Mobile money usage in Uganda tripled last year, with the number of users surpassing those of bank account holders.

Charles Abuka, director for financial stability at the Bank of Uganda, said the number of users of the mobile money transfer system grew from 2.9 million in 2011 to 8.9 million at the close of 2012. This pushed the number of mobile money accounts past the 4.9 million bank accounts as at December 2012.

“The number of mobile money transactions increased from 87.5 million in 2011 to 242 million at the end of 2012, and the value of the transactions grew from Ush3.8 trillion ($1.46 billion) to Ush11.7 trillion ($4.5 billion),” Dr Abuka said.

He attributed the development to increased mobile phone penetration in the country. All the five major mobile telephony operators have mobile money transfer platforms. They are MTN Mobile Money (MTN), Waridpesa (Warid), Airtel Money (Airtel), Msente (UTL), and Orange Money (Orange).

“We have to improve financial inclusion indicators. One area that promises to boost this transformation is mobile payments technology,” Dr Abuka said.

Mobile money transfer has become popular because it reduces costs and the risks associated with cash transactions. Dr Abuka said the mode of payment was not only cheaper and secure but also reliable.

“It offers a transaction platform to bring the unbanked into the formal financial sector,” he said.

Mobile phone money services have become the preferred avenue of savings around sub-Saharan Africa, according to a study published by a global mobile operators lobby.

Bank of Uganda deputy governor Louis Kasekende said 12 million Ugandans lacked access to financial services as they were only available in urban and peri-urban areas.

Distance, the high fees charged by deposit-taking financial institutions and minimum balance requirements, lock the poor out of banking services.

“We need to bring down the volume of cash-based transactions from 88 per cent to 17 per cent, by reducing the percentage of people who use the bank teller as a means of withdrawing money,” Mr Kasekende said.

Experts say further development of products on mobile payment platforms is hampered by the absence of effective co-ordination between the regulatory authorities, the BoU, Uganda Communications Commission and the Uganda National Bureau of Standards.

Mr Kasekende said building a regulatory framework for mobile money and financial inclusion would improve financial stability and integrity. He added that this would further protect consumers, especially those for whom this is the only channel to access formal financial services.
Regulation would also safeguard the financial system against the risks of an informal cash-based economy.

While a lot of attention has been paid to the potential risk of the mobile money infrastructure being used for money laundering, Dr Abuka said on the flip side, it makes money movement more traceable.

“These risks can be reduced by strengthening the risk management protocols of the mobile delivery channels and devices. These can be deployed to track all transactions and localise users. The size of transactions can also be limited by value to allow customers to transact relatively small amounts of money,” he said.

“Digital transfers and payments potentially make criminal activity more traceable, compared with cash-based transactions, which are more vulnerable to crime and difficult to monitor.”

Money laundering and fraud are the main concerns. But customers’ privacy and data security can be protected through regulation and insurance.

Though mobile money services have grown, bankers do not see them as a threat to their business.

“Mobile money is essentially a collaboration between the banks and the telecommunications industry,” said Jacqueline Namara, the marketing manager of Stanbic Bank Uganda. “In mobile payments, banks are still needed to facilitate the transactions by the telecom firms and their clients.”