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The Independent Magazine’s story titled “Inside MTN Mobile Money Saga” prompted MTN Uganda to release a statement in which the telecoms operator sought to draw a line between the facts and the fiction.

MTN’s strongly worded statement accused The Independent‘s story of being “inaccurate and deliberately false”.

The Independent, quoting “testimony of witnesses in the on-going case” accuses MTN of ‘creating’ fictitious money and having it sent to selected agents who in turn withdrew it as cash.

“Among the revelations is one that MTN, by over-drawing its electronic-money account deliberately “creates money” on its Mobile Money platform,” reads the article. “At one point this created money amounted to Shs21 billion which MTN and its staff and agents transacted in, cashed, and benefitted from.”

MTN disagrees.

“We wish to clarify that Mobile Money platforms do not generate money and to that extent no fake money can be created. All Mobile money platforms generate “electronic value” that corresponds to the value of a customer’s deposit with an Operator’s agent.

This week, The Independent has continued coverage of the same saga, this time reporting that the Central Bank is planning a major investigation into the “MTN Mobile Money dealings” and the investigation, the report says, follows the “expose by The Independent”.

Crucially, the magazine makes a number of porous arguments, especially regarding the telecom operator’s capacity to create money.

In practice, MTN does not hold any cash throughout the entire mobile money process. An electronic equivalent of the cash received by Mobile Money agent is created on MTN’s Platform, and agents deposit/withdraw money directly into the escrow account at Stanbic bank.

MTN has not denied that a fraud happened. The company says during the period between 2011 and 2012 (in which the fraud happened), its staff “connived” to create fictitious e-money deposits that would later be withdrawn by participating agents.

If the balance on MTN’s platform didn’t match the balance on the escrow account, it would end up being MTN’s loss, the company says.

It is difficult to see whose else it would be, although the Independent doesn’t think so.

In the first article, they quoted Economist Fred Muhumuza, a former advisor to the finance minister who currently works as the KPMG Senior Manager for the Financial Services Inclusion Programme on the supposed lack of regulation.

“The trouble is that new money is created without the knowledge and authority of the central bank thereby increasing money supply beyond programmed levels,” Muhumuza reportedly told The Independent, “The excess money can increase demand and cause inflationary pressures (increase in prices) that is bad for macroeconomic stability.”

Muhumuza seems to take the issue of money creation a bit too far. Almost unreasonably! Unless MTN actually prints money, I don’t see how the money being circulated BY the bank – the official licensee – happens to be without the “knowledge and authority” of the Bank of Uganda. “At all times the balance of E-money was supposed to be equal to real cash. MTN does not print notes,” said Babra Nalukwago, who was a Business Analyst in MTN’s Public Access and Mobile Money, according to Independent.

Officials from both Stanbic and MTN told journalists that the two systems – that at MTN and the Escrow account at Stanbic Bank – are synchronized every 15 minutes, an improvement from twice-a-day as was the case when the infamous fraud happened back in 2011.

Mr. Muhumuza, however, makes a valid point regarding the inadequacy of regulation.

Today, Mobile Money is run under the Bank of Uganda Mobile Money Guidelines, 2013, a copy of which is available here. In the 21-page document, I found the following text regarding the future of mobile money regulation:

“These Guidelines are an interim measure for enabling the operation of the mobile money service. The Bank of Uganda in conjunction with other stakeholders will create a comprehensive regulatory framework over time through the necessary legal and regulatory changes.”

Both of The Independent’s articles point at the difficulty in getting comments from both MTN and Stanbic. It’s understandable, of course, considering a lot of the details in the story are part of an on-going court case.

But the writers at the magazine must be having a field day with this story. Perhaps they have some other interest?

If, by some chance, MTN did sanction the ‘creation of money’ fraudulently, the better question would by, ‘why?’.