Written by Paul Newall
Discussion between Khurram Sikander (KS) and Paul Newall (PN)
The recent ruling in Uganda to declare mobile money illegal has surprised many and caused quite a commotion in the digital financial services (DFS) space – and much conversation in the Enclude offices. I talked with Khurram Sikander, Enclude’s Global Group Lead for Digital Payments, to discuss some of the major topics and gain his insights on the matter.
PN: The recent ruling in Uganda has thrown into uncertainty one of Sub Saharan Africa’s most promising mobile money environments. What are your initial takeaways?
KS: I do not believe that the views shared by Member of Parliament Katunu and Justice Madrama are entirely correct. While the regulations in Uganda could be more clearly articulated and could include a more comprehensive set of guidelines, they do mandate that mobile money operators (referring to non-bank providers such as MNOs) partner with financial institutions to apply for a license. It is then the responsibility of the financial institution to carry out due diligence on the mobile money operator, including proof of financial position; and review of the operator’s business plan, risk management proposal, technology system, and AML/CFT measures. Once approval from the Bank of Uganda (BoU) is obtained, mobile money is treated as a financial institutions business regulated under the Financial Intelligence Authority.
PN: There does seem to be some recurring confusion with how the money is reconciled between the two parties in this relationship. This confusion has led the MP and Justice to consider MTN a financial institution. Can you expand upon that – once transferred, how is the money reconciled between the bank and the telco?
KS: The regulations clearly state that the mobile money operators have to hold, in an escrow account in their partner financial institution, the equivalent value of the mobile money / wallet they sell to their customers. The parties are expected to reconcile the balances of the escrow account and the mobile money accounts to ensure the net effect is always zero. Negligence in this area is where the fraud often takes place.
PN: This all seems like a misunderstanding of the regulations. Keeping in mind how successful Uganda’s mobile money market has been, why do you think the MP and Justice took it upon themselves to declare it illegal?
KS: It seems that there is a fundamental lack of clarity from those reviewing the regulations. In any case, I do not see the government suspending a $6 billion per year business (as of 2014) and a large source of tax income anytime soon, and in fact, the BoU has responded to the situation by issuing a statement confirming that mobile money is lawful and secure.