Going mobile in Uganda
Last year, I was one of the recipients of the Robin Cosgrove Ethics in Financial Services Essay Prize presented by Christine Lagarde at the International Monetary Fund in Washington D.C. My essay looked at how the rapid growth in mobile payments in Kenya and other areas in the developing world could provide important ethical lessons for the broader financial services industry.
I recently had the opportunity to visit Uganda, which allowed me to see for the first time how mobile payments are affording new opportunities to people in emerging markets. But just as importantly, it illustrated how people are utilising and adapting these technologies to meet their social and economic needs.
Firstly, it is worth a word on the country itself: Uganda is very young and is growing very fast. Three quarters (75.8%) of the population is under the age of 30, and nearly half (48.1%) are under the age of 14! By 2040, it is predicted to have outgrown its neighbour Kenya, reaching over 100m people by the middle of the century. Such a vibrant and youthful population provides a fertile ground for new technologies, as well as presenting significant infrastructure challenges.
For those who may be unaware of how mobile payments systems work in the developing world, the process is incredibly simple and only requires the most basic (non-smart)phone. Consumers wishing to send money give cash to a local agent which is then credited to their account on the mobile network. These funds can then be sent to recipients in much the same way as an SMS text message. Recipients then withdraw these funds for a small fee via an agent.
Even the smallest town or village in Uganda had a house or shop painted with the colours of Airtel or MTN – the main mobile phone networks – and the majority had agents housed in everything from the smallest wooden shacks to formal modern branches.
Many people in the UK might associate mobile payments with consumer activities, such as going to the shops or a restaurant. Bars such as Africana bar in Fort Portal (pictured) accept mobile, but talking to people in the area, they found that paying for few drinks using their phone was needless and cumbersome.
One of the notable differences in Uganda is the relative fragmentation of the market. The astonishing growth in mobile payments in Kenya was partly due to a partial monopoly enjoyed by the M-Pesa system operated by Safaricom, coupled with relatively light-touch regulation. Unlike bank transfers, mobile payments cannot be easily made between providers, meaning a single unified system is likely to scale much faster. For anyone making payments – from NGOs to ordinary consumers – having multiple networks may improve competition at the expense of speed and utility.
However, what has made the growth and evolution of mobile phones and payments particularly interesting is the proliferation of unintended consequences and uses. One observer I spoke to, who had worked on development projects in Uganda for over two decades, said that a worrying increase in smoking and drinking was halted with the introduction of mobile phones and mobile payments. He believed this was largely due to Ugandans opting to spend their limited discretionary income on airtime and remittances instead of cigarettes and alcohol.
Much of Uganda’s population still relies on small-scale and subsistence farming. Mobile payments have significantly improved market access as well as enhancing community cohesion here. One guide in the stunning foothills of the Rwenzori Mountains told me that farmers in his community would give excess produce, such as the ubiquitous matoke, to a local delivery driver to transport to the nearest town. After taking a fee from the community as a whole, the driver would then send the appropriate amounts back to the villagers. For those who can’t afford a phone, an intermediary would take the mobile payment and then distribute it in cash.
Uganda is a country that is undergoing massive growth and change with a young and vibrant population. It will be fascinating to see how Ugandans continue to adopt and adapt new kinds of technology over the coming to meet their needs.