Feature: Uganda's unbanked rush for mobile money services

Beatrice Nassanga owns a chain of pharmacies in Kampala, Uganda's capital. Over the years her clients have turned cashless and embraced the mobile money technology.

When clients or patients turn up at her pharmacies, they purchase drugs by sending a short mobile message (SMS) to her phone, meaning money is transferred from the buyer's phone to the seller instantly.

Richard Ssebuliba is a motor vehicle mechanic in Banda located on the outskirts of Kampala. Like Nassanga, Ssebuliba also receives money from his clients via mobile money. When he goes to town to buy used spare parts, he also uses mobile money to pay for the parts.

"Some clients come with either less cash or no cash at all. So they send me mobile money using their phones and I give them the drugs they want," Nassanga told Xinhua at one of her pharmacies in Munyonyo, a Kampala suburb.

Ssebuliba and Nassanga are among the more than 18 million Ugandans who use the mobile money platform to trade, send and receive money. This according to the country's central bank, Bank of Uganda, makes mobile money the most used medium of transaction.

The high mobile phone penetration in Uganda is partly responsible for the rapid growth of mobile money service, according to the Uganda Communication Commission (UCC). UCC is the state regulator of telecommunication companies in Uganda.

Currently there are four major telecommunication companies namely MTN Uganda, Africell, Uganda Telecom and Airtel that offer the mobile money platform. Other companies like Ezee Money, although not telecommunication companies, use the platform provided by the four companies to provide the mobile money service.

In a bid to diversify their service provision which among others included voice, internet data and SMS, telecommunication companies included the mobile money service. This service works as an SMS which a buyer sends to a seller through the platform provided by the mobile network operator. This message is in real time indicating how much money has been transferred.

Apart from trade, this service is also being used for domestic remittance where the urban folks send money to their relatives in rural areas. In most trading centers according to UCC, there are mobile money services.

Utility companies and the traditional banks have also started using the service where one can pay their telephone or water bills using money transfer on his or her phone. One can also check their bank account balances using the mobile money platform.

The increase in the number of mobile money users is also attributed to the high number of unbanked people.

"Our society has been largely unbanked, they don't hold any bank account for various reasons some of which include the banks being in urban areas, opening a bank account is cumbersome," said Fred Otunnu, Head Communications UCC.

"Mobile money came in to fill that gap. It found a very fertile, receptive population because you can account with as low as 2000 shillings (less than 1 U.S. dollar). Mobile money has been embraced not only by the rural folks but even in the urban centers, " he added.

Mobile money services in Uganda are regulated by UCC and Bank of Uganda. UCC regulates the technology part while Bank of Uganda regulates the financial transactions. Mobile money service provision in Uganda is not yet seen as a formal financial service like banks but it is still treated as an SMS. Although Bank of Uganda in collaboration with UCC developed guidelines regarding the operation of the service, there is need for an enabling law.

"We think lack of an elaborate legal framework still exposes the consumer to high risks. There are guidelines but they are not sufficient enough, they are not adequate, they are not legally enforceable," said Otunnu.

"We need as a matter of importance a law that provides for mobile money as a transaction. This matter has been brought to the attention of parliament," he added.

Apart from the legal concerns, UCC constantly monitors the operations of the service providers.

"We do not look at the financial aspect, our concern is about the technology that is being used to transmit data because it is not physical money but an ordinary SMS," said Otunnu.

"Our concern therefore is that is the SMS delivered in real time, can it be corrupted, what are the confidentiality issues," he added.

"Mobile money as a service is good and its one of those services that has had exponential growth not only in Uganda but also in other parts of Africa," he said.

Mobile money advocates are enthusiastic about its capability to transform the financial fabric of society, particularly for the poor. Endi