Uganda: Mobile Banking a Turning Point in Financial Services

OPINION

By Michael Jjingo 

When mobile banking arrived in 2005, courtesy of MTN, no one imagined it would spread like wildfire, and lead to other innovations and enhancements to the usage of the mobile handset.

Today, with 11,000,000 mobile subscribers, and 4,500,000 bank accounts, commercial banks and other financial institutions have a great opportunity to deepen access to services to disadvantaged and low-income groups using the phone.

The importance of financial deepening has soared in the recent years with the emergence of several financial access options as a key thrust of public demand. There is a rising opportunity that players in the financial market have not focused on that much, in driving acquisition, origination and servicing costs. Most of the on-boarding initiatives and incentives are directed towards the conservative banking strategies.

Contrary to the mobile phone menu that was availed to customers at the inception of mobile phone services in Uganda in 1998, the same handset has evolved from simply receiving calls and text messages to include mobile updates, internet access, mobile banking, research, advanced camera, voice and picture recordings; point of sale, agency banking, insurance access, utility bill payments, etc.

The value of the same handset, by way of benefits derived, has grown in many areas, and continues to register a higher likelihood for innovations and developments in line with enhancing user convenience and satisfaction.

The widespread usage of the mobile phone in Uganda offers a platform for transactions that can facilitate inclusion of people who would otherwise be outside the purview of the financial system.

More recently, the population that lives outside the environs of financial services has formed numerous group-led financial involvement options, taking the form of Savings And Credit Cooperatives (Saccos), Village Savings and Loan Associations (VSLAs), Rotating Savings and Credit Associations (ROSCAs), savings clubs, and investment clubs, among others. This has resulted in the yearning for financial services by the disadvantaged and low-income groups.

Several NGOs have come in handy to avail some much-craved services like financial literacy, group setup, mentoring, Sacco IT systems and capital development. All this has facilitated the exponential growth in financial deepening.

Most importantly, the government has been at the forefront of promoting financial deepening as seen in the setting up of requisite departments and resources in bodies like Bank of Uganda, ministry of Finance (Financial Inclusion Department), Microfinance Support Centre, ministry of Trade, Industry and Cooperatives, Uganda Cooperative Savings and Credit Union (UCSCU), Uganda Cooperative Alliance, and Association of Microfinance Institutions in Uganda (AMFIU). President Museveni has also sponsored several Saccos; he has on several occasions spoken about financial discipline, developing a savings culture and access to financial services.

With Interswitch's drive to interconnect bank ATMs, with connectivity to mobile money, and the facilitation of easy banking for the common man, innovative banks have conceptualized, developed and implemented several initiatives to achieve financial inclusion. Interswitch, with over 200 ATMs, facilitates routing of financial transactions, inclusive of mobile money transactions (cardless), between bank switches, thereby enabling Ugandans to utilize any of the ATMs of the connected banks.

Recent research indicates that mobile money users prefer to keep their funds with regulated financial institutions. Some users cited insufficient agent floats and loss of money especially in the event of death, when the survivors of the deceased cannot easily access a deceased user's mobile money account.

Linking financial institutions with mobile money users will go a long way in satisfying the citizenry's desire to access financial services through regulated financial institutions.

That aside, mobile money services still remain favourite and deep-rooted compared to services offered by financial institutions. Mobile banking not only assures the customers of "anywhere anytime banking" but also offers secure, convenient and seamless banking, with a full range of financial services. No doubt, the usage of telecom mobile agents as bank correspondents is very cost-effective and enlarges the banks' outreach.

Mobile financial services already available include balance enquiry, account-to-account transfers, airtime purchase, balance enquiry, account statement, utility bill payments and subscriptions, and SMS banking. Others include Mobile accounts (loans and savings), transfers between mobile money accounts and bank accounts, customer instructions to the bank, money transfers, withdrawals, and payments while abroad, etc.

Mobile banking is certainly a turning point and a key vehicle for financial deepening and convenience. The spinoffs from this development will cascade down to all the current and prospective bank customers, and the earlier you embrace it, the better.

The author is a Kampala-based banker and entrepreneuer.

SOURCE:The Observer (Kampala)