Stanbic Bank and MTN Uganda are set to launch a micro savings and loans product on MTN’s mobile money platform in the next few weeks, according to Patrick Mweheire, Stanbic’s chief executive.
It is the second mobile banking product after MoKash, a partnership between MTN and Commercial Bank of Africa which launched in August. And more could be on the way: sources say Kenya’s Equity Bank is also exploring the possibility of extending its Equitel service, which is currently active in Kenya, to other markets including Uganda.
Mobile money is credited with increasing financial inclusion among some of the world’s poorest populations, since it provides them with a regulated platform to manage their money. Increasing financial inclusion, according to the Consultative Group to Assist the Poor, leads to more growth and employment.
Experts however agree that a mobile money account by itself is not enough. To achieve meaningful financial inclusion on the platform, customers should not only be able to move their money over distance but also over time – “in the form of savings, insurance, and credit,” according to Kevin Donovan, an anthropologist, in a World Bank report.
Platforms like MoKash give customers options to make advanced use of their mobile money accounts. It allows customers to save up to any amount they want, and offers annual interest rates that range from 2-5%. It also offers loans to qualifying customers of up to Shs1 million at a 9% monthly interest rate. To top it all, these transactions take place on phone and are not charged (no arrangement fee, for example).
Development economists believe that mobile banking, if well utilised, is one of the keys to greater financial inclusion in underdeveloped economies. The success of mobile money where banks had failed positions it to disrupt other sectors, in this case insurance and payments. Only 4% of Ugandan adults had insurance in 2015, according to InterMedia survey data.
The partnerships between MTN and the two commercial banks were made possible by the Financial Inclusion Act Amendment Bill, which became law in January. It amended the 2004 Financial Institutions Act, allowing banks to use agents, among other changes. This freed commercial banks to get into digital financial services using agents and, as the two cases show, partner with telecoms.
But launching new platforms is only one part of the equation. These platforms have to be used regularly and actively for them to have the desired impact.
Recent data shows that there is still a lot of distance to be covered. In 2015, the proportion of financially included adults was 39%, according to InterMedia. The greater proportion – 35% of all adults – had a mobile money account, compared to 11% with a bank account. Only 31% of mobile money account holders used their account actively. And, only 40% of the active mobile money users were using at least one advanced activity (such as savings and paying bills), although this figure rose from 27% in 2013.
Getting to that point is still an achievement. Mobile money usage would also be greater if the 45% of adults who still don’t have mobile phones got them. Other reasons given by the 43% of surveyed adults who were not aware of mobile money include language, lack of technical skills, and cost.
Those are some of the hurdles that MTN and its two partners face, and that have to be overcome for their platforms to perform to their full potential, and in order to achieve greater and meaningful financial inclusion. The number of mobile money account holders using their accounts actively has to go up if mobile banking is to gain traction. The challenge then, according to InterMedia, is increasing consumer awareness of the new innovations.
Visa to launch in Uganda
The international payments firm Visa is also planning to launch a mobile payments platform in Uganda before the end of the year, after launching in Kenya early this month. mVisa, as the platform is known, enables people with accounts in four banks to send money to others on the platform and pay for goods and services.
In Kenya, it was positioned as a challenger to the dominant Mpesa platform. Its limitation, however, which will also apply in Uganda is that requires users to have a bank account. Only 11% of adult Ugandans have a bank account, as mentioned earlier