providing for the safety and efficiency of payment systems, payment service providers and the issuance of electronic money among others.

Highlights of the National Payment Systems Act, 2020

  • The Act provides for the central bank as the regulator, supervisor and overseer of the operations of payment systems in order to ensure their safety and efficiency.
  • In relation to the securities settlement system, the Act limits the central bank’s functions to issuance, redemption and settlement of debentures, stocks, shares, treasury bills and bonds issued or proposed to be issued by government and the transfer of monetary value of debentures, stock, shares bonds or notes issued or proposed issued by a body corporate.
  • According to the Act, a person shall not offer a payment service, operate a payment system or issue a payment instrument without a license issued by the Central Bank. However, the requirement to have a licence will not apply to payment instruments issued by the Central Bank or payment systems operated by the Central Bank.
  • The Act also provides that a system is eligible to be licensed by the Central Bank if it has any of the objects that include clearing of payment instructions between financial and non-bank, settling of obligations arising from clearing of payment instructions, transfer of funds from one account to another using an electronic device, provision of electronic payment services to the unbanked and under-banked population.
  • The Act also specifies that subject to those objects, a payment system is eligible to be licensed by the central bank if that payment system is interoperable with other payment systems in the country or internationally.
  • The Act provides that the Central bank may establish a regulatory sandbox framework for purposes of governing the way a person may obtain limited access to the payment ecosystem to test innovative financial products or services without obtaining a license.
  • In terms of oversight, the Act confers certain powers and responsibilities on the Central Bank for purposes of ensuring the safety and efficiency of payment systems.
  • The Act also provides that a payment instruction or settlement shall be valid and enforceable by and against a payment system operator or participant and shall be final and irrevocable from the time the payment instruction or settlement is determined under the rules of that payment system to be final.
  • The Act also provides that every participant in a payment system shall open and maintain settlement accounts in the books of the central bank or an authorised settlement agent, including the maintenance of minimum balances, on such terms and conditions as the Central Bank or payment system operator may specify.
  • The Act provides that a payment services provider licensed as an electronic money issuer shall among other things issue electronic money only after an equivalent amount of cash is deposited in a trust account or a special account opened in accordance with the relevant provisions.
  • The Act also requires a licensed electronic money issuer to apply to the Central Bank in the prescribed form to open a trust account in a financial institution or a micro-finance deposit taking institution to facilitate issuance of electronic money.
  • The Act also provides that a payment service provider who is a financial institution or microfinance deposit taking institution and who intends to issue electronic money shall with the approval of the central bank, open and maintain a special account in its books of account.
  • Regarding consumer protection, the Act provides for the protection of consumer information by imposing a duty on the license and the central bank to protect the privacy of a participant and consumer information and not to disclose information of a participant or customer unless the disclosure is made in compliance with the law.

Implication of the Act

  • All entities that had transfer payment systems must apply to the central bank for a licence to operate under the National Payment System Act for example the likes of MTN mobile Money and Airtel Money.
  • The Act gives lee way for other entities to set up electronic payment systems since s regulatory framework is now in place, as long as those entities comply with the provisions of the National Payment System Act 2020.


The National Payment Systems Act, 2020 and the regulations thereunder thus cater for the safety and efficiency of the payment systems, functions of the central Bank in the circumstances but particularly in relation to payment systems, oversight and protection of payment systems.

This Act seeks to bridge this gap by providing for the safety and efficiency of payment systems and the issuance of electronic money.