Uganda’s population relies a lot on mobile transfers and finances. In order to make the process more convenient and effective for their customers, the Ugandan government has created a proposal, asking Uganda’s Bankers Association to hold the mobile funds on trust accounts, where the users could earn interest. Uganda’s population uses mobile payments a lot, for p2p transactions, shopping and especially mobile casino websites since online gambling is highly developed and widely used in this region.
While mobile payments are used pretty much as regular as standard payment methods, mobile payments lack a lot of benefits that come from using more standard bank accounts for payments, in this case, a trust account privileges, where the banks hold the money while the transactions are being made. But it looks like The country’s bankers’ Association is not ready to treat mobile fundas regular funds since it rejected the proposal by the government.
The main reason behind the rejection, as stated by the association, is that they are not the entity responsible for these funds in the first place. The key players here, who should be dealing with the situation are mobile money agents, mobile wallet holders and merchants, which is why holding mobile funds in trust accounts won’t be an option for Uganda’s population for a while.
The Bankers’ association also stated that because the deposits fluctuate so frequently. Paying interest does not make sense for the banks.
Despite the rejection, the Parliament’s Finance Committee proposes that the banks that hold the license to operate in the country, do a proper checkup on these mobile payment service providers, then enter into an agreement with them in order to provide an escrow account that is going to hold the money.
It seems like the banks aren’t ready for the collaboration with the telecom companies because as stated in their official press release, anything that concerns the mobile e-Wallets and the payments made by them, is none of their concern.
Just last week, Wildrod Owo, the Executive Director of the Uganda Bankers’ Association along with Mathias Katamba, the Managing Director of the DFCU bank, Nazim Mahmood, the Managing Directors at ABSA, and Anthony Kituuka, the Executive Director at the Equity Bank, proposed that the interest rates proposed that interest is earned on the main account after the banks have invested funds held in trust accounts and have earned a return to pay. Considering the nature of these trust accounts, the banks have the responsibility to keep the funds available for liquidation by Mobile Money subscribers, which in turn makes it difficult for users to use these funds for investments.
When faced with criticism from the banking sectors, mainly because mobile account does not equal a bank account, hence should not be granted the benefits of the banks account, Owor hit back, saying that this regulatory change was concerning the payment systems and their regulation and less so the banking matters related to the interest rates, which should be taken care of by the Financial Institutions Authority.
The association argues that since this initiative will take the toll only on the banks, they should be the ones to decide whether or not the initiative is worth it, which they clearly don’t think it is since they shut down the proposal.
Katamba also warned that even if these changes are made, banks will likely introduce higher fees for those getting interest from mobile accounts only which will tarnish any positive effect this proposal could have had.
While it makes sense to grant the mobile fund users the same benefits that the regular payers get, it might need more time so that bans and the users can get on the same page. Since Regular Telecom companies won’t be doing any banking services any time soon, it is up to the banks and the government to improve the current financial situation for the mobile fund users.
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