Mobile Money, Agent Banking Transactions Surge as EAC Regional Transactions Decline

by Christopher Kiiza
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The emergency and widespread adoption of mobile money and agent banking services in Uganda has unquestionably captured the interest of millions of Ugandans.

A huge number of Ugandans now consider mobile money and agent banking services as not just convenient, but also the simplest ways to conduct financial transactions without having to bear the burden of spending time in banking halls.

The latest Bank of Uganda Annual Report 2022-2023 reveals that during the year ended 30th June 2023, mobile money transaction values significantly increased by 22.6% from 156 trillion shillings in June 2022 to 191.3 trillion shillings while the transaction volumes increased by 20.8% from 4.8 billion to 5.8 billion over the same period.

Similarly, the number of registered mobile money customers as at June 30 2023 stood at 42.9 million reflecting a 11.4% increase from 38.5 million in June 2022.

The active customers (who transacted at least once in the preceding three months) increased by 16.3% from 22.7 million in June 2022 to 26.4 million in June 2023. As at the same date, the 26.4 million active e-money accounts were held by a total of 20.7 million NIN (National Identification Number) holders, representing approximately 46.8% of the total population in Uganda.

Despite the surge in transaction volumes, Ugandans prefer to transact low value transactions with majority transacting as low as 50,000 shillings.

“Statistics continue to show a stronger preference for low value transactions with an average transaction value of UGX 36,477 posted during the year. In addition, low value transactions remain dominant with 92.8% of the transaction volume constituted by transactions less or equal to UGX 50,000,” the report reads.

Safety of the Money

It is noteworthy that with the significant increase in the volumes of money transacted through mobile money platform, a relevant concern emerges about the security of the funds.

However, Bank of Uganda says all the e-money issued is fully backed up by cash held in trust accounts in partner Banks.

As at year end, the Central Bank said balances held on trust accounts by the partner banks stood at 1.46 trillion shillings, reflecting a 10.5% increment from 1.43 trillion shillings reported in June 2022.

Agent Banking

The Agent Banking Platform is a shared system used by the financial institutions to offer agent banking services.

As of 30 June 2023, a total of 23 institutions (22 commercial banks and 1 Microfinance Deposit-taking Institution) had signed up to the platform.

Bank of Uganda said modest results were posted by the shared agent banking platform which supports agent interoperability.

“The transaction volume on the shared agent banking platform marginally increased by 2.3% from 8.6 million transactions in the year ended June 2022 to 8.8 million transactions in the twelve months to June 2023,” it said.

Transaction values on the other hand, registered a significant increase of 29% from 9.7 trillion shillings in June 2022 to 12.5 trillion shillings in June 2023.

“The shared agent banking platform continues to be a key enabler for the mobilization of deposits especially in the rural areas,” the Bank of Uganda report reads.

Debit & Credit Card Performance

Debit card transaction values increased by 36.5% from 1.26 trillion shillings in the year ended June 2022 to 1.72 trillion in 2023 while credit card transaction values significantly increased by 61.1% from 66.4 billion to 107 billion shillings over the same period.

A similar trend was noted for point -of-sale transactions whose transaction values increased by 28% from 711.6 billion to 910.4 billion over the same period.

East African Payment System (EAPS) Performance

Unlike mobile money and agent banking platforms that registered vast increase in transactions, the East African Payment System (EAPS) registered a huge decline in transactions.

The East African Payment System (EAPS) is an initiative of the East African Community (EAC) Central Banks and is linked to the RTGS (Real Time Gross Settlement) systems of the EAC member states.

This multi-currency system supports cross-border payments in which transactions are executed across the region in any of the currencies of the EAC Partner States.

Currently, Uganda, Kenya, Rwanda, and Tanzania are on EAPS.

The Bank of Uganda report shows a 26.2% decline in inbound EAPS transaction values from 1.3 trillion posted in the year ended June 2022 to 0.96 trillion in 2023.

“Regarding the outbound transaction values, an overall decline of 20.8% was noted from UGX 1.2 trillion to UGX 0.95 trillion over the same period.”

Kenya remained Uganda’s main trading partner on EAPS during the period under review.

Bank of Uganda attributed the decline in EAPS transactions mainly to the Global shocks and the Covid-19 aftereffects leading to the general slowdown in the regional trade.

Regional Payment & Settlement For COMESA

The Regional Payment and Settlement System (REPSS) is an electronic platform that facilitates cross-border payments within the COMESA (Common Market for Eastern and Southern Africa) region.

REPSS enables settlement banks in participating COMESA countries to send and receive payments within the COMESA region.

The transaction value processed by REPSS increased by 34.4% from USD 25 million in 2022 to USD 33.6 million in 2023.

Currently, the systems allow settlement of payment instructions denominated in USD and EURO.

Nine out of the nineteen COMESA countries were active on REPSS.

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