The Bank of Uganda has taken the bold, necessary step to take over supervision of the mobile money operations in the country. Accordingly, BoU has issued operating licenses to MTN and Airtel under the National Payment Systems Act 2020.
The move was indeed overdue, possibly an oversight occasioned by the hasty manner in which mobile money was introduced in the country. But BoU had to wait for the proper legal framework under which to take over the role of supervising mobile money operators and thus regulate the mobile money operations.
The Uganda Communication Commission did not have the expertise, nor the mandate to supervise the huge money transfer operations by the two main mobile telephone operators, which everyday -move bigger amounts of money than the commercial banks.
Now that the central bank has taken over the supervision and regulation of the mobile money sector, Ugandans can hope for two practical changes over which they have been and continue to suffer a lot of pain.
First, the mobile money lending function if operated at exorbitant rates. Much as it is a free market of willing buyer and willing seller, BoU has the responsibility of formerly guiding the lending rates in the country, that is why it periodically issues the CBR, which the commercial banks rely on on to fix their rates.
Secondly, the actual charges which constitute operator’s fees and taxes, make the mobile money operation almost extortionist. While the advent of mobile money was lauded as a step towards expanded financial inclusion of the largely unbanked population, with every mobile number being an money account as well, it is being achieved at a punitive cost.
The simple fact is that every million (shillings) that enters a mobile account automatically becomes 980,000 once you try to use it, even if it is one second after it got deposited. If a commercial bank ever imposed such rates it would be abandoned by the customers and go out business fast.
Yet so many people working upcountry where no bank branches exist are being aid via mobile money. But once a million shillings gets deposited, you can only retrieve 980,000, the rest having ‘vanished’ in charges and taxes. Individuals keep arguing on who meets the charges in the transaction between them. But an employee working on a construction site or in a farm has no bargaining power with employer, and has to keep losing relatively colossal sums. So it is with hope that the public welcomes the central bank into the mobile money arena, in the hope that this subversion of financial inclusion will be tackled.
