Mobile Money Services in Uganda

Ali Balunywa and Dr Lovink at the Source of The Nile

A qualitative research of the mobile money phenomenon in Uganda carried out by Dr Geert Lovink (university of Amsterdam) assisted by Ali Balunywa (independent media consultant)

Article by Ali Balunywa

Background:

Five Master students from the University of Amsterdam, Ali Balunywa, Wouter Dijkstra, Ben White, Guido van Diepen and Kai Henriquez Uganda for two months of field research. The aim of the research was to understand how local African communities engage ICT. Each researcher had an individual approach and research question and wrote a personal Masters Thesis based on the two months of field research. Geert Lovink (often referred to in international publications as a ‘New Media Guru’) was the project advisor.

The aim of the research was to better understand the significance of ICT from the end user perspective. In this way the group chose to focus on the “man on the street” as opposed to an organizational or governmental approach. This is out of the interest to understand how ICT has already found a presence at a local level and irrespective of organizations or governments involved.

After graduation, the 5 students encouraged by their supervisor; Geert Lovink, summarized their theses into a book; Beyond ICT4D: New Media Research in Uganda. Beyond ICT4D: “New Media Research in Uganda is a collection of ethnographic reports from diverse perspectives of those living at the other end of the African ICT pyramid. Crucially, these texts refocus on the so-called “ICT4D” debate away from the standard western lens, which depicts users in the developing world as passive receivers of Western technological development, towards Ugandans whose use and production of technologies entail innovations from the ground up. It is this ‘other’ everyday point of view that is too often missing in the ICT4D debate: valuable voices that put technologies, projects and organizations into their proper context” (http://networkcultures.org/wpmu/theoryondemand/titles/no-10-beyond-ict4d-new-media-reseach-in-uganda/).

Inspiration and preparations

After publishing the research and completing the book project, Dr. Lovink decided to fulfill his urge to visit Uganda to carry out more research especially on the mobile money phenomenon. After a few mishaps, the journey was confirmed. Travel would be in December 2012. Preparations started midyear. Appointments with the relevant organizations and people were made and confirmed. Among the mobile money operators, it was only MTN that failed/refused to respond to our requests for an interview. We went through many contacts including MTN staff, but unfortunately, the only responses were to those people who would have liked to help, but insisted this was not their docket.

We were fortunate to get the email of the person responsible; Charlotte Kaheru and 2 others (Email: kaheruc@mtn.co.ug, ntabgoj@mtn.co.ug, kirengs@mtn.co.ug), but our repeated mails went unanswered and unacknowledged! In spite of MTN being one of the big operators, it did not deter us from confirming our appointments with the Airtel, Warid and UTL.

Dr. Lovink (L) with Prof Balunywa and Dr Ssejjaaka at MUBS Library

On 3 December 2012, we started our day with a visit to the Makerere University Business School (MUBS) who were privileged to be the official hosts of Dr. Lovink. After a cordial morning meeting with the Principal of the School; Prof. Waswa Balunywa, Dr Lovink offered the MUBS Library 50,000 free digital off line books. The principal postponed receiving the books until the next day when his senior staff would be around to share the good news.

We then proceeded to Airtel where we met a Mr. Albert Mugisha. He took us through the Airtel money solutions confirmed to us that Airtel money was already integrated with bank services. He added that Airtel money supports a number of integrations including merchant integration platforms where money transfers and purchase of goods and services online is made possible from website Sales by mobile payments.

On being asked how banks reacted, Mr. Mugisha responded that banks are embracing mobile money players and not taking them as competitors. In the US, Europe and Asia, the credit card system works unlike here where mobile money rules.

“Is mobile money taking over?” we asked. Mugisha answered that Mobile money is largely restricted to person to holder, not to the Internet, which has reduced fraud unlike he credit card system.

Reconciliation with agents must be regular to avoid fraud and embezzlement with this system. Mr. Mugisha assured us that at Airtel unlike other providers, there have been no incidents of hacking into the systems yet.

Will the operators grow too big to be banks themselves?

Mugisha said there is that possibility and that the future is in mobile money, not credit cards. The currency of the future will not be dollar or euro.... but something connected to mobile money and that if mobile money operators become banks.... then they will define the economies

The technical system used by Airtel money is just the database and the big thing about it is the security. The machinery is within reach of technicians, not just cloud computing, which is remote. The Airtel Kenya office runs most technical things, troubleshooters and the Apps developers.

A separate company runs Airtel money detached from the mother telecommunication company.

We also talked to Mr. Stephen Waiswa the Public relations officer and Mr. Bernard Anguyo; the director mobile money at Airtel. They reassured us that the ambience the banks like Standard Chartered and or Barclays banks scares the peasants. The local banks can't open branches all over the country like Mobile Money does. Airtel in one year already has 8,000 agents and MTN (which started a couple of years ago) 15, 000. With a combination of all operators, the whole country is covered

Airtel receives money on behalf of merchants and sends goods to clients. Merchants; collection accounts, have interface set up on PC and or phone. Service providers like Umeme (Electricity), National Water etc have no sim cards, but have mobile numbers connected online. The transaction begins with cash, buy Airtel money, send to a provider, who receives mobile cash or e value which he transfers to credit card and credit card tokens are received to enable one to buy goods

Airtel Mobile money products include: School fees payments, bill payments like water and Umeme etc.

In Kenya, the people use their phones, as wallets were money is kept unlike in Uganda where it is send and draw. And Kenya has many other services payments that can be made by phone for example paying fares in taxis. Taxi owners gain by getting their money in a lump sum at once on their mobile phones. In the long run the relationship between Internet and mobile money will grow.

Today, Airtel 9 months later has 1.4 million clients and yet all banks combined have only 3 million accounts.

Another Airtel mobile money product is Bank integration. One can deposit or withdraw money from his account using the mobile phone. So one no longer has to stand in long lines, but do it from the comfort of his home or office. Mobile money also has a rural outreach. This means with integration of banking and mobile money services many clients also can have Bank accounts.

Warid Telecommunications

The next day we visited Warid telecommunications where we talked to Mr. Kimathi; the head mobile money called Warid Pesa. Mr. Kimathi is a Kenyan national and he first explained to us the Kenya situation where he said Mobile money is integrated with Internet. For example, Pesa pal, which is similar to PayPal and can be used to pay online.

Today Warid Pesa has at least a million clients. It has also introduced payments for services like parking fees. He thinks payments in taxis is a far shot, but will soon be achievable.

Kimathi lamented that corruption doesn't allow technology to grow. Those utility payments like electricity, pay TV, school fees, taxes, water works well. Though Kenya has gone a step further by making it possible to use the service to pay in supermarkets and fuel stations.

Warid today has 8,000 agents. Warid thinks simple, secure and instant should be the future of mobile money. Almost 30 per cent Warid clients use Warid Pesa. Mobile money keeps clients’ loyalty.

In Kenya, telecom and mobile money is separate. Mobile money is under bank of Kenya, but in Uganda the Uganda Communication Commission supervises it all.

Equity bank is the Warid partner bank.

Uganda Telecommunications M-Sente

The next day the team visited Uganda telecoms limited (UTL) and met Mr. Peter Kakaire head M-Sente, the mobile division of UTL. Mr. Kakaire enlightened us on the workings of M-Sente. He said M-Sente has 563,200 clients served by 4,770 agents though only around 55% are active. They have a presence in all the 5 regions of Uganda.

Mr. Kakaire travels often to supervise, see penetration and numerical growth of M-Sente.  UTL stronger in the North compared to elsewhere, though growth is uniform across the country. By the end of 2011, M-Sente had only 700 agents, with a subscriber base of 250,000.

Mobile money is a basic product; it is a generic product most important driver is agent network growth. Not all 1,800,000 telecom subscribers are on M – Sente though. Government is enforcing a sim registration to capture the details of clients like; name, photo, address through the providers. Data collection is centrally stored as and when physical forms come in. but photos are sent online digitally. UTL is using advantage of this exercise to recruit clients to M-Sente.

UTL is already dealing in airtime and the retail outlets are around 40,000. All these vendors are potential agents. Money is now a bigger product than airtime.

The range of products; expand Eco system from just sending money to acceptance of mobile money to pay for goods and services. This competes with cash money where there is no extra charge. On mobile money there is 7% surcharge if you are registered, it is more for unregistered clients. Receiving and sending money also costs money

Special channels can be arranged where preferential rates can be given and the percentage goes down to say 1.4% for example dealing with a company like Shell.

Bulk of the money is not all transferred, but is stored on the phone. Eventually the clients might ask for interest on money kept on the platform.

Telecoms are not ready to have a price war over mobile money, because competition is with banks not each other. Margins on mobile money are very low and cannot be pushed any lower. The telecoms make a small profit. The agents take most of the profit and the telecoms remain with about 1%.

Infrastructure costs are high. In Uganda there are 4 players: Fundamo, Visa, Komviva and Obope. (Platforms). Recently, Visa bought off Fundamo. Uganda’s cash economy will soon turn into a mobile money economy. It is suspected that Visa might be positioning itself to be across all platforms.

Mobile money is more like a debit card done on a mobile phone

When asked about the future of mobile money, Mr. Kakaire said it was very important for the Central Bank to play the supervisory role and not UCC whose core competency is telecommunications and not fiscal policy.

Meanwhile, DFCU is the partner bank of M-Pesa at UTL.

Our next appointment the next day was with I-Network. I – network is a knowledge sharing platform funded by the Dutch IICD. It collects and shares information on its 1600 member mailing list and also publishes a newsletter.  It was established in 2002 and is the most successful D-Group in Uganda today. It organizes workshops, trainings, carries out research for the Uganda Communication Commission and lobbies government for ICT policies. The parliament of Uganda regularly consults it on ICT issues. It also creates awareness on ICT related subjects and shares expert knowledge.

Ms. Margaret Sevume, the Content manager at I-Network was the hostess of the meeting attended by Stephen Musoke, Ali Ndiwalana, Albert Mucunguzi, Elisha Wasukira, Geert and myself among others. It was noted that mobile money in Uganda has picked up, though the numbers seemed too big for the telecoms to handle.  It was also generally agreed that the transaction costs were still too high and that there was no cross network support among the providers.  There is also need for merchant banks to support the service to avoid remaining a dump post by integrating mobile money with bank accounts like Airtel is doing.

Meeting Mr. Albert Mucunguzi and his team of PCTech Magazine rounded up the research. Mr. Lovink made a presentation on how to do a research in this period of social media as the final item of his business in Kampala. The well-attended presentation was made at Makerere Business School Senate room to staff students and ICT interested public.