ICT Africa Headline Press Release

Mobile Money Reducing Tax Revenue in Uganda

The Observer - ICT Africa News

Ask any top official at Uganda Revenue Authority about their feelings regarding mobile money and chances are that you will find some who will describe the money transfer service as a necessary evil.

While mobile money has eased the way transactions are carried out, and is contributing to turning Uganda into a cashless economy, it has, on the other hand, also denied the country tax revenue.

URA is getting a deeper sense of what it means when consumers ditch banking halls for roadside kiosks and the comfort of their living rooms to transact over the phone. The result: less tax revenue.

While announcing this financial year's quarterly tax revenue - where the tax body recorded a Shs 26bn deficit against its target - Commissioner General Allen Kagina said the below-par performance was partly influenced by "the increased competition banks are facing from mobile money operations."

With the advent of mobile money, banks have been denied bank charges, further reducing their revenue. Also, banks used to charge customers to open up accounts. Some banks used to charge as much as Shs 20,000 to open up an account. With mobile money, there is no need to pay for an account. It is all free.

The reaction has been tremendous. With more Ugandans paying for utility bills like water, electricity and pay-television via mobile money, the amount of money transacted on this platform shot to Shs 12 trillion early this year, from Shs 3.75 trillion in 2011, according to figures from Bank of Uganda.

Banks fight back:

Not to lose ground, banks have put up a spirited fight. Most of them have increased the hours of operation, some like Dfcu stretching to 7pm. Others like Diamond Trust and Standard Chartered have branches open on Sundays.

Some banks have decided to incorporate mobile money services or partner with telecom companies. Centenary bank, for instance, has Cente mobile platform where customers can deposit money on their bank accounts without going to the banking hall.

They can also check their account balance, and mini statement. At least most banks have encouraged their customers to use mobile money banking as a way to save time and being more convenient. Banks like United Bank of Africa are now mobile money agents.

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