Professor Benno Ndulu gives Joseph Mubiru Memorial Lecture

Prof Ndulu

Via The Independent:    

When one talks about financial inclusion in Uganda, it is always mobile money that comes into their minds first. The mobile

money system is now entrenched and is even a substitute for banks.

Mobile money has successfully brought on board ordinary people involved in the informal sector in the money transfer business.

So when Prof. Benno Ndulu, the former Governor of the Central Bank of Tanzania took to the podium as the Guest Speaker at the 26th edition of the Joseph Mubiru Memorial Lecture on Feb.20, he knew the magnitude of the mobile money sector to most of the members of his audience at Kampala Serena Hotel.


Ndulu has been a regular visitor to Kampala and was therefore familiar with most of the topical issues in the financial and economic sector of Uganda.

Ndulu’s speech had a great deal of an East African context and it was not surprising when he labelled the region as the “cradle of mobile money”. M-pesa that is founded in Kenya is a trailblazer across the continent when it comes to mobile money services.

Speaking under the theme “The role of financial innovation and inclusion in scaling up growth in Uganda,” Ndulu gave a preamble of thoughts before he delved into the achievements of financial innovations in Uganda.

First, he urged a move from financial inclusion to universality to bring on board the 22% that are financially excluded.

Secondly, he called for more utilization, stressing that even those who have mobile money, only a small fraction are active.

Thirdly was taxation, a statement that elicited a wild applause. “When there is a momentum of leapfrogging success, there is a temptation to tax it like hell,” Ndulu remarked. “By overtaxing, you are discouraging this set of services and you undermine the tax base,” he added.

His third sentiment resonated well due to the controversial tax that was levied on mobile money at the beginning of the current financial year. He also bemoaned the fact that mobile money taxes are “regressive”. He noted, “They do not discriminate across ability to pay”.

Impressive statistics & innovations

With the aid of a PowerPoint presentation, Ndulu spoke glowingly about the strides Uganda has made in financial inclusion and innovation. He was impressed that Uganda had made a leap from 52% in 2013 of people using formal financial services to 58% in 2018 according to Finscope, a financial data aggregator.

In 2009, the percentage stood at 28%. The former governor was happy to point out that six out of ten Ugandans are able to use a digital payment today.

Ndulu said there was a lot to celebrate about innovation in terms of growth such as the rise of agent-based services in contrast to the brick and mortar businesses.

“Previously a bank needed a certain level of investment to set up a branch now thanks to this innovation, which is not the case anymore,” he said.

Related to the agent based services, he hailed the reduction of face to face cost thanks to digitization.

He also cited the use of big data in banking and block chain technology, the latter being the latest controversy to roil the world of financial technology in the last year.

Ndulu applauded the innovations in the financial market such as mobile money gateways like Payway, micro insurance, digital micro credit and loan disbursements like MoKash, and mobile money cross border payments such as the collaboration between MTN and M-Pesa.

However in spite of all these wonderful innovations, he says, there is still a usage problem that follows all of them. “Of all the 690million mobile money accounts in the world, less than a quarter are ‘active’” Ndulu regretted.

This measure of being active is for those who use the accounts over a ninety day period.

Low utilisation

In spite of the all the wonderful financial innovations, there is a problem of utilisation with almost every product. “Despite the cellular expansion, there is less than 12% of population in low income countries who use the internet, notwithstanding the high ownership of smartphones.” Ndulu said.

He cited the cost of the smartphone that has dropped by 50% across the region compared to about five years ago yet those who own smartphones, only a measly 15% use them for financial services.

This was also related to his earlier concern of inactive mobile money accounts. The utilisation shortfall was elaborated by Rashmi Pillai, the Acting executive director of Financial Sector Deepening Uganda (FSDU) who was the discussant of the speech.

She wondered why most of the financial transactions were person to person and why there was not more sophisticated use of financial technology and other services. “There is a huge access and usage gap,” Pillai commented.

She added that agents tend to coalesce around areas of economic activity in the urban areas denoting another aspect of the access-usage gap. She paused questions on whether this gap can be reduced. “Are people incentivised to have mobile money savings? Are we building financial markets for big volume digital payments?”

Pillai described Ndulu as a “forward thinking central banker” and lauded him for the various innovations he introduced when he was at the helm of the central bank in Tanzania.


Please find the original article here.

Photo credit: The Trumpet News