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Mobile money boosting financial inclusion in Uganda

By Samuel Sanya

Added 2nd January 2018 12:00 AM

Equally important, the report found that Ugandans have embraced advanced functions beyond-basic-wallet services.

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Equally important, the report found that Ugandans have embraced advanced functions beyond-basic-wallet services.

Uganda is building towards a financially inclusive economy via increased access to mobile money services and growth in registered mobile money accounts, a report by fininclusion.org has established.

Access to financial services has continued to grow substantially, from 50% in 2015 to 55% the following year due to continued growth in the population that uses mobile money, fininclusion observed.

It was found that two in five Ugandan adults had a registered financial account in 2016 and that 35% of all Ugandans are active users of their registered financial accounts up from 32% in in 2015.

Equally important, the report found that Ugandans have embraced advanced functions beyond-basic-wallet services.

“Consumers are more likely to know of a mobile money point-of-service than a bank branch or other regulated financial outlet. Awareness of the mobile money concept and providers is nearly universal,” the report, which was funded by the Bill and Melinda Gates foundation, said.

Relatedly, while opening the seventh International leadership conference in Entebbe Bank of Uganda Deputy Governor Louis Kasekende said mobile money transactions have hit sh54 trillion, representing half of Uganda’s Gross Domestic Product (GDP).

“When my aunties and relatives ask me to send them money in the village, they give me their numbers which are registered for mobile money. I know that the same applies to many of you here in this room,” he said.

The gap between commercial banks and mobile money service providers is expected to get thinner as telecoms and banks continue synchronising service provision to offer seamless customer experience.

The momentum for partnerships between the telecommunication and banking industries this year is expected to exceed that witnessed last year (2015) as the two seek to exploit the power of synergies to grow their revenues.

Synchronisation has seen the capabilities of mobile money grow from mere sending and receiving of money using a mobile phone to paying for almost anything including utilities, school fees, taxes and pay television services, which transactions used to be done in a banking hall/bank branch.

Additionally, banks have further harmonised their operations with telecommunication companies to allow customers access their bank accounts using the mobile money platform.

For instance, one is able to check bank account balance, deposit money from their mobile money account to their bank account and withdraw money from the bank account to the mobile money account.

Banks such as Dfcu, Post Bank, Bank of Africa, Centenary, Stanbic and Finance Trust Bank currently allow their customers do bank transactions using mobile phones.

Mobile money subscribers can also withdraw money across all interswitch ATMs in the country.

Centenary Bank Managing Director Fabian Kasi says customers should expect continued collaboration between the two service providers to further enhance convenience in service provision.

“Putting up A physical bank branch is too expensive but partnering with telecommunication companies by using their mobile money platform to bank the unbanked is cheaper and will definitely drive financial inclusion,” Kasi says, adding that the synergising  trend is not expected to gain momentum going forward.

Mobile money transfer business had emerged as a threat to commercial banks, forcing them to seek partnerships with telecommunication firms to roll out mobile banking products.

The tremendous growth posted by mobile money services was informed by faster adoption of mobile phones services and the convenience it comes with compared to banks.

Alpha Capital Partners Managing Director Stephen Kaboyo explains that mobile money has transformed financial services landscape in Uganda, complementing the traditional "brick and mortar" banking.

He attributes the tremendous growth of mobile money services because it operates on high volume/low margin business model that appeals to the mass market, unlike commercial banks.

“Now at almost 20m mobile money accounts in Uganda, looking ahead one can only imagine a rich interface between telecoms as service providers and the banks,” Kaboyo notes.

The Interswitch Chief Executive Officer, Uganda, Olumuyiwa Asagba, also alludes to the expected narrowing of the gap between mobile money and commercial bank services, owing to the convergence that customers derive from synchronisation.

He, however, notes that although the convergence only benefits the section of the population with bank accounts leaving those without to entirely depend on mobile money service providers, Asagba hopes that heightened rolling out of agency banking will help expand services to the unbanked population to facilitate increased convergence.

The Equity Bank Group Chief Executive Officer James Mwangi said the bank intends to roll out agency banking in Uganda, as soon as the Financial Amendment Bill which among others seeks to allow agency banking in Uganda is enacted into law.

“We want to roll out agency banking in Uganda so that we take services closer to people to boost financial inclusion,” Mwangi said on the sidelines of the MasterCard Foundation Financial Inclusion Symposium in South Africa.

The bank also intends to roll out mobile banking and start giving loans to customers through mobile phones.

“We have been given approval by Bank of Uganda to work with the telecoms so that the mobile phone becomes the self-service platform for customers to transact with the bank. We will soon launch that product in Uganda,” he said.

In Kenya where mobile banking has gained momentum, Mwangi said the platform received a lot of response from the public, with mobile credit accounting for 64% of total loans disbursed by the bank in 2015.

It should also be noted that early this month (December 2015), Metropol, a business information and credit management company announced that it would venture into Uganda to among others provide credit rating and credit reference services as well as mobile-phone based banking.

The mobile money services will enable mobile phone users to borrow directly from banks.

According to the Group Managing Director Sam Omukoko, Metropol intends to link mobile phone users with commercial banks where they will be able to get credit facilities the same way they would borrow airtime after running short of it.

It should be noted that International money transfer companies also joined the bandwagon, with Western Union partnering with telecoms to allow mobile money subscribers receive money directly into their mobile money accounts.

According to mobile service provider MTN, allowing harmonising telecoms and banking services seeks to guarantee customers convenience and also reduce the transaction cost.

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