Finance Minister calls for talks over huge mobile money charges

KAMPALA – The State Minister for Finance (General Duties), Mr. Henry Ariganyira Musasizi has urged fintech companies to find ways on how the cost of mobile money transactions charges can significantly be reduced to bring more Ugandans into the money economy.

 Speaking at the stakeholders’ dialogue hosted by Airtel Mobile Commerce Uganda Limited (AMCUL) at Kampala Serena Hotel, Mr. Musasizi who is also a Member of Parliament for Rubanda County East said confirmed that feedback from the population indicates the cost of transactions remains prohibitive to millions of Ugandans.

Mr. Musasizi however, denied reports suggesting that the mobile money charges are high solely because of tax introduced by the government.

“I don’t want an impression that the mobile money charges are high solely because of the tax. That is not true because the 0.5% tax charge only applies to the withdrawals of cash only and can be avoided if one is able to do electronic transactions across the whole value chain. You don’t meet this tax anywhere,” he said.

What this means, he added, “if you’re withdrawing UGX100,000, the tax charge is UGX500. If you’re withdrawing UGX10,000, the tax charge is UGX50.”

“What we are saying is on every mobile money transaction, there is a transaction cost of 10% meaning, you’re withdrawing UGX 10000 there is one 1000 on withdrawal out of which, only UGX50 is tax. Meaning 950 is a charge which goes to the service provider.”

The State Minister for Finance also challenged the fintech sector players to propose possible avenues through which both government and services providers can work together to bring the cost of mobile money transactions down.

“We are asking them in order to promote financial inclusion and facilitate our people in the countryside access to financial services if is there a way this transaction cost can be brought further down. That’s where we want the debate to center.”

A report released in December 2022 by the Bank of Uganda (BoU) indicated that the High transaction charges in the financial sector have fallen hardest on the poor who are least able to afford to pay.

As of the end of March, the total value of cash exchanging hands over mobile money platforms increased to a monthly average of sh12.7 trillion, driven by the continued adoption of digital payments.

The government currently earns excise duty on digital financial services, such as mobile money — a highly popular platform today for lower-income earners.

However, about 90% of all mobile money transactions are reported to be in the lower value of sh50, 000.

Delays in establishing a National Payment Switch for service providers — which will accelerate interoperability — are partly to blame for the high transaction charges, experts say.

“The charges are regressive, with the vulnerable poor who constitute the majority, bearing the heaviest burden,” Michael Atingi-Ego, the deputy governor at BoU, said.

“Statistics indicate that approximately 90% of mobile money transactions are in the low value of under sh50,000. You can imagine the tax burden that has on the poor. We still have a lot of work to bring affordable services closer to the people and include the masses out of the formal financial system,” he said.

AMCUL Managing Director, Japhet Aritho said the engagement sought to find solutions on how to achieve Progressive Regulatory Environment.

“The discussions were thought-provoking and setting the stage for Innovations, inclusion, and affordability that AMCUL is known for,” he said.

“A dialogue like this helps us to identify the gaps that need to be addressed in terms of regulation, improved services, and new industry developments, among others. We will explore partnerships that create opportunities for shared value from our different expertise that will grow Digital and financial inclusion in this country. I believe the National Payments System is on the right trajectory of growth and depth”

“I applaud our regulators like the Bank of Uganda, Financial Intelligence Authority, and Uganda Revenue Authority among others for supporting us in the implementation of the technical and regulatory framework which guides our day-to-day operations. We have made commitments to the development of a fair, predictable, and progressive regulatory environment. We will continue to engage to realize these commitments” Mr. Aritho concluded.

The fintech sector is regulated by the Bank of Uganda under the National Payments Systems Act (2020) which was enacted in 2020 and whose regulations came into force in June 2021.

According to the BOU records, as of September 30, 2022, twenty-three (23) entities had been licensed under the NPS Act, 2020 with a recorded volume of UGX3trillion in industry transactions. AMCUL, as a Payment System Operator and Payment Services Provider, was the first licensee to be granted licenses under the new regulations.