Uganda’s central bank has unveiled new regulations to govern the fast growing mobile money services sector, aimed at limiting fraud and increasing efficiency.

Under the new rules, firms offering mobile money services must be registered as limited liability companies or financial institutions licensed by the Bank of Uganda (BoU), must provide proof of financial position, a business plan, risk management proposal and must possess appropriate and tested technological systems.

The new rules come at a time of massive growth in both users and transaction volumes.

The total value of mobile money transactions more than doubled from Ush7.3 trillion ($2.9 billion) in June 2012 to Ush15 trillion ($5.9 billion) in June this year, according to BoU data. The data also shows that there are an estimated 17,889 mobile money agents operating countrywide.

“The total number of registered mobile money customers grew by 114 per cent from 5.7 million customers in the year ended June 2012, to 12.1 million customers in June this year. This is a rapidly growing segment and authorities would like to ensure that all the risks that may arise are well managed,” said Charles Abuka, BoU’s director for financial stability.

Local mobile money agents say telecommunications companies need to cooperate more to ensure the success of anti-money laundering efforts reflected in the new guidelines.

“I think all telecommunications companies should implement tighter Know Your Client measures similar to those being undertaken by MTN Uganda. These measures include reviewing of agents’ records and audit of previous transactions, which could help eliminate several risks of money laundering,” said Stephen Kaboyo, a financial analyst and mobile money agent.

The new guidelines will also facilitate stronger regional integration by minimising regulatory loopholes that sometimes affect cross border money transfers.

Similarly, the strong growth experienced in Kenya’s mobile money services market has added weight to arguments for uniform regulations in order to facilitate regional integration.

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In January 2013, mobile money transactions in Kenya grossed 53 million involving about Ksh143 billion ($1.69 billion), according to data from the Central Bank of Kenya.

Mobile money transactions currently average Ksh4.6 billion ($54.4 million) per day. By the close of 2012, mobile phone money transactions in Kenya were valued at $18.19 billion.

The average size of transactions per customer has also increased, from Ksh3,067 ($45.5) in 2007 to Ksh6, 660.4($78.6) in January this year.

Cashless transactions have been rising in East Africa over the past few years due to the increased use of plastic cards and mobile money to pay for goods and services.

Regulators, businesses and consumers have been pushing for alternative ways to make payments including cards, mobile phones and electronic fund transfers, changing the way business is done in the region. More consumers are resorting to cashless transactions to repay loans, settle utility bills, and even pay for school fees.

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By Martin Luther Oketch and Bernard Busuulwa