Uganda is growing so rapidly that people no longer need to carry cash, as mobile money has become an essential part of daily life.
It has revolutionized the way people send, receive, and store money, making financial transactions faster and more convenient than ever before.
What started as a simple money transfer service has now grown into a multibillion-dollar industry, dominated by telecom giants such as MTN Uganda and Airtel Money.
These companies, along with a few smaller players, have capitalized on the growing demand for digital financial services.
While mobile money has brought financial inclusion to millions who previously had no access to traditional banking, there is growing concern that telecom companies are taking advantage of consumers.
The cost of transactions remains high, with customers paying significant fees for sending and withdrawing money.
As a result, many Ugandans feel that while mobile money is convenient, it is also expensive. This raises a critical question, does the high cost of mobile money threaten the vision of a cashless economy and financial inclusion for all?
A decade ago, banking in Uganda was a privilege for the few. Banks were mainly found in major towns and required a lot of paperwork to open accounts.
For people in rural areas, the process of accessing financial services was a challenge, many relied on informal means, such as sending money through buses or trusting friends to deliver cash which was slow and risky, with the constant threat of theft or loss.
When MTN Uganda introduced mobile money in 2009, it changed everything. With just a basic phone, people could now send and receive money instantly, no matter where they were.
This service quickly became popular, and within a few years, Airtel and other companies joined the market.
Mobile money spread across the country, becoming the primary way for Ugandans to conduct financial transactions.
Today, mobile money is more than just a transfer service. It is used for paying school fees, utility bills, shopping, and even receiving salaries.
The government has also integrated mobile money into tax collection, allowing citizens to pay taxes and access public services digitally. The industry has grown so much that mobile money transactions in Uganda now exceed approximately UGX 100 trillion annually.
However, as the service expands, so do the profits of telecom companies, which make billions from transaction fees and service charges.
Every time a customer sends money, withdraws cash or pays for a service using mobile money, a portion of the transaction goes to the telecom provider.
One of the biggest complaints from Ugandans is the high cost of using mobile money, the fees vary depending on the transaction amount and whether the recipient is on the same network.
For instance, withdrawing UGX 100,000 from an MTN mobile money agent costs about UGX 1,500, while sending the same amount costs between UGX 1,000 and UGX 1,500.
For someone who regularly uses mobile money, these charges add up quickly. The problem is even worse for small businesses that rely on mobile money for daily transactions.
Some business owners have been forced to increase prices to cover transaction costs, ultimately passing the burden onto consumers. Despite complaints about high fees, mobile money companies continue to thrive, attracting millions of new users each year.
They have aggressively marketed their services, ensuring that even the smallest businesses and remote villages rely on mobile money. By offering convenience and security, they have positioned themselves as essential players in Uganda’s financial system.
However, some argue that these companies are more focused on making profits than on promoting financial inclusion. The high transaction fees discourage some low-income earners from using mobile money regularly, pushing them back to cash transactions.
Another way telecom companies make money is through merchant payments. Large businesses, supermarkets, fuel stations, and hospitals now accept mobile money as a form of payment.
While this makes transactions easier, businesses have to pay a percentage of every transaction to the mobile money company.
This means that even when consumers are not directly paying transaction fees, they are indirectly affected as businesses factor in these costs when pricing goods and services.
In recent years, mobile loans have become a game changer in the industry telecom companies have partnered with banks to offer microloans to customers based on their mobile money transaction history.
MTN’s MoKash and Airtel’s Wewole allow customers to borrow money instantly without visiting a bank, while this service provides quick financial relief, the interest rates are high.
Many customers who take these loans struggle to repay, leading to financial stress. Some critics argue that mobile loans are trapping people in a cycle of debt rather than improving financial inclusion.
Telecom companies also benefit from partnerships with banks and fintech firms. Banks use mobile money platforms to process transactions for customers without traditional bank accounts.
Stanbic Bank, for example, has partnered with MTN Uganda to offer FlexiPay, a digital wallet that allows customers to make payments using mobile money.
While these partnerships expand digital financial services, they also generate more revenue for telecom companies, reinforcing their financial dominance.
The Ugandan government has also played a role in increasing mobile money costs. In 2018, a 1% tax was introduced on mobile money withdrawals, which was later reduced to 0.5% after public outcry.
This tax affected transaction volumes, as many people reduced their mobile money usage to avoid additional costs.
Some customers started withdrawing large amounts at once to minimize the number of transactions, while others returned to cash transactions. The tax showed how government policies could either promote or hinder the growth of digital financial services.
Security remains another challenge in the mobile money industry. As the number of transactions increases, so do cases of fraud and cybercrime.
Scammers use various tricks to steal money from customers, such as sending fake messages plus impersonating mobile money agents. Some fraudsters even manipulate mobile money systems to withdraw money illegally.
In response, telecom companies have invested in fraud detection systems customer awareness campaigns, and more.
However, the risk of cybercrime remains a major concern, especially as mobile money has become the dominant form of financial transactions in Uganda.
The mobile money industry is also highly competitive. While MTN and Airtel dominate the market, smaller players and fintech companies are trying to challenge them.
New entrants like Safeboda Wallet have introduced cheaper services, forcing the big telecoms to rethink their pricing strategies.
Some of these new companies offer free transactions or significantly lower fees, attracting customers who are frustrated by high mobile money costs. If this competition continues, it could lead to lower transaction fees and better consumer services.
Despite the challenges, mobile money is here to stay. It has become the backbone of Uganda’s economy, supporting businesses, individuals, and government transactions.
However, for digital financial transformation to succeed, mobile money must be affordable and accessible to all Ugandans.
The high transaction fees risk slowing down the shift towards a cashless economy. If customers feel that mobile money is too expensive, they may continue using cash or look for alternative financial solutions.
The future of mobile money in Uganda depends on how telecom companies balance profit-making with financial inclusion.
If transaction costs remain high, many Ugandans will be left out of the digital economy. Policymakers must also play a role in regulating the industry to ensure that consumers are not exploited.
While mobile money has transformed Uganda’s financial landscape, the true success of digital money will be measured by how accessible and affordable it is for the average Ugandan.
For Uganda to fully transition into a digital economy, mobile money must be an enabler, not a burden.
The telecom giants making billions must consider reducing transaction fees to encourage wider adoption. If the cost remains too high, digital financial transformation will be limited to the middle and upper class, leaving out the very people who need financial inclusion the most.
Uganda’s mobile money success story should not just be about corporate profits it should be about empowering every Ugandan to participate in the digital economy.