"Mobile Money" to transfer millions of dollars via text message on
their mobile phones. The phenomenon is democratizing banking in Uganda
and changing the country's socioeconomic landscape.
Like the majority of Ugandans, Margaret Okello has never had a bank
account. But thanks to an incident involving her mother's cow, the
Kampala housewife recently learned that she could use her mobile phone
to transfer cash.
Okello says the cow was crossing the road in the Bukwali village in
Western Uganda when a motorcyclist crashed into it and damaged his
bike. With zero savings, Okello says her mother was stuck in a serious
"According to the regulations the owner of the cow has to pay because
the cows don't have right of way, so the owner of the cow has to pay,"
Moments after the accident, Okello visited a MTN service center in the
capital, Kampala, one of 600 service centers the regional telecom
company operates in Uganda. There, an agent converted Okello's $20
into electronic funds. In less than 5 minutes, Okello's mother
received a text message listing a special pin code which she used to
retrieve the funds at a MTN service center in her village.
In east Africa, the mobile banking system was first introduced in
Kenya a few years ago. Now, one out of every six Kenyans uses the
service to transfer money. In the past two months, telecom providers
such as MTN, Uganda Telecom, and Zain have cooperated with local banks
to expand this service into Uganda.
In the case of MTN, Ugandans are using their phones to send allowances
to their aging parents in outlying villages. Others use it to pay off
their children's' school fees, and more than 20 percent of subscribers
are using their mobile phones as a substitute for a savings account.
Uganda has only three million bank account holders, but close to 10
million mobile phone subscribers. Traditional banks are sparse in most
parts of rural Uganda. MTN's Mobile Money head, Richard Mwami, says
mobile phones have created a new "battleground" for banking.
"The power of the mobile phone [is] we have taken our financial
services to people who before have not been exposed to these services.
In fact, what we see happening is a lot of growth has been registered
in the central part of the country," said Mwami.
Mwami says subscribers are sending an average of $35 each transfer,
which he says means low-income people are using the service most. He
attributes this to the minimum 40 cents MTN charges per transfer as
compared to the $5 charged by traditional banks.
Although it is too soon to weigh the full economic impact of mobile
money on rural Uganda, the ease of the service has inspired people
like Kampala tour guide operator Timothy Sekanwagi to do something he
would not have considered doing before.
Sekanwagi recently bought property in the Ugandan countryside. The
businessman saved himself a 90-minute drive each way to the village
and high fuel charges by using his mobile phone to transfer a payment
to a local contractor.
"I bought a piece of land so I'm trying to put up a structure there so
instead of going there I can just send the money, so it is very cheap
and convenient," Sekanwagi said.
Mwami adds that this is only the start of an emerging money transfer
culture that could significantly boost economic development in Uganda
in the coming decade.
Mobile money transfers are popular in several other African countries
as well, including South Africa and Nigeria. Telecom operator Zain is
now piloting projects across the Middle East and Afghanistan.
Statistics indicate the developing world will use their mobiles to
transfer more than $5 billion in the next three years. Some analysts
are already dubbing mobile companies like Zain the "biggest bank in
This article was originally published by Voice of America.