Deposit accounts, mobile phone teledensity statistics misleading

Apr 05, 2017

I checked the figures related to the number of deposit accounts held by Ugandans and non Ugandans alike in the various supervised financial institutions (SFIs) operating in Uganda.

Richard Tumusiime, Marketer.

The use of statistics is important not only for general planning but also marketing purposes. In marketing, we rely on statistics (market research) to segment, target and position the product offer in the market.

Organisations generate their own statistics but most of them rely on other bodies like the Uganda Bureau of Statistics (UBOS), Bank of Uganda (BOU), Uganda Communications Commission (UCC), among others. It is, therefore, paramount that when statistics are published by the various responsible bodies, the users analyse and appreciate whether such figures mean anything to them.

 I checked the figures related to the number of deposit accounts held by Ugandans and non Ugandans alike in the various supervised financial institutions (SFIs) operating in Uganda. I also looked at the figures as reported by the Uganda Communications Commission regarding mobile phone penetration in Uganda. But first, let me talk about the deposit accounts.

According to the ‘Status of Financial Inclusion' report by BOU as at end of 2013, the number of deposit accounts in SFIs was 5,367,512. Assuming that this number has grown by 50% as at end of 2016, this would mean that 8,051,268 deposit accounts are operated.

One may therefore need to pause and ask: Does the reported figure of number of accounts correspond to the actual number of people or organizations running those accounts? Does it mean that over 8 million people operate deposit accounts in Uganda? The likely answer is NO. If you are reading this article, use yourself as an example. How many accounts do you operate?

Most likely more than one. Therefore, when BOU compiles this deposit accounts data, literally it appears as if more Ugandans (and non Ugandans) are being financially included and therefore the state of financial inclusion in Uganda is improving; but the actual number in real terms may be half or less. 

The same thing applies to mobile money accounts. According to UCC's third quarter market report (July-September 2016), the number of mobile money subscribers as at end of September 2016 stood at 20,622,252. On the face of it, it appears as if the same number of Ugandans (and non Ugandans) is actually enjoying the mobile money service.

However, look at yourself. Most likely, you operate two mobile money accounts. That implies that the actual number of people registered on the mobile money service is half or less the number of mobile money accounts.

Therefore, for someone interested in understanding the extent to which Ugandans are joining the formal financial system, the figures may be misleading. You may find that what SFIs report as new account holders are actually the same people who hold accounts in other competing SFIs. So, the net effect in terms of new people joining the formal banking system is near zero. This may explain why banks register increasing levels of dormant accounts month in month out.

When a person opens a new account for whatever reason, they tend to neglect the old account and before long, it becomes dormant. The banks have not helped matters as to most of them, reactivating a dormant account involves almost the same process as opening a new one and there are even some charges involved. What a customer does is to open a new account elsewhere.

To conclude on the bank accounts issue, the BOU needs to devise a reporting system that can be able to track the number of people or organizations operating accounts against the number of bank accounts so that a true picture of the extent to which Ugandans have embraced the formal financial system can be painted for effective planning and policy formulation purposes.

It will also help banks to appreciate whether their effort towards recruiting new accounts is worth the hassle or they should refocus such expenditure to improving customer service so that they retain the existing customers as long as possible to minimize the incidence of dormant accounts.

Let me turn to the issue of phones.

UCC reports that mobile phone subscriptions (both pre-paid and post-paid) as at September 2016 stood at 22,646,850 lines. Uganda's population as per recent census results (2014) stood at 34,634,650.

Given the average annual population growth rate of 3%, it is estimated that Uganda's population as at end of 2016 was 36,743,900. If you compare this figure with the one of phone lines as reported by UCC, one would get the impression that Uganda's mobile tele-density is 62%. 

However, is this actually the case? Again, take yourself as an example. How many phone lines do you operate? Most likely a minimum of two. Some people operate three to four lines. So, how do we compare the number of people operating mobile phone lines and the phone lines themselves?

If UCC reports the above penetration coverage, what does it mean? It is therefore clear that the phone lines are more than the people that operate them, meaning that the reported penetration coverage does not give a true picture.

The real picture is that people operating phones are less than half the phone lines themselves. So, the so called tele-density is a fallacy. That's why it is not unusual for one to receive two or more SMS from the same source on his/her different lines. The sender thinks that he is transmitting the message to different people where as they all end up to one person. This leads to resource wastage if the sender is paying for each SMS especially those involved in SMS marketing. 

Therefore, can UCC try to establish, with the help of individual telecom companies, the number of people operating mobile phone lines in Uganda vis-avis the number of phone lines? This will help us to appreciate the phone penetration level in real terms so that those involved in the telecommunications sector as well as financial institutions developing mobile based products can closely estimate the market potential and plan accordingly.

The writer is a marketer

 

 

 

 

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