Cellphone payment. Picture: BLOOMBERG/ PAU BARRENA
Cellphone payment. Picture: BLOOMBERG/ PAU BARRENA

Kampala - Ugandans will be able to buy government securities through a mobile money platform in a move by the east African country to become less dependent on commercial banks and institutional investors for its funding.

The government said on Tuesday that the measure, approved at a cabinet meeting on Monday, would boost savings and investment among Ugandans as well as driving economic growth.

Ugandans with mobile money accounts, many of whom had limited access to banks, will now be able to directly buy government debt. The move follows a similar move by Kenya in 2017 and also open the market up to Uganda’s diaspora.

Mobile money allows subscribers to transfer money and make payments for services and products via their mobile phones and has developed rapidly in Africa, where it is now widely used.

Of Uganda’s population of 41-million, about 23.6-million are mobile-phone subscribers.

MTN Uganda, a unit of MTN Group is likely to be the main beneficiary of the change among telecoms operators as it has the largest mobile-money customer base, followed by Airtel, a unit of India's Bharti Airtel.

Uganda has traditionally auctioned its debt - mainly treasury bills and bonds - via bids submitted through commercial banks who act as primary dealers and the government expects the mobile money plan to cut its cost of borrowing.

“Widening the scope of investors reduces the dependence on a few players such as commercial banks, offshore players and institutional investors which tend to bid highly in the auctions given that the government has limited choice,” it said.

Critics worry about Uganda’s appetite for credit, which has seen its public debt reach 41.5% of gross domestic product (GDP) as of June.

They fear that escalating borrowing could spark a crisis like those in the 1990s and early 2000s before debt forgiveness by the World Bank on Uganda’s loans.

The Bank of Uganda, the country’s central bank, said in 2018 that its debt stock including credit agreed but not yet disbursed had reached 50% of GDP.