Uganda's Central Bank Caps Cash Withdrawals at 2 Million Shillings

The Bank of Uganda on Friday imposed a two million shilling daily cap on cash withdrawals, escalating a national push toward digital payments that could reshape how banks, businesses, and ordinary Ugandans handle money.

The Withdrawal Limit Takes Effect Immediately

Under the new rule, individual account holders cannot withdraw more than two million shillings—roughly $540—in a single day. Corporate accounts face an even lower ceiling of ten million shillings. The directive came from the Central Bank's Payments Systems Department and applies to all commercial banks and microfinance institutions licensed to operate in Uganda.

Bank of Uganda Governor Michael Atingi-Okae signed off on the policy, citing the need to reduce cash handling costs and curb money laundering risks. The regulation was distributed to lenders as a compliance deadline, with enforcement beginning the day of announcement.

Why Uganda Is forcing the shift

Digital payment adoption in Uganda has lagged behind neighboring Kenya, where mobile money platforms dominate retail transactions. Roughly 40% of all consumer payments in Uganda still occur in cash, according to 2023 data from the Financial Sector Deepening project. That contrasts sharply with Kenya, where mobile payments account for the majority of transactions.

The Central Bank has argued that a cash-heavy economy creates bottlenecks. Transporting physical currency costs banks an estimated 1.2% of their operating expenses annually, according to a 2022 banking sector report. Reducing these costs could lower interest rates on loans, though the timeline for such benefits remains unclear.

What the cap means for small traders

Market vendors in Kampala's Owino Market, one of East Africa's largest trading hubs, rely heavily on cash settlements. Under the new rules, a vendor buying wholesale goods from suppliers would need to split large purchases into multiple transactions or use mobile money transfers. The inconvenience could push some traders toward digital platforms—exactly what the Central Bank intends—but the learning curve may slow adoption.

Bank of Uganda's deputy governor in charge of fintech, John Muwanga, told reporters the transition would be phased. "We understand this creates friction initially," he said. "But the long-term gains for financial inclusion outweigh short-term disruption."

Banks Face Compliance Pressure

Commercial lenders have until month-end to reconfigure their automated teller machines and internal transaction monitoring systems. Sources at two major Ugandan banks said the technical adjustments require software updates across hundreds of ATM networks—a process that could cost each institution between 150 million and 300 million shillings.

The restrictions apply to over-the-counter and ATM withdrawals combined. Banks exceeding the cap risk penalties under the Financial Institutions Act, including potential license reviews for repeat violations.

Market Reaction and Investor Concerns

Shares in Centenary Bank, Uganda's largest commercial lender by market share, dipped 1.8% on Friday following the announcement before recovering some losses by midday trading. Analysts at Nairobi-based Standard Investment Research said the policy could temporarily reduce fee revenue for banks that profit from cash transactions.

Foreign investors monitoring Uganda's business climate expressed concern. The Uganda Investment Authority said it had received inquiries from three international firms in the past 48 hours asking whether the policy would affect their operational capacity. "We're fielding questions about cash-flow management for businesses that rely on physical currency for supplier payments," said an authority spokesperson.

The Push for Financial Inclusion

Bank of Uganda has argued for years that expanding digital payment infrastructure helps unbanked Ugandans access formal financial services. Mobile money accounts in the country grew 12% last year, reaching 31 million registered users in a nation of roughly 48 million people.

The withdrawal cap is the latest in a series of measures. Last year, the Central Bank required all government salary payments to go through bank accounts rather than cash handouts. The policy affected roughly 400,000 civil servants and was credited with opening that many new formal bank accounts.

What Comes Next

Bank of Uganda plans to review the two million shilling threshold after six months. If cash withdrawal volumes drop significantly, the cap may be lowered further. Financial technology companies are already positioning to fill gaps—Mobile money operators reported a 15% surge in transaction values on the day the policy was announced, suggesting users are quickly adapting.

Businesses should watch for secondary guidance on how the cap interacts with existing transaction limits on mobile money platforms. The Central Bank has promised a FAQ document for commercial operators within the next two weeks.