KAMPALA. The rapid growth of mobile money in Uganda is benefiting both micro and macroeconomic segments of the economy by complimenting and improving the outreach of financial institutions across the rural and urban areas.
Since introduction of mobile money in Uganda by Bank of Uganda (BoU) in 2009, there has been financial inclusion with millions of people acquiring mobile money accounts.
Today, trillions of Shillings are being transacted across the country using the platform, a development which has simplified people’s life regarding access to financial services.
Players in the sector argue that as the usage of mobile phones continues to flourish in the developing world, new services are emerging as mobile network operators (MNOs) diversify services to compliment voice and SMS in a progressively competitive environment. The goal, here, is to improve customer retention and make more money.
The number of mobile money accounts has been growing in the country over the years, with statistics from Bank of Uganda showing that as at December 2016, mobile money accounts stood at 21,585,485 accounts, while the number of mobile money agents as at December 2016 was 132,937 agents.
A mobile money operator in Kampala City, Ms Rita Namatovu told Prosper Magazine that all kinds of people come for mobile money services in her shop sending money and making withdrawals.
“We get those coming for withdrawal and sending money in small and big amounts in the range of between Shs5,000 and Shs1,000,000 on daily basis,” she said.
Ms Namatovu said because people find it convenient using the mobile money services, there are many mobile money service providers doing business and others still coming up.
Ms Namatovu is just one of the hundreds of small and medium business people earning and having a livelihood from giving mobile money services.
“In the year to December 2016, total value of mobile money transactions stood at Sh43.8 trillion. This was greater than the Shs32.5 trillion witnessed in the year to December 2015,” the director - financial stability at BoU, Dr Charles Abuka said, in an interview with Prosper Magazine last week.
By end of last year, mobile money providers numbered seven in total, including: MTN, Airtel, Uganda Telecom, Africell, M-cash, PayWay and Eeezy Money.
Like in the neighbouring Kenya, mobile money is playing a key role in Uganda’s economy in terms of financial inclusion and quick payments for goods and services since many people are beginning to prefer using it to traditional banking means of payments.
Dr Abuka explained that mobile money is reaching a larger number of low-income and previously unbanked customers, moving millions of households from a cash-only economy into the formal financial system. “The mobile phone is seen as the main instrument in propelling financial inclusion given that at least 52.3 per cent of people in Uganda own a mobile phone (about 19.5m people),” he said.
Dr Abuka clarified that as a payment service, mobile payment does not provide a banking service solution but facilitates the operation of financial institutions with deeper outreach, thereby improving the services to the current clients and making it possible to reach marginal clients.
He explained that E‑money represents a promising opportunity to provide low-income individuals with more than just payment and safe storage services, and it is increasingly becoming a savings vehicle.
Mobile banking also offers a secure, low-cost, accessible transaction platform to bring the unbanked into the formal financial sector, thus promoting financial inclusion.
“Therefore, mobile money plays a critical role in the financial inclusion strategy as it provides a platform for customers to access a much broader range of financial services,” he said.
The rapid growth of mobile money compliments some of the traditional banking services by improving the outreach of financial institutions thereby, improving the services to the current clients and making possible to reach marginal clients in the current E-generation. The mobile phone is replacing some of the services of conventional branch banking. This is due to the benefits it offers in terms of accessibility and cost cutting advantages since it does not require incurring the capital expenditure of setting up a branch and the related operational costs.
Dr Abuka added: “Mobile money operators have partnered with different commercial banks in Uganda following advice from BoU. Since BoU is a regulator of commercial banks and could only grant no objection to a bank and not a Mobile Network Operator.”
The benefits of this partnership include transaction limits, limits on fraud related cases, creation of e-value-reconciliation of account and e-float balance, replication of mobile money platforms by mobile money service providers and backup platforms.
Telecoms partner with banks
At present telecom operators are in partnership with some banks to facilitate mobile money transacting. MTN Uganda Limited is in formal touch with Stanbic Bank, KCB, United Bank of Africa, Bank of Africa, Equity Bank and Post Bank.
Airtel Money has partnered with Standard Chartered Bank, KCB, Pride Microfinance, Centenary Bank and Post Bank. Uganda Telecom’s M-Sente is with dfcu Bank, Pride Microfinance and Post Bank, while Africell which operates Africell Money has partnered with Housing Finance Bank, Post Bank and Pride Microfinance.
MTN Mobile Money manager, Mr Anthony Katamba, told Prosper Magazine last Tuesday that mobile money is performing well and it’s growing across the country.
“Mobile money is cheap and it includes everybody in the system. It accommodates transaction as low as Shs500. So it is playing a key role in fostering financial inclusion and I think this is the reason why it is growing so fast,” he said.
Mr Katamba said what makes using mobile money convenient is the fact that anyone with a registered mobile phone number is automatically hooked to the mobile money service without going to open an account as it is done in the banks.
“Registered word is wallet, when you have wallet electronic, you cut out much of the bureaucracies associated with opening traditional bank accounts where one has to fill in application forms for account opening,” he said.
The telecommunication companies provide platform to enable transaction take by partnering with the banks who does the physical transfer of money to locations where the final transaction takes place. Alongside partnering with the banks, telecommunications companies have registered mobile money agents. Mr Katamba revealed that as of last year MTN had 37,000 mobile money agents doing business with them.
The chief finance officer - Stanbic Uganda, Mr Sam Fredrick Mwogeza, told Prosper Magazine on March 17 that banks are moving away from the conventional banking channels due to competition in place, which has seen banks partnering with the telecommunication companies to provide mobile money services to the general public.
“Banks are increasingly adapting to convenient banking channels such as mobile and Internet banking to meet customers’ needs for convenient financial services,” he said.
On how safe mobile money services in Uganda are, Dr Abuka explained that mobile money currently poses less overall risk than banking and other payment systems in terms of systemic risk to the financial sector. This is because the large numbers of clients that frequently transact small amounts pose limited systemic risk because they represent such a small share of overall financial sector assets.
“The service provider, for example Mobile Network Operator, partners with a licensed financial institution which is subject to the Financial Institutions Act, 2004 to offer mobile money services. These service providers submit periodic reports to BoU in specified format in addition to conforming to other mobile money guidelines,” he said.
In every financial transaction there are always risks associated with it. As a way of mitigating the risks that may occur, in 2013 BoU put in place Mobile Money Guidelines that address a number of issues specific to money transactions. These guidelines help secure the financial system against risks of informal economy, foster economic growth, job creation, improve transparency with customers, and minimise fraud.
Dr Abuka said the MNOs should submit to the partner banks Know Your Customer information on customers carrying out large transactions through mobile money from Shs5m, pointing out that this will enable the partner banks to carry out independent audits on large transactions to curb money laundering.
“The MNOs should go through their partner banks before increasing transaction limits. Partner banks should then seek BoU’s approval before increasing the daily transaction limits,” he said. He added: “The partner banks should explicitly state in their agreements with the MNO that the latter is in charge of customer complaint handling and the MNOs should communicate clearly to their customers about where to go in case of any complaint.”