Why the increase in Ugandan Mobile Money tariffs won’t matter


The 2013 Uganda budget reading identified Mobile Money as one of the avenues to help the government raise money for a budget that was almost fully funded locally without the help of development partners. The 10% excise duty imposed on all Mobile Money transfers (Inclusive of non telecom operators) is expected to rise about $12M.

Many skeptics predicted negative effects as a result of the taxation on Mobile Money transactions arguing that Mobile Money is majorly used by the poor and taxing transfers meant that the poor or  un-banked population would no longer afford to transact or would do so with difficulty thus crippling the growth of the sector. After thinking critically about the tax imposed and the increased tariffs by some telecoms, I concluded that both won’t matter for reasons I detail below.

Advertisement - Continue reading below

First and foremost, Mobile Money is a fast growing sector with lots of potential to change how business is transacted. By 2011 there were only 2.9M subscribers overall  who have now tripled to 9M and still growing.  MTN Uganda alone saw a 50% growth in its Mobile Money subscriber base  in the year 2012.  So the 10% excise duty on Mobile Money transactions only means a slight increase in the tariffs which are not necessarily deterrent. Some of the reasons why the tariff increase won’t matter are given below.

1. The Convenience of Mobile Money

We shouldn’t underestimate the convenience that Mobile Money brings. You don’t have to line up like we always did (and still do) in the bank let alone look for the limited locations the banks have. With Mobile Money I can receive money from anyone and from any network. I can even receive money without having a phone myself. I am able to send money to almost anyone with so much ease and  for rates much lower than bank transfer rates. The ability to pay for utilities and services in the comfort of my home or on the go is something that makes the slight increase very much negligible

2.  The increase is reasonable

MTN Uganda and recently Orange Uganda increased their rates to accommodate the tax imposed however MTN had already increased  its rates a few weeks before the budget was read apparently adjusted their tariffs so as not to deter customers. Except for the press release, many wouldn’t even have noticed he increase which can be absorbed without necessarily feeling the pinch. Actually we should expect the tariffs to further increase.

3. The Demand for the service is growing

The volume of transactions via Mobile Money have grown so big that no one expected it would grow that big. Bank of Uganda had to intervene and initiate the setting up of controls to monitor the sector. This is evidence of growth and the more the demand, the more we should expect price increases as the costs of administration for the service providers also increase. Basic economics predicts that the higher the demand the higher the price will go except for industry regulations.

Rather than grumble about the slight increase in tariffs, I would rather we concern ourselves with issues like;Regulation of the sector to reduce or even eliminate incidences of fraud and to ensure stability of the platforms upon which this services operate. This means creating service standards without which no one should be allowed to operate the service.

Growth and Development of the service/industry is another aspect we should all be aiming for so I am looking forward to being able to seamlessly integrate my Mobile money account to my bank account and also to VISA and MASTERCARD platforms to enable international commerce.

Lastly and most importantly the service should be simplified and made accessible even to the rural and the poor. Financial inclusion through access to banking services that are simple and flexible I believe  is one of the ways we can fight poverty.

As clearly stated above, I re echo the need to grow and develop the sector rather than grumble about the aspects that wont matter

 Image via ACUMEN

  • Francis Lubanga

    You raise good points Onyait