At least 79 percent of Ugandans believe mobile money services have become too expensive and unaffordable during the past year, according to a recent survey. The figure compares to 32 percent in 2017. The survey, which assesses the banking, mobile money and tax implications of the services, found that the country’s new tax laws, especially those pertaining to mobile money, have pushed the service beyond the reach of the average person.

The Ugandan government last year introduced a 0.5 percent tax on mobile money and increased the excise tax on it from 10 to 15 per cent. The new taxes have brought about a spike in mobile money-related charges, and mobile operators have reported a drop in transactions. The survey, which sampled 1,344 mobile phone users, also indicated that 57 percent of mobile money subscribers have reduced the amount of money they transact on the platform, from 32 percent in last year’s survey.

Tarifica’s Take

Mobile money’s emergence as a global phenomenon has a great deal to do with its notable success in Africa, where it decisively changed life for the better for the vast number of consumers who had no access to traditional banking services or even cash—in fact, it could be said that in many cases it made consumers out of potential consumers. And while mobile money solutions have proliferated and become more diverse, serving many types of customers who could hardly be said to be “unbanked,” it is still most useful, indeed essential, to those who continue to live in remote areas and with few resources.

Uganda is a market in which such customers are numerous. Only 17 percent of Ugandans have a bank account, while 73 percent have a mobile money account. In addition, the growth in the mobile money sector, according to the survey, has caused at least 3 out of 10 Ugandans to be able to access credit services.

For the government to impose taxes that increase the price of mobile money imperils this key market sector and causes grave risk to legions of consumers. In order for mobile money platforms to retain their core utility and remain relevant, they must be affordable. From the point of view of mobile operators, which administer and, in many cases, own the services, or partner with banks to offers them, something needs to be done. If the Ugandan government will not repeal or lower these taxes, operators may well have to absorb the costs in one way or another, because if they simply transmit the costs to the users, the users may have no choice but to stop using mobile money.