By David Mugabe

Today, no single technology has transformed the way financial transactions are done the way sending money through the mobile phone has.

In reshaping financial transactions, mobile commerce has emerged as an infrastructural enabler of business.

Even with banking entering Uganda way before independence, they did not have the same impact. Early banks like Standard Chartered Bank and Bank of Baroda are older than Uganda as a state.

In the 1960s, commercial banks included Bank of Baroda, Barclays Bank, Bank of India, Grindlays Bank, Standard Chartered Bank and Uganda Cooperative Bank.

These institutions have in the past few decades been joined by another over 20 banks. But even with the presence of 23 banks, there has been very little impact on financial deepening. Estimates show that just about 11% or about 3.5 million people in Uganda have a bank account.

This means about 85% of the population lacks an avenue through which to carry out transactions like sending, receiving and keeping money.

Enter mobile commerce

Mobile money entered Uganda in 2009, and in about three years, it has turned out to be the greatest enabler of financial transactions in the last decades.

There are now more people registered on mobile money in three years than Ugandans with bank accounts in over five decades, even if banks have many more products to offer.

Mobile money has broken barriers, and with Africa taking the front seat in mobile phone penetration, the number of people using mobile money can only rise.

MTN Uganda has today registered close to 2.5 million people on the mobile money service and forecast that there will be 3.5 million subscribers by the end of this year.

“In monetary terms, close to sh500b is transferred on the mobile money platform in a month.

“The most important aspect to note here is the positive impact on the population. We have empowered Ugandans to transact with ease at their preferred locations at all times,” said Justina Ntabgoba, the MTN corporate affairs manager.

The phenomenal growth of the mobile commerce has sometimes led to the breakdown of the platform as existing supporting technology gives way to the demand for the service. MTN recently had a systems upgrade in which the entire subscriber base was uploaded onto it after major interruptions in service.

Over 70% of mobile money transactions are below sh70,000 ($30), meaning there are very few alternatives for the public to transact cheaply.

Mobile money, according to experts, has also proved that people do not fear technology if only it provides solutions to their problems.

This is illustrated by the growth of MTN mobile money service, which raked up 890,000 users in its first year of operation, a figure doubling what it had forecast.

“It has caused a change in lifestyle and it will be a vehicle towards financial deepening and growth,” said one observer.

Msente, the mobile commerce platform for uganda telecom is steadily keeping pace and pushing through just over sh10b monthly.

“We have more than doubled our customer base over the last few months. We are now in excess of 700,000 subscribers and growing with increased coverage and distribution of our agents across the country,” said a utl officer.

Because of its ability to enable payments of other services like utilities (water and electricity bills), money transfer through the mobile phone remains a major attraction for growth because clients do not have to walk to financial institutions to pay their bills or use bulky hard currency for bulk transactions.

Mobile commerce is fast, safe and breaks through great geographical boundaries.

It has also provided a strong revenue base for operators, especially in an environment where fortunes from voice are on the decline.

Airtel spokesperson Joseph Kanyamunyu says Airtel money, it’s mobile commerce version is fast picking up only less than three months in operation.

Airtel boasts an extensive network strength that they believe will be able to provide a stable platform for transactions.

Challenges

Ntabgoba says the biggest challenge with the mobile money platform is the registration process, which requires genuine identification.

Because Uganda is still battling to have a national identity card, this creates a scene for a lot of falsifications.

“One must have a valid ID to be registered and this is difficult because many customers lack the adequate identification.This has caused some delays in registration,” said Ntagoba.

The other challenge is regulating the agents that provide the cash, especially with liquidity problems, where customers walk into the shop and there is no money.

Because the majority of the money is sent to rural areas where literacy rates are low, there have emerged a few cases of fraud.

Future

With growing penetration and more product offering, mobile money will provide financial inclusion for almost half of the population (16 million), were they all to register.

This will even be strengthened by the compulsory SIM card registration that has commenced.