Rural Uganda tapping into mobile technology to deepen financial inclusion

A mobile phone has ceased being merely a communication device and instead become a conduit to creating a cashless eco system world over.

In less than a decade, a mobile phone has rapidly evolved into a safe and secure money transfer tool. It is also increasingly being used to conduct more complex transactions like settling utility and expense bills.

How has it aided m-commerce?

Take an example of the now popular Village Savings and Loan Associations (VSLA). Dotted countrywide, these schemes have been instrumental in deepening financial inclusion in the countryside.

According to a 2013 FinScope Survey, in rural areas people are more inclined to use informal financial service providers like village saving schemes and mobile money (35%) than the formal services like banks.

Since the Ugandan government plans to increase gross national savings from the current 14.5% to 35% of GDP by 2024, these figures will be a welcome relief.

The statistics from m-commerce providers like MTN Mobile Money, Airtel Money among others are also promising. The banking sector on the other hand has to constantly innovate so as to meet the ever changing needs of Ugandans. The FinScope Survey on Uganda’s financial sector reveals that the number of Ugandans owning bank accounts has declined since 2009.

It would appear that, Ugandans now prefer easily accessible means not only for the purpose of accessing their funds but also for saving in smaller denominations. This is where the Village Savings and Loan Associations and Savings and Credit Co-operative (SACCOs) come in handy.

However, these schemes are often riddled with accusations of theft of funds majorly because the methodology of keeping the money is not very clear.

‘Who is the most trust-worthy? Who can keep our money well?’ These are some of the challenges these rural folk face.

Telecom firms like Airtel Uganda and MTN have identified these as avenues to grow their subscriber numbers as well as widen their revenue streams.

The ‘villagers’ on the other hand access a service that provides convenience.

Airtel signed a Memorandum of Understanding with Plan Uganda to provide a group collections solution to its Village Savings and Loan Associations in rural Uganda, mainly the eastern part of the country.

The mobile operator with support from the Grameen Foundation developed the service that will enable the VSLS’ to keep their group’s cash as mobile money.

The Group Collections solution is an innovative solution that makes it possible for a VSLA’s and any other form of group collections associations like Investment Clubs among others to collect money for a common goal.

It is not rare to find that most rural folk actually prefer keeping their money in secret places for safe ‘custody.’

At the official launch of the Group savings product, Airtel officials said that Savings solution is a mobile solution that will reduce the groups’ reliance on cash and introduce the benefits of mobile technology.

The service will incorporate the following; Group accounts, a group wallet to support safe storage and access of group funds as e-value, Mobile money transfers, Group Savings and deposits, Record management through Mini statements, and Mobile banking.

The Group Savings product will be linked to a financial institution to allow access to credit. Credit will be dependent on saving history and installments can be paid from the wallet through mobile banking.

The VSLA’s Signatories will be trained on how to use the solution to save their collected monies on the Group E-wallet.

Once the money is deposited on the group wallet, it can then be stored for a while and the Group may cash out as and when they feel like.

The Pin Holders will receive an instant SMS notification confirming the amount deposited and the recipient can withdraw the funds at the nearest mobile money agent if deemed necessary.

Savings groups are a viable alternative for the vast number of the rural folk, mainly women unlikely to be served by the ‘brick-and-mortar’ financial institutions. With all the successes and benefits of savings groups and mobile phone technology, combining the two create the potential to improve each other without losing their intrinsic benefits.

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