Mobile money tax a threat to school fees payment solutions

Kampala. In the months leading to May 2016, 25-year-old Osbert Muganga and his team dreamed of creating a solution that would enable school fees payment just by a click on one’s phone.
For years he had seen the trouble parents and students go through to get their bank their tuition and school fees.

“Traditionally, they would to travel from their homes and go to the bank to pay fees. They would waste a day doing just that,” Muganga says.
They went from dreaming to researching and findings indicated that parents in rural areas were spending up to Shs50,000 to bank their children’s school fees, while it cost parents in urban centres up to Shs15,000.
It is then that Muganga and his colleagues came up with SchoolPay, a Shs500m software that integrates mobile money and banking systems.
“Banks are the major drivers of the platform because the money coming through mobile money is instantly sent to the school’s bank account,” he says.

They approached banks and later went to schools to test the platform. In May 2016, they hit the market.
For schools that acquired the fees payment platform, students were given unique payment codes.
Soon, parents were paying schools fees using mobile money accounts within a minute minus stepping in a banking hall.

The numbers grew faster and two years down the road, one million students from 200,000 schools, majorly government, private schools and universities are transacting on the platform.
Unfortunately, the new 1 per cent mobile money tax now threatens the survival of this young innovation.
According to Muganga, now the platform’s business development manager, total termly collections for the banks stand at Shs100b.
At its peak, 100,000 transactions were happening on the platform. About 80 per cent of these collections are done using mobile money while 20 per cent are over the counter.

“If you are paying about Shs500,000, it would attract a cost of Shs1000 and if you were paying Shs1m, the cost was Shs3200. But with the new tax, starting Sunday, I received numerous complaints from parents vowing to use the platform for the last time,” Muganga says.
The hike in costs has been met with anger as parents and schools vow to terminate its usage. One parent who paid school fees worth Shs600,000 vowed not to use the platform again after spending about Shs15200 with the new taxes inclusive instead of the standard Shs3200.
Equally in pain, are parents who are requesting the MTN mobile channel to be reinstated on the platform after it was blocked for the approach it has used to implement the new tax.

“Airtel charges the parent directly and the school receives the full value of the fees. MTN is charging the recipient which is the bank so they charge 1 per cent on collection that the parents have paid in total. So we suspended MTN until it revises its method,” Muganga says.
He also says that because of the 1 per cent tax on collections, the eight banks might eventually shift that cost to schools. The first day of July, the day mobile money tax was effected coincided with visitation day for some schools. Being the midterm for students, parents were expected to use the platform to pay schools fees. However, there was a huge drop in transactions.

“We had about 5000 transactions on the platform. We had expected 30-40,000 transactions that day so with the tax, we have lost a lot. People [will endure and line up in banks or] take cash to schools,” Muganga says.
Since Sunday, the platform has had about 10,000 transactions instead of the anticipated 50,000 in the first three days of July.

Exempt innovations

Financial inclusion. Following the sting by the 1 per cent tax, Muganga now feels the new costs will render the school fees payment platform irrelevant.
“Banks pay us at installation and later for value not by per transaction. It depends on the revenue they have after collections. That means my paycheque may not come as it was before,” he says.
A few more months like these could also hinder innovation and financial inclusion, according to him.

“We were going to enhance the platform by enabling parents to save for school fees, pocket money for students and loans for school fees but mobile money tax will hinder this.”
Muganga now hopes government can exempt innovations like these to promote financial inclusion.

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