Across Africa, the rise of financial technology, popularly known as fintech has been nothing short of transformative. In little more than a decade, the continent has leapfrogged traditional banking models, replacing brick-and-mortar counters with mobile phones and digital wallets.
From Lagos to Kigali, millions of people who once lived outside the reach of banks now transact, borrow, save, and even invest using nothing more than a handset. Africa is today recognized as the world’s laboratory for digital finance, with mobile money volumes surpassing US$800 billion in transactions annually, according to GSMA reports, driven largely by East Africa’s pioneering systems.
Uganda stands at the forefront of Africa’s digital financial revolution. With over 50.5 million registered mobile money accounts by the end of 2024, the country has transformed from a cash-based economy to a digital-first financial landscape. This surge in adoption has been propelled by a combination of regulatory foresight, technological innovation, and a deep-seated need for accessible financial services.
In 2024, Ugandans transacted an average of UGX 435 billion daily through MTN Mobile Money, totaling approximately UGX 159 trillion for the year. This volume underscores the pivotal role mobile money plays in the nation’s economy, facilitating everything from school fees and utility payments to remittances and business transactions.
The growth trajectory of mobile money in Uganda is remarkable. In 2023, there were 1,607 mobile money accounts per 1,000 adults, a significant increase from 1,304 in 2021. This expansion is indicative of the widespread acceptance and reliance on digital financial services across the country. While mobile money began as a tool for basic transactions, its evolution into value-added financial services marks a significant milestone. Services such as micro-savings, Nano-credit, micro-insurance, and pay-as-you-go models for solar energy and smartphones are now accessible through digital platforms. These innovations are particularly impactful for Uganda’s large informal sector and rural populations, offering financial products that were previously out of reach.
As the digital financial ecosystem expands, so does the need for effective taxation. The Uganda Revenue Authority (URA) has implemented a 0.5% excise duty on mobile money cash withdrawals and a 15% excise duty on fees charged by banks and non-bank operators for money transfers. While these measures aim to broaden the tax base, they also present challenges. In 2024, MTN Uganda faced a UGX 260 billion ($70.9 million) tax demand from URA, primarily concerning excise duty and value-added tax (VAT) on services provided over the past five years.
This dispute highlights the complexities of taxing digital financial services. The rapid growth of mobile money and the diverse range of services offered complicate traditional tax models. To address these challenges, the URA is exploring mechanisms like e-invoicing and real-time reporting to enhance compliance and reduce the tax gap. Additionally, as regional systems like the Pan-African Payment and Settlement System (PAPSS) mature, Uganda is collaborating with neighboring countries to address cross-border taxation issues, ensuring that digital transactions across the East African Community are appropriately taxed.
Uganda can draw valuable lessons from its East African neighbors in navigating the digital financial landscape. Kenya’s success with M-Pesa illustrates the importance of scale and disciplined data management, with an emphasis on real-time transparency and robust market conduct supervision. In Tanzania, the introduction of levies on electronic and mobile money transfers in 2021 faced public pushback, leading to reductions and waivers, underscoring the need for careful calibration of taxes to avoid driving users back to cash.
Meanwhile, Rwanda’s investments in digital infrastructure, particularly the Rwanda National Digital Payment System (RNDPS), have enabled instant, interoperable transfers between banks and wallets, benefiting micro, small, and medium enterprises (MSMEs). Collectively, these experiences highlight the critical balance between innovation and regulation in fostering a thriving digital financial ecosystem.
To fully harness the opportunities offered by Uganda’s digital financial ecosystem, citizens must adopt a strategic and informed approach. Maintaining detailed digital transaction records is critical, as it not only provides a clear financial footprint but also enhances access to credit, loans, and other formal financial services. It is equally important to engage exclusively with licensed and regulated platforms under the National Payment Systems Act, ensuring transactions are secure and protected from fraudulent schemes.
Ugandans should also actively leverage value-added services such as pay-as-you-go solar systems, micro-insurance, and digital savings products to build financial resilience and long-term stability. Staying informed about applicable taxes, including the 0.5% excise duty on mobile money withdrawals, enables proactive financial planning and helps avoid unexpected liabilities.
Finally, prioritizing data security by safeguarding personal identification numbers, passwords, and other sensitive information is paramount, as it protects users from cyber threats and fraud, ensuring that digital finance remains both safe and empowering.
One of the biggest threats to the growth of fintech in Uganda is public trust. Recently, a storm on Twitter, sparked off by Dr. Jim Spire, who shared frustrations over unexplained mobile-money losses, quickly gained traction as several users echoed similar complaints. The matter escalated to the extent that the Managing Director of Airtel Uganda had to issue a public statement to reassure customers about the safety of their mobile money.
While the intervention was necessary, the incident underscored a critical vulnerability: if users begin to perceive mobile-money and fintech platforms as unsafe or unreliable, adoption will stall regardless of innovation or policy support. Trust is the currency of digital finance, and without robust systems, swift communication during crises, and transparent dispute-resolution mechanisms, fintech companies risk reputational damage that could reverse years of progress.
Uganda stands at a pivotal juncture. The foundational work of integrating mobile money into the financial fabric is complete. The next phase involves enhancing the quality of digital financial services, ensuring they are inclusive, affordable, and secure. This requires investing in interoperable payment rails, implementing risk-based Know Your Customer (KYC) regulations, strengthening consumer protection, and ensuring that taxation policies are predictable and proportionate.
The writer is a Chartered Accountant, Analyst and Tax Advisor