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M-banking takes root in Uganda

He used to keep his daily earnings in the house until June when he opened a mobile money account with an aim of developing a savings culture.

Mr Peter Ddumba, a Boda Boda cyclist in Luzira, whose mobile money account has a balance of about Shs145, 000 said he could not afford keeping his money in the bank because of the high charges involved in opening and maintaining a bank account.

"I feared opening a bank account because I didn't have the money to pay in bank charges," said Mr Ddumba adding: "With mobile money, I don't need to open a bank account any more now that I can keep, send and receive money via my phone at a very low cost."

With the increasing number of people opting for the new platform, the market for money transfer services seems to be tilting from the conventional transfer systems to the new high speed mobile money service.

Barely a year in the market, Mobile Money, which rides on telecommunications service provider MTN's network has about 200, 000 registered users who move an estimated Shs6.8 billion monthly.

Zain, the only other telecom operator with money transfer platform, has about 1.2 million customers and it's estimated that it carries out over 10, 000 active transactions on a daily basis using its 'Zap' facility, which was launched in June.

The old transfer institutions including Posta Uganda's EMS, Moneygram and Western Union declined to comment saying that revealing company information would make them unprofessional.

"I can't reveal that information because our competitors would know a lot about us and that just can not work," said Mr Deo Kateizi, the head of Western Union at Centenary Bank.

The swift change in popularity is mainly attributed to the fast (almost instantaneous), relatively lower cost transactions, convenience and enhanced security of the new platform.

"I always keep money on my Zap account so that if I need to send someone money, I don't have to close my shop to go in the bank, I just Zap the money," said Mr Moses Turyasingura, a shopkeeper on Luwum Street.

To avoid money laundering, a phone message is always received by both the sender and the recipient confirming the transaction.

Mobile money registered users require Shs800 to send any amount of money irrespective of the destination and between Shs700 and Shs9,000 to receive cash depending on the amount.

The non-registered users and those on other networks pay upon receiving a withdrawing charge, which varies between Shs1,000 and Shs19, 000.

Zap subscribers pay a flat fee of Shs250 to send and a similar amount to withdraw. None-registered users pay between Shs200 and Shs2, 000 for sending and Shs1, 000 and Shs5, 000 to withdraw.

That means that one using the new platform would be able to save more than 60 per cent of what he would have spent using the old technology.

Posta Uganda charges five per cent of the total amount of money one is sending as Express Mail Service (EMS) charge and Shs4000 as postage fee.

Western Union charges range between Shs5,000 and Shs35,000 depending on the amount to be sent and the destination yet Moneygram charges between Shs3,000 and Shs30,000.

Both Moneygram and Western Union charge only the sender.

Banks, which provide numerous money transfer service including cheque payments, card payments, direct debits and wire transfers charge between Shs2,000 and Shs25,000 depending on the bank, the transfer service required, amount to be transferred and destination.

In an interview with Business Power, MTN's Sales Manager Junior Kwebiiha said the company targets about half a million people at the end of the year and close to 2 million by the end 2010.

Zain's Marketing and Mobile Data Manager George Buza said the company's target is to have everybody in the country appreciate the service and join the existing 1.2 million subscribers in using the facility.

Unlike Mobile Money that currently offers only money and airtime transfers, Zap is a mobile commercial facility that offers a range of mobile commerce services including money transfer, mobile airtime transfer, merchandising and mobile banking.

With Mobile Money, a phone acts as a bank account and at the same time as an ATM machine to enable subscribers have access to their money whenever need arises.

Unlike EMS that takes two to three days before reaching the final destination, mobile money's process is as instantaneous as receiving a text message.

For convenience and swift money transfer, Zain sealed an agreement with Western Union to increase accessibility of Zap services by Zap customers at any Western Union agent location country wide.

Mr Buza said: "Ugandans living abroad will now be able to send and receive money through Zap with our collaboration with Western Union."

Under the partnership, Western Union's commission payment is done by the sender.

Even as Zain is driving in that direction, MTN does not think of crossing borders any time soon citing differences in the regulatory frameworks of different countries.

"We are still analysing the legal implications since licenses to regulate the system are not the same," said Mr Kwebiiha adding; "even telecommunication in Uganda that has existed for years has just upgraded to using the same Sim Card across borders."

Mr Buza said in January 2010, schools that would have registered will be able to have parents pay fees using the facility.

Though the platform received positive response in the country, the providers say continued sensitisation is still needed if they are to bring all their network subscribers on board. MTN currently has over four million subscribers yet Zain has over 2.5 million.

In the meantime, the two telecoms only allow transactions that do not exceed Shs1 million and a similar amount as the maximum account balance.

The Monitor

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