Mobile money has been split as a standalone business which, going forward, will be regulated by Bank of Uganda as a financial service.
The move, which effectively takes mobile money away from telecom service operations, regulated by Uganda Communications Commission, has now been implemented with the issuance of financial services operator licences to Airtel Money, which will trade as Airtel Mobile Commerce Uganda and MTN, which has placed its mobile money business under MTN Mobile Money Uganda.
The licences, which were issued at the weekend by the National Payment System department at Bank of Uganda, will seek to ensure overall effectiveness and integrity of payment systems in the country, including mobile money.
In a Friday statement, Bank of Uganda Governor Emmanuel Tumusiime Mutebile, said the Central Bank had commenced licensing of payment system operators, payment service providers and issuer of payment instruments, which is provided for under the National Payment System Act 2020 and guided by the National Payment System Implementing Regulations that were gazzeted on March 5, 202.
Apart from MTN mobile money and Airtel Money, the Friday statement also indicated that the Central Bank had licensed Wave Transfer Limited to operate under the regulatory Sandbox, which will provide a layer between banks and their innovations to facilitate collaboration between Fintechs and the banking sector.
The move, apart from ensuring a streamlined regulatory regime of all financial-related operations, will also seek to support deepening of the cashless economy, which the Central Bank had about four years ago said would be achieved by 2022.
However, even with the rapid growth in digital transactions, supported by mobile money and online banking, it will be difficult for the Central Bank to achieve a cashless economy next year given the high affinity to cash payments by a number of Ugandans.
According to the Bank of Uganda annual report for the year ended June 2019, Uganda is still a largely cash economy with cash payments representing at least 96 per cent of completed transactions.
For instance, in 2019, cash payments rose above the annual average of Shs423b to Shs544b, which represented an increase of 20 per cent from Shs455b in 2018.
The National Payment Systems Act, among others, seeks to separate telecom services from financial operations that are largely regulated by Bank of Uganda. The Act also requires telecom to register new subsidiaries under which mobile money services will be operated.
For instance, Airtel Money will operate under Airtel Mobile Commerce Uganda while MTN will operate its e-commerce platform under MTN Mobile Money Uganda.
Mr Peter Kawumi, the Financial Technology Service Providers Association of Uganda chairman, said mobile money operations are now properly regulated by a competent function under the Central Bank.
The licensing of payment systems, he said, will now open up investment opportunities and partnerships within and beyond Uganda and a clear growth trajectory. Previously, it has been difficult to regulate mobile money due to the absence of an enabling law.
While no particular details are mentioned, the 2019/20 Deposit Protection Fund report noted that there were plans to protect money belonging to mobile money subscribers, which means that just like banks, mobile money companies will be required to deposit a certain amount of money with the Deposit Protection Fund to protect subscriber deposits.
“With regards to developments in the regulatory space, the National Payments Systems Act was passed by and assented to. Under this legal regime, protection will be accorded to mobile money subscribers should there be failure of a financial institution holding mobile money balances,” the report indicated.