MTN Uganda is to pioneer a cell phone-borne cash transfer service that promises to significantly cut the cost of remitting money around the country and possibly transform the lives of thousands of poor Ugandans who depend of philanthropic cash handouts from their rich relations in urban centers.
The daily Monitor reported today that the service is inspired by Kenya’s M-Pesa, operated by Safaricom which lets people use their cell phones to send and receive money via SMS without any of the burdensome and onerous conditions associated with formal banking: holding an account, charges, minimum balances, paper work and suchlike. Since M-Pesa was developed a year ago, the service has gained massive popularity and Safaricom has since reported it as one of its most successful innovations ever.
Because MTN is still working on the project, with parts of it still in infancy, the company’s officials have refused to comment on when they will launch it and how exactly it will work in Uganda. It’s unclear whether MTN will adopt the Kenyan delivery model or will tweak it to match the Ugandan market.
If the company’s plans come to fruition, they will upset Uganda’s money transfer market, infusing it with new competitive pressure that will inevitably depress existing charges. Currently, Uganda has two local money transfer service providers: Posta Uganda (Money Order) and Simba Telecom (Simba Cash) which charge anywhere between 10 to 25% of money being sent as transfer charges. Cash transfers through banks are extremely limited because they are far expensive and even then, only a tiny portion of Ugandans has accounts.
An SMS money transfer service could easily topple the existing formal market players since it would have two twin advantages: scale and affordability.
More than six million Ugandans now hold cell phones, the same number of people that would automatically have access to the service. That eclipses the number of people with bank accounts which is estimated at about 2.5 million. Even then many of banks are only present in big towns while others still operate only in Kampala, making themselves inaccessible to millions that live in far flung areas. Simba Telecom and Posta Uganda networks, too, only stop in big towns, which severely limit their reach.
Safaricom’s M-Pesa was originally developed with co-funding from UK’s DFID as a vehicle to make financial services affordable to vast hordes of Kenya’s poor. As the service gained popularity though, it became a main source of revenue with more than three million customers having signed on service on their cell phones.
To send cash using MTN’s money transfer service, a customer will have to buy E-money from an agent near him, which is then loaded on to his account and then he can send to a recipient who receives a text message with a code telling him to go and collect money from an agent within his proximity.
The company is already said to have approached financial regulators for a license.
This is about the best thing that has happened to Uganda’s economy. It is a great opportunity for the poor hardworking. Now business turn over can go to unknown heights from the increased rate of transaction. Imagine a cheque matures in 4-5 days, and this money is instant! I foresee so many developments in financial institutions because of this one change!
well thanx for the service what of a ugandan who is not in uganda anyway how to use ur service ps
Am quite impressed by telecom giants leading the way in smooth transfer of money were existing financial institutions like banks have failed to deliver; to the poor section of society that lacks bank accounts.
The society is iiliterate and doesnot understand the extreme procedures required by banks.etc