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Ahead of the fintech’s 3rd anniversary, CEO East Africa Magazine’s Executive Editor, Muhereza Kyamutetera, spoke to Richard Yego as well as Jemima Kariuki-Njuguna, the Chief Product Officer; Stephen Mutana, the Chief of Strategy and Stakeholder Management, Sarah Bateta Okwi the Chief Financial Officer and Alex Wekoye, the Chief Commercial Officer, about the unstoppable omnipresent platform of platforms that MTN MoMo is becoming.
As mentioned above, 2023 marks the second full year of MTN MoMo’s existence as a standalone fintech as well as two years since you joined the company as its first substantive CEO. Can you share an overview of 2023 in the context of these two years as well?
Richard Yego: A lot has happened. I’m wondering why it took me too long to join MTN because it is a fantastic employer. It’s been a great two years of continued execution of our purpose⏤ Everybody deserves the benefits of a modern connected but also financially inclusive life⏤ with substantial gains and growth across the board.
During this time we put major focus on fully constituting our senior leadership/exco team and have since built a strong team, which then gave us the right momentum to drive the business forward because the team structure hadn’t been fully set up at the time I joined in February 2022.
Suffice to note, that these two years have also been marked by recovery from the COVID-19 epidemic.
We have also spent the last two years investing significantly in technology and great people and in turn, innovative game-changing solutions which have all rewarded us with growth. We are grateful for the support provided by our customers, employees, and other stakeholders in achieving this feat, which has been invaluable.
In our relentless quest to deepen and widen financial inclusion to both the unserved and the underserved, our strategy is underpinned by a steady focus on what we call advanced services while keeping a keen eye on basic services, as they form the core of our being.
Basic services are deposits and withdrawals- what we call peer-to-peer (P2P). Advanced services such as payments, lending and several other solutions that create mutual value for us, the customers and the economy.
Some of these solutions include MoMo Advance in March 2022; MoSente Loans in April 2022, as well as Clinic Pesa and My Xeno Investment products in late 2022. We also pioneered and launched an innovation called the FMCG Digital Suite, a mobile-based supply chain platform that allows businesses in the fast-moving consumer goods to place orders, generate invoices for deliveries, as well as pay and be paid in real-time with MoMo Pay. We also collaborated with PostBank to assist the Government in the seamless disbursement of development funds through our platform to the grassroots level.
As a result of the above solid foundation, I am delighted to report that 2023 recorded yet another considerable year-on-year growth across all key pillars of our business. We currently have 12.1 million active mobile money users [12.36 million in Q1 2024), an increase of 10.1% from the 10.9 million registered in 2022. Our platform accounted for 3.4 billion transactions, trading a total transaction value of UGX 133.2 trillion (compared to UGX 93.2 trillion in 2022).
When I joined, basic services were contributing about 80% of total revenue with advanced services contributing just about 20%. But today as I speak, advanced services are now contributing above 25%. This has been supported by robust growth in our merchants’ network. At the beginning of 2022, we had just about 60,000 merchants, but we hit 100,000 active MoMoPay merchants by October 2022 and this rose to 200,000 by February 2023. We closed 2023 with 292,387 merchants.
As we grow our service offering, we aim to create a marketplace that supports cashless and digital economies through affordable, inclusive, understandable, and comprehensive financial services.
If basic services are contributing 75% of the business, why not focus on the goose that lays the egg? Relatedly, for those not in the known MTN Mobile Money of yesteryears that was simply a send-and-receive money tool, has greatly evolved into a can’t-live-without-it platform for individuals, households, businesses and the economy in general. For starters can you paint a picture of what this MTN MoMo ecosystem has grown to?
Jemima Kariuki-Njuguna: You’re absolutely right. So much has changed. So, with basic services, you go to an agent, and either cash in (deposit) or cash out (withdraw). It also includes sending money. And that was really the nascent stage of mobile money. That is how all other markets started.
What happens with mobile money services is that you must transcend into the future- mobile money is serving more purposes beyond just allowing you to send and receive money. That was the primary need. Once that was solved, what else could we do?
We have been able to open up other channels, so you can make a payment for goods and services. With MoMo pay, merchant businesses out there can accept to be paid. With e-commerce, it allows you to use that same channel for payments. Beyond that, you can also buy our own telco services⏤ airtime, a new bundle etc using MoMo. And then now where we’ve moved to is things like remittances. Beyond sending money in-country you can also send and receive money from abroad. We have corridors everywhere. You can send and receive money to the UK, Europe, China etc where we literary allow you to send money to the world and receive money from the world.
We’ve also opened up things like loans, that’s another big channel. We know that if you limit your mobile money to local use cases, it becomes a bit hard for you to grow. But when you partner with other key players like banks, you can do so much more for the customer and in the process grow yourself as well as your partners. It also allows us to fulfil our financial inclusion agenda.
So allowing customers to borrow, and not only just individuals but businesses, as well as our agents., being able to borrow from our services has been key. And then beyond that, we are also looking at e-commerce – a space where payments are not just face-to-face, someone can be seated in the office and they can shop for their goods and services, for various reasons. So those are the spaces where we’re moving into and ultimately what we want is to solve all your financial needs. So, you no longer need to carry cash. If you can digitise all these financial transactions, that’s really where we want to get to.
Alex Wekoye: As mentioned earlier, our purpose is⏤ Everybody deserves the benefits of a modern connected but also financially inclusive life. Basic services which are depositing and withdrawing, are very limiting when it comes to the actual meaning of Financial Inclusion.
Our understanding and execution of financial services, looks at the entire spectrum of services.
Uganda’s National Financial Inclusion Strategy 2023-2028 defines financial inclusion as “efforts to make financial products and services accessible and affordable to all individuals and businesses, regardless of their personal net worth or company size”. It also underscores the fact that “access to formal financial services such as savings, loans, and payment can raise the standard of living and welfare of low-income populations”.
Similarly, as MTN MoMo, our financial inclusion strategy focuses on five key pillars. First, we start with the basic foundational send and receive services. This is where it all started. The second pillar and it is a spinoff from that, is sending and receiving across borders, also known as remittances. Number three is payments. Payments is a large animal which we are trying to build, which takes care of things like bill payments, bulk payments etc. It is here that we can support, entities like the World Food Programmes to ensure we handle bulk payments to refugees and so on. The fourth pillar is what we call banktech. This is where we have lending services. When customers interact with the first three pillars, they over-build a transaction behaviour-based credit profile, against which they can borrow. Because they’ve been on our network, we know their transaction behaviour over time and therefore we can extend loans to them. MTN MoMo has several partnerships with banks and non-bank financial institutions from whom our customers can borrow, through our platform. The last and fifth platform is insurtech which my colleagues have also spoken about.
Generally speaking, as MTN MoMo we’re building what we call a Unicorn. Unicorns are fashioned around the above five elements that I have talked about.
Commercially speaking, basic services are also expensive because withdrawing money is first of all expensive to the consumer, but also expensive on the channel, because we pay commission to the agents. Half of that money goes back to the agents. So our margins on cash withdrawals are very low, as compared to, let’s say a MoMo pay transaction which brings nearly 100% revenue to us.
Richard Yego: Access to credit especially for business is very critical for us. It is where we shall be able to further drive the growth of this economy. Imagine us supporting the small and medium enterprises- the vegetable vendors, and boda-boda guys. These are the guys who drive the economy and job creation. We need to have something for everyone.
Central to this is also being able to support our merchants with stock financing. You know, many of the SMES out there want to fully stock up at the beginning of the day but are struggling with cash flow. So we must address that element this year. In terms of stocking for the merchants but also the agents. Yes, we’ve been supporting our agents with what we call an extra float in terms of float advance. But it’s not enough it doesn’t address their other capital requirements. It only addresses liquidity.
To address capital requirements, we need to give our agents term loans- it could be a 60-90-day loan for them to boost their business with more capital to serve the consumers. Imagine the frustration of going to the agent and you want to withdraw UGX200,000 but they only have UGX100,000. We need to be able to develop a solution that completes that transaction – some kind of overdraft facility that helps their liquidity and ability to meet customer needs.
Do you guys want to do everything? What are you leaving for the banks? Aren’t you going to kick the banks out of business?
Stephen Mutana: The banking landscape is changing. There is this view that whatever mobile money gains, the banks lose which is wrong. Fundamentally, mobile money operates and thrives on bank partnerships, whatever value we have in the mobile money ecosystem is backed up by real value in the banks.
But for starters, the most important part of this whole story is most of this value or call it deposits in the mobile money ecosystem was originally not in the formal financial services system. But because mobile money made it easier and more relevant for those who are unbanked or underbanked, we have been able to mobilise all these deposits from under the beds and pillows and piggy banks to the mobile wallet and ultimately to the bank. For instance, there are people getting loans for the first time on the phone, but if they walked into a normal commercial bank if they even ever dreamt of it in the first place, they wouldn’t meet the criteria for a loan, but on the phone, they can. So we’re now bringing them to participate in the formal financial system but in ways that only mobile money has been able to unravel.
By extension, we are helping the banks. We are playing a role in the economy where people now get to understand that, they can borrow with decency, because in the past they would have to stake their goats, chickens, produce or even gardens to be able to get a loan. But now, suddenly on their phone, with respect, privacy, and decency and apply for and get a loan.
We have talked about the term loans we are introducing in the market, or the ability to conveniently pay fees on the mobile phone⏤some people take it for granted these days, but before people used to travel long distances and line up at the bank for the whole day. Now, it’s done seamlessly over the phone. Those funds are aggregated on an online account or mobile money ecosystem, which then moves into the banks. So instead of a bank having a branch with brick and mortar, suddenly the phone becomes a point of engagement device for a person who usually used to commit time and effort to go to a branch., now be able to transact safely and securely. So mobile money is extending what has been the business of banks to people who were previously underserved or even not included in ways that are meaningful to them.
Richard Yego: Simply put, we are facilitating deposit mobilisation for banks because as we facilitate people to make their very first formal financial services transaction, that money has to be backed up by an amount in the bank.
In 2022, we closed with about 9 trustee banks and these rose to 13 at the end of 2023. These 13 banks control probably about 85% of the industry assets.
In 2022, our customers had deposits amounting to UGX1.2 trillion and in 2023, this rose to UGX1.4 trillion. We are growing and soon it will be UGX2 trillion and then UGX 3 trillion and more. In 2023, we paid interest to customers on these deposits amounting to over UGX43 billion.
It is also important to emphasise that, unlike the banks that make money off deposits by lending it out or fixing it, for us we do not make money on deposits. We only earn when this money goes around in the ecosystem, which is why we are more interested in the velocity of money- how many times it moves from one wallet to another before it is withdrawn in cash.
We are facilitating the banks to raise more deposits that were originally out of their reach. Much as we are competitors⏤ some people are saying that mobile money is throwing banks out of business⏤ I think it is more of competition. When you look at the banks that have partnered with Mobile Money, and look at their performance, they have a better performance in terms of deposits and lending growth rates compared to when they weren’t partnering with us or compared to those that do not partner with us.
It is not a question of who is eating who’s bread, but rather it is about us getting together and baking a bigger bread, so all of us can share in it and thrive. We need to work together as financial service providers to digitise cash.
Don’t you think you could make more money if you did the lending yourselves instead of working through other financial institutions? MTN Uganda and your parent company have a solid balance sheet- you can surely handle this. Is this something that you are planning to do all by yourselves, maybe in the near future?
Richard Yego: The National Payment Systems Act says we cannot offer any lending services without partnering with a financial institution or an entity that has a lending license. All the financial services providers we work with are licensed either by the Central Bank or by the Uganda Microfinance Regulatory Authority.
Our loans and savings partners include NCBA Bank, KCB and Clinic Pesa, a fintech. We also have loans-only partners, who are: PostBank and two fintechs⏤ Jumo and Optasia. Our Loans & Savings products include: MoKash MoPesa and Clinic Pesa. Loans-only products include MoSente, Xtra Cash and MoMo Advance.
Our medical insurance is done in partnership with Ayo, a licensed insurance firm and an MTN subsidiary.
The second reason why we are not doing the financial services solo is that it requires significant capital to fund the loan book. We need someone to fund that loan book.
Lastly, our real intention in line with our Ambition 2025, is to build the largest fintech Platform of Platforms. Our belief is to not do it alone but in partnerships. I think it goes a long way when we partner with banks to be able to lend to the public. When you see all those funds that we disburse, the banks are doing the disbursement. Some of the banks even do the credit scoring. There are some cases where we do the scoring but there are elements where the bank does it. So I think that is going to be the way forward even as we go ahead. We have to have partnerships.
From all these great things that MTN MoMo is executing as well as looking around the continent especially, what would you say are the key emerging trends in the mobile payments ecosystem? What are some of the key strong emerging trends that you see?
Jemima Kariuki-Njuguna: There are a lot of things out there but one of the key trends is the changes in how people pay. It has been pretty rudimentary- you dial*165*3# on your phone and then put in the numbers of the recipient and continue to complete the transaction. But we are now actively looking at how to improve that experience. So, one of the key things that we are introducing is Quick Response (QR) payments, where you no longer have to enter these numbers which are prone to errors. Customers will be able to scan to pay a merchant. We are enhancing it much further so that you can scan to cash in and cash out at an agent point as well. QR payments are already a big trend out there, especially in Asia. QR is like life. The beauty of our Quick Response (QR) is that you can scan it and comes back up with all the details of the business you are paying- from the name to even the amount. With the dynamic QR, you never have to enter anything other than a PIN to complete the payment. That is quite interesting for us. It’s a trend that is carrying the day, as far as enhancing the user experience for payments.
Beyond that, we’re also going to go into tap and pay. Tapping to pay is something that people are doing in most markets. It’s really around the same element of trying to enhance the user experience. Why should I spend time in a queue trying to fidget to complete a payment, yet I can tap? This is in line with what we want to introduce this year, which is a card but also enhancing it from a mobile perspective, for phones that are NFC enabled, you should be able to just tap and pay.
The other elements that we’re looking at, in terms and trends that we have already incorporated in our day-to-day operation are the contribution of artificial intelligence and machine learning. We are looking at ways in which we can personalise our offerings to customers. You cannot do that on a one-by-one basis unless you are using artificial intelligence. We are deploying AI to observe, learn and analyse how every customer relates with their mobile money wallet, and then be able to design an individualised experience, that would allow them an excellent user experience that in turn gets them to use us more. For example, if it is a digital loan, using AI, we can able to design a package that is built around a particular customer’s usage habits.
Other areas that we are looking to go into in terms of lending, are buy now and pay later. Can we give loans that customers can pay in instalments for example, especially for bigger amounts? We’ve seen in markets where people are thinking of buying goods, that are quite expensive, say furniture, electronics, etc… they might not be able to pay all that all at once, so can we split it? That is what buy now pay later means⏤ maybe, allowing customers to three to six months instalment instalment payments or even 12 months. Which is a higher purchase at the heart of it. That is how people used to buy big ticket items back in the day- that is one area that we want to get into.
Most of the things we are doing are in partnership with other credible entities out there. We have eased the way our partners can integrate with us through an API- Application Programming Interface. We have over 30 open APIs available. We have a developer portal is you are a fintech, a business or even a gig worker, or even a techie and you are interested in connecting to MoMo, you can just go to this portal and you can access any of our APIs- whether it is a disbursement one, collections, KYC Checks etc and you start doing business. We have opened it up in line with our agenda of being a Platform of Platforms.
How do all these great plans and solutions build down to return for the shareholder? MTN MoMo in April released its 2023 results. What were the key highlights that you would like to point out for your stakeholders?
Sarah Bateta Okwi: We had a great 2023 underpinned by 10% growth in the number of active 90-day users, from 11 million in 2022 to 12.1 million in 2023. This has since reached 12.4 million users at the end of Q1 2024. Our merchants also grew by 68.7% to 292,387 at the end of 2023.
As a result, we saw our transaction value in the active wallets rise by 44.3% to UGX133.2 trillion⏤ altogether some 3.4 billion transactions, an increase of 30.8%.
As a result, our revenue went up by 19.4% from UGX656.9 billion to UGX784.4 billion, allowing us to register a 25.2% growth in after-tax profit- from UGX162.1 billion to UGX202.9 billion.
Our assets also rose by 30% to UGX1.8 trillion from UGX1.4 trillion.
This growth also resulted in enhanced shared value for our customers as well as the entire country⏤ our tax contribution went up by 23.4% to UGX379.8 billion, while interest paid on customer deposits went up by 115.6% to UGX44.2 billion. In line with our goal to create shared value through financial inclusion, we doubled our micro-loan offering, to UGX 569 billion which provided support to our individual and business customers.
On the non-financial side, MTN MoMo was recognised for financial services digital excellence as well as the digital brand of the decade (2013 to 2023) together with MTN Uganda Limited at the 2023 HiPipo Digital Impact Awards Africa. I was also honoured to be named the CEO of the Year 2023 Gold Winner at the same awards.
MTN, was also voted the Employer of the Year 2023, by the Federation of Uganda Employers (FUE) and we want to remain the Employer of the Year of course because if we can take care of our people, the people will take care of the customer and when the customer is happy, everyone else gets happy.
What would you say is the current market share enjoyed by MTN MoMo?
Sarah Bateta Okwi: If you consider the service providers regulated under the NPS Act, there are about 30 of them; as of February 2024, we are confident that we had over 50% of the payments services market share in terms of revenue, customer market share, and the number of active subscribers. We are working overtime to make that gap wider and more decisive.
In your view, what do you think were the key drivers for this growth? Give us an insight into how much and where has MTN MoMo invested to realise this growth.
Richard Yego: First of all, we have invested in our technology platform- last year we invested about USD20 million. We invest significantly to make sure that it is safe, that it is robust and that it is more scalable so it can handle more builds, such that when teams are innovating and transforming these innovations into use cases and solutions for our customers, the capacity of our platform can handle it, and it can turn it around quickly.
We also invested heavily in our people at all levels. I already mentioned that in 2023 we filled up our exco team. We have a whole team of innovators, headed by our Chief Product Officer. We have a whole experienced Commercial Team who support the on-the-ground execution. We are also investing in our customers – our customers being subscribers and merchants. We’re investing in acquiring and retaining them. It’s a very big investment. It’s very expensive to influence customer behaviour through the various solution interfaces and we continue innovating through a full range of alternative solutions.
We have invested and continue to invest in our channels – those are our agents and dealers – we have hundreds of thousands of them. Last year we invested more than USD70 million into our agent network in the form of commissions. We are also investing in making sure they have enough liquidity and float and now we are also exploring investing in further capital financing as well as insurance.
Half of the money we earn goes back to agents as commissions, supporting over 200,000 jobs. If you consider the fact that at least each of these 200,000 people is supporting three other Ugandans, then you what impact we are having on the economy.
We continue to invest aggressively to ensure that we retain and defend that growth and value. We are very proud of this growth across the board and we continue to be very ambitious with many of the initiatives that we have our eyes on and we are not looking at slowing down.
Indeed, our mobile money ecosystem has greatly evolved. But how do we compare with the rest of the region in terms of what our system is capable of?
Stephen Mutana: The GSMA reported that East Africa has the highest number of adults that have wallets as a proportion of the population. In other words, the adoption of mobile money or these wallets on phones has been highest in East Africa. And of course, we know the pivotal work that was done by Kenya in this regard on behalf of the entire world.
However, there are some key differences in usage. When users from the region⏤ Tanzania, Rwanda and Kenya, come to Uganda, the first thing that shocks them is how much cash still plays a big role in the day-to-day lives of Ugandans and the economy. They can’t believe that they can’t get to use mobile money in certain places. Of course, it has improved, but there are still key gaps, especially with merchants where they can pay using mobile money. If you go to Kenya, Rwanda, and Tanzania, it’s a way of life. Literally, you can walk with your phone, and be able to do your life in these countries without recourse to cash.
So at the top level, increasingly, it is less seamless in Uganda. Cash is still playing a big role. But this is an opportunity. We need to fight the whole thing around cash. Cash is the inefficiency. We need to move to digital payments.
The other issue is around e-governance services⏤again Uganda is playing catch up. We have the Irembo platform in Rwanda, the citizens portal in Kenya and Tanzania also has a government portal. They have gone ahead to intentionally move payments of government fees, and taxes- and you’re talking about, medium to low-level taxes to mobile money, because mobile money is actually a guard rail or a channel for citizens to be able to seamlessly pay and access services in near real-time because when you pay something with mobile money instantly you get the payment notification and you should be able to get the service and the seller to get the value in real-time.
For example, when you are importing, you can pay your taxes and fees at the port of entry, generate evidence that you paid for it and enjoy whatever you have paid for. You should have to line up at the bank, to fill in forms and all that bureaucracy. So what those other countries have seamlessly done is build government payments be it tax or fees, into the citizens’ portals as well as for businesses which improves the way of life as well as revenue collection, transparency, and minimises costs and losses, because sometimes with cash there is the potential for loss, or leakage.
Relatedly how does our fintech ecosystem integrate with the rest of the world? What can MTN MoMo customers do when they are outside Uganda?
Stephen Mutana: For context⏤ one of the biggest exports of Uganda is labour. We have youths in the Middle East as well as in other parts of Africa such as Southern Africa who frequently and seamlessly need to send money back home. In 2023, diaspora remittances reached USD1.42 billion. This is where remittances come in and MTN is doing fabulous work around making it more affordable affordable and easier, but also driving awareness for this service. The worst thing is for your citizens to be employed in another country, and they don’t know how to send money back home, effectively, safely, and instantly, because they are sending this money back for school fees, health care, and supporting dependents. This has been quite instrumental and we are opening up more corridors- again in partnership with key players to make sure that citizens can be able to seamlessly transfer this money back home.
The other bit is the money going out of Uganda to the world- you know East Africa is increasingly integrated. We have parents, with students abroad, and we have people doing business across borders. This also implies that there are what we call outbound payments or remittances. Again, that has been made extremely seamless because fundamentally, and the governments are driving this as well, Africa needs to do business with each other. We need to do business with ourselves. We do business with a lot of the external world, but there’s a lot of value in us doing business with each other. I think you have heard of the Africa Free Trade Continental Area (AfCTA).
A lot of the inbound and outbound channels that we rebuilding or have built follow these trade routes. Once Africa can fix the transportation, and visa arrangements- if we simplify the visa and travel arrangements as well as the air connectivity- you don’t have to fly out of the continent first, to be able to get to another part of Africa, what will follow is ease of doing business and naturally the next question becomes payments. How easy is it to pay for goods and services?
People travelling abroad for business or leisure, no longer have to carry cash. One of the solutions that has been put in place in some high-traffic destinations such as Dubai in the United Arab Emirates, is that we have now done integration through a partner, where you can use your MTN MoMo Pay to pay for goods and services. In some places like Duty-Free and some of the key outlets – we have rolled out about 24,000 merchants and counting. We have taken MoMo pay to the world.
Previously some people were excluded. They didn’t have cards and had to carry cash. They now can transact. And if you run out of cash, you can tell someone back at home to end you some MoMo and you continue doing whatever it is that you were doing.
Richard Yego: We want to go regional. Imagine you go to Rwanda, Kenya or Tanzania and you pay a merchant there, the same way you would pay them here. That is very key. And it won’t stop at just payments, you can also deposits and withdrawals. Imagine going to Kenya and you go to an MPESA agent and you can cash in and cash out the same way!
I am sure this success is not without challenges in the ecosystem⏤ challenges when addressed could see MTN MoMo as well as other fintechs and the digital commerce industry play an even bigger role. What are some of the key bottlenecks especially in the regulatory and policy space, that if unlocked could see MTN MoMo accelerate growth and impact?
Stephen Mutana: In terms of some of the key bottlenecks from the regulatory policy space, which impact mobile money, or the fintech industry in general, is the entry price of a smartphone. The smartphone is the ultimate device where these services are best consumed. We know there is a government tax on smartphones in Uganda, which impacts the final price. We continue engaging with the government, to make sure that we can remove this tax and make it easier for citizens to acquire smartphones.
We have again, using the power of technology and distribution and mobile money, being able to do what you call device financing through such innovations as MKOPA, MTN Kabode smartphone and all sorts of other value propositions for customers- based on how long they’ve been with MTN, their usage habits, etc. which allows them to have access to these forms. At the start, they pay a small deposit, which is around UGX49,000 and you pay UGX8,000 per day. You can see that we’re trying to break this affordability thing into small chunks for people who are not able to afford a smartphone. If the government reduced or removed the taxes on smartphones, we would be able to drive up the uptake much faster.
While some of the services we offer can be consumed on normal feature phones; and smartphones, the appification of services, makes things easier- the interaction, engagement and user experience are better, so customers can consume more.
The other issue is the direct tax. You do know that in 2018, a tax was introduced on mobile money withdrawals. What that has done, essentially, is to put a burden on those that were underbanked or non-banked that have come into the mobile money, space. The biggest use case for mobile money today, after all these years, is still somebody sends you money and you withdraw it. So there’s a lot of friction on that withdrawal tax element. What that means is that there’s a lot of burden, on those who don’t have other alternatives to mobile money. Those who have alternatives to mobile money have circumvented this tax and are using other channels to withdraw, such as agent banking which is not taxed.
The biggest chunk of our transactions⏤ 90% of them, UGX50,000 and below. – 90% are UGX50,000 and below, so you can imagine the pinch that they are feeling. If it can be equalised, then we’re going to avoid behaviour where people are moving money to their bank account and going to the ATM or Bank agent to withdraw it because then they are circumventing the tax. That is the reason wallet-to-bank fees were increased in 2018. If you do recall they were quite low. We increased because customers were now starting to do high-value transactions and pushing them to the bank and going to the agent to withdraw. We had to increase because it was loss-making, so we had to rationalise those rates.
Relatedly if the tax on mobile withdrawal must remain, there should be equalisation. Agent banking should also be taxed because it is all an exchange of money- from an e-form to a physical form. Principles of taxation- equality- should apply. Ultimately, I think even after equalisation we would want a reconsideration of how we can reduce that tax on withdrawals and hence reduce the burden on the burden on underbanked and meet our goals of financial inclusion much faster which has far greater benefits than the tax yield, we believe.
A lot of our population is youthful. Most of them are not economically active so, they are dependents. The Finscope Survey 2024 undertaken by the Bank of Uganda in partnership with the Financial Sector Deepening Uganda (FSDU) has clearly outlined that mobile money continues to be the biggest driver of financial inclusion. I think the number was 64% in 2024 vs 56% in 2018. That 8% growth shows that mobile money continues to be a key platform. SACCOs have started growing but mobile money by far is the most significant.
To harness the youth dividend, we need to put in place financial inclusion enablers and mobile money by far is our biggest opportunity to drive financial inclusion and help make our youth productive and successful- to help them get a foothold in the world, and leverage their talents and potential. We should be taking advantage that we have a young, active, vibrant population. Other than the youth, we also have to look at the women especially those in the rural setting- again government and regulator, should actively participate in catalysing interventions around savings, and agriculture, making it easier for people to participate in agriculture when they plant, what kind of seeds, do they have access to inputs? These are some of the things where fintechs/MoMo can play a very big partnership.
Other bottlenecks include cyber crimes and fraud, low digital and financial literacy levels and therefore the need to educate customers to embrace the digital economy and become more empowered.
Richard Yego: BoU recently reported that they spent UGX200 billion in 2022 to print currency notes- that whole logistics of printing cash is very expensive. We can try more e-payments. This is actually in line with the National Financial Inclusion Strategy II⏤ removing access barriers but also the NDP III. If we can have the interventions – imagine the farmers on the ground being paid those government incentives digitally; and then us being able to get that data and extend credit. Today we can’t give them credit because we are not sure because the transactions are in cash form. That is very crucial. If we can get that support from the government, then we’ll be able to even enhance our agricultural productivity and all other activities that would support our women and youths. That would be the smartest way of doing business as a country and we can learn from Rwanda because they have done it.
Last year we paid UGX379.8 billion in taxes to the government, which was a 25% growth from the previous year. When you bring more people into the fold there is more activity and therefore more potential for government revenue.
The other advantage of digitising payments is that for merchants, there is instant generation of records as well as instant generation of data which helps them to build a credit portfolio. Because this has been largely a cash economy and because of the lack of formality and lack of records, with mobile money, they have verifiable records, they can get a statement. We are working on credit for businesses and with proper records merchants can unlock access to credit and that will give businesses a great leap.
lastly, there are also challenges to do with pockets of resistance and suspiciousness about digitalisation. It is more of a negative mindset about accepting MoMo payments. Some people are saying maybe these people want to get us taxed because there is now increased visibility of their transactions and we’re saying, “No, the benefit outweighs whatever worries the merchants might have”.
The explosion of uncollateralised digital lending, with all its transformational potential, comes with a good amount of credit risk, because you are literary lending to strangers, which makes accurate credit scoring very important. It is also prone to other risks such as fraud as we have already seen in the market with other lenders. How are you fool-proofing your system against such vulnerabilities to keep the system credible for all partners involved?
Richard Yego: True, there is a good amount of risk and accurate credit scoring is a do-or-die. We are taking our time to get it right. Whereas we had planned to have more products fly into the market in 2023, we had to step back and take our time so that we don’t get our fingers burnt. That is why you will see that our statements do not have any provisioning for doubtful debts.
That said, digital lending products, such as the overdraft facility we are working on, wield a lot of power and potential for the underserved and unserved.
When you look at Kenya, I think they disburse about USD17 million daily under their overdraft facility called Mpesa Fuliza. It allows customers to complete transactions when they have less money.
Imagine you walk into a restaurant and your bill is UGX50,000 but you only have UGX30,000, we shall be able to top up for you based on your credit score. However, the money goes to the service provider We are financing the transaction- not giving the customer money money. The money goes to the wallet of the service provider. It’s different from giving you money because we can’t control what you use it for.
That is so powerful a solution. Once we get it right, and we are still doing that, it’s our biggest focus and one of the biggest focus areas this year in our advanced services portfolio. We are going to target it at specifically completing and advanced service. It could be a MoMo payment, a utility payment, it could be any type of payment, but excluding withdrawals. Once we get it right you will be able to see the impact that we shall create- it will be massive. Of course, we will be rolling out the same for our merchants and agents, so they too can complete vital transactions in their ecosystem.
If Kenya can do USD17 million daily, you can imagine how much it is in a month and how it fuels the economic activity around the economy. We have to get to it right, and that’s why we have taken a bit of time but we are soon getting there.
There is so much data being generated and shared across various entities in the ecosystem. Isn’t there a risk of breaching consumer confidentiality? How do you ensure that confidentiality is protected as this data moves across from the telcos to the credit scoring companies etc?
Richard Yego: All data sharing is done within the laws as provided for and supervised by the Personal Data Protection Office. Data sharing is important for credit scoring, but the customers must first consent to this data sharing before we share it. If we do not provide data, there is no basis for credit scoring.
However, care is taken to anonymise all data before we share it. We mask it, without names. We instead use account IDs.
You must be very familiar with the scenario of “send the money to my MTN MoMo account because I owed Airtel money”. We are integrating with credit reference bureaus for purposes of credit scoring and weeding out multiple bad borrowers. The problem is not multiple borrowing but rather multiple defaulting. If we can drive that positive and responsible borrowing, we shall be able to get lower NPLs and higher repayments as well. It is important to manage NPLs within 5% because anything above that is detrimental, even for the banks and other financial partners that we work with.
One of the biggest sector challenges/risks has been financial crime, especially fraud. How are you dealing with this challenge? Are you getting sufficient support and cooperation from other players to bring this under control?
Stephen Mutana: When it comes to dealing with fraud the biggest bottleneck has been dealing with the “suffering in silence mindset”. In the past, if any of us would be hit, we would all keep it to ourselves. It was a shame and embarrassment. The fraudsters took advantage of this.
COVID-19 brought a lot of customers into the digital transactions space, but unfortunately, it also brought very many thieves online with even smarter tactics and abilities. One of the things that we as an industry and national level are doing is a mindset change. We are getting people companies to come out and share information once attacked. With that, we have been able to share experiences, learn lessons develop stronger systems and work together progressively towards resolving these issues for the future.
For instance, last year, Stanbic Bank held a cross-national conference on fraud management and cybersecurity. It was well attended. Before that, MTN had held a conference and I would call it more of a platform where we brought all the people we work with- be they partners, banks, agents, integrators and aggregators, to share with them what we were seeing and what had experienced and for them to also share their experiences. It was a learning platform that has allowed all ecosystem players to come up with ways in which to secure the transfer of data between our systems to make sure that good practices are done within our ecosystems; that our staff are trained on cyber security and are aware of basic things like how to use and safeguard system passwords and user passwords.
Unfortunately, some of this fraud is being driven by internal actors. But we also even took it to another level, where we’re doing a memorandum of understanding with entities like Uganda Police, other government ministries and agencies, and with Uganda Banker’s Association, all around these aspects of fraud and cybersecurity and how to flag some of these internal actors to each other.
We have also trained Uganda Police investigating officers on how these frauds are being done at a system level, and at a consumer level and educating them or sharing with them experiences. This then helps and enables them to be empowered to carry out more comprehensive investigations. Obviously, in the medium to long term, some changes changes have been made and need to be made in the law, to make it easier to take on this scourge and challenge of cybercrime.
As an organisation, MTN MoMo has 24-hour monitoring of key business lines and key transactions, not only on our behalf but also on behalf of our partners. Many times, we’ve called our partners, and engaged them to say, we see something weird happening and indeed, we’ve been able to successfully prevent some frauds or attempted frauds. In addition to that, we’ve also deployed an anti-fraud system as MTN- these are world-class systems.
Then, of course, we’re now using new emerging technologies like AI to help us monitor and flag transactions; detect certain unusual patterns and intervene timelily. This also goes to help customers even build more trust and confidence in the ecosystem that we’re preventing any form of unsolicited or unplanned losses. I guess this is where we are at this point.
We have also deployed the agent and merchants quality management teams in the field to interact with the merchants and agents, who were also targeted. These teams can engage our agents and merchants, and educate them on the latest products as well as fraud. The agents are then able to pass on this knowledge to our customers.
In 2023, MTN MoMo received the ISO/IEC 27001:2013 certification from the International Organisation for Standardisation, which lays out the requirements for establishing, implementing, maintaining and continually improving our information security management system. We continue to rigorously monitor our risk environment to ensure the safety and reliability of transactions on our platform.
In addition to fortifying our MTN MoMo platform and offering cybersecurity training to our third-party partners, we rolled out the Beera Steady – Be Better campaign in partnership with Next Media, the Ministry of ICT and National Guidance, Uganda Communications Commission and Bank of Uganda. The campaign has raised awareness of the safe and responsible use of communications technology Focused on fraud and online safety, SIM-card registration, misinformation, digital transparency and accountability, and consumer privacy and data protection. I am pleased to report that with this initiative, we have seen an 86% reduction in the number of socially engineered fraud cases.
In your desire to create a platform of platforms, you have repeatedly said that you aim to create an affordable and inclusive cashless marketplace. With all the payments and bank tech products you just enumerated, do you see MTN MoMo and other related fintechs play the role of debit/credit cards that have eluded Uganda and much of Africa for various reasons?
I will relate the credit card to the overdraft facility that we talked about earlier⏤ the MoMo advance. It is a perfect equivalent of a credit card facility that enables customers, merchants and our agents, to complete their respective purchases when they are low on balance.
For online purchases, we are re-launching a virtual card with DTB Bank. We first launched it in 2017 in partnership with United Bank for Africa but the bank said it wasn’t viable for them. So we are revamping it in partnership with Mastercard to enable our Gen Z clients who do not own bank accounts to be able to make their online transactions with Netflix, Amazon etc to be able to safely and conveniently transact off their wallets.
We are already enabling, merchant payments on POS machines⏤if you walk into a supermarket, you will realise that for example, an Absa Bank machine is being used to initiate a payment from your mobile phone and then you just input your code and complete a purchase. It’s very convenient.
In these partnerships, as you can see, we are not just competing with the banks we are also enhancing convenience and generating more deposits for the banks because we are enabling their merchants to collect with mobile money and then we do revenue share. That is another area we are playing in. But we believe physical cards- yes they are still prevalent, but they are on their way out. The way forward is the mobile and virtual cards. With a phone, you should be able to carry out a transaction that would have required a card.
The more you make it easier for customers to borrow, the higher the temptation to over-borrow. How do you ensure responsible lending and borrowing, which in a way controls your credit risk?
Jemima Kariuki-Njuguna: As much as we have a marketplace where you can access up to 5 types of loans at any given time as a customer, you can only access one loan from a given provider. The moment you pay back then you’ll be able to access another. With that, we can remove the temptation because we know that everyone, is not without fault.
Also, we allow the customer to view their borrowing limit on each type of loan. One provider could be able to give you UGX50,000 maybe another UGX150,000 and the other UGX300,000. The customer can compare the amounts, the interest rates and the terms/duration. All those options are there to help the customer choose wisely.
We have got four term loans and one over-draft facility which is the MoMo Advance. You can do one overdraft and only one term loan. I believe the variety and competition are good even amongst our providers because we have seen some providers be able to get more aggressive and offer better terms. Previously we had one or two lending providers, so we weren’t reaching as a bigger base as possible. Now we can reach about 3 million borrowing customers because we have enhanced the bouquet.
It is also important to note that every customer’s borrowing limits are tailored to their unique usage profile, their ability and capacity to pay back and generally their credit score. That helps us to make sure we lend you what you can afford. If we Lent you what you can’t afford, that would mean that there is a problem with our credit scoring.
How are your Non-Performing Loans compared to the banking industry?
Richard Yego: Largely, they are under 5%, especially for mature products like MoCash⏤they are under 5%. That is a good threshold to work with. Generally, when a loan product is new, initially, the NPLs are high, but they keep improving.
Lastly, it is also just about 2 years since you joined MTN MoMo as the Chief Executive. How do these two years, lay a more solid foundation for 2024 and beyond? What can stakeholders expect? What will be the drivers of new growth?
Well, I think most of the key highlights and foundation laid by the team under my leadership have already been mentioned. We have spent the last two years, laying a solid foundation for growth, especially in advanced services. We have invested in technology and security, people, product innovations and channels. I see us continuing to consolidate these investments in 2024 and beyond.
In 2022 we had slowed down on agent recruitment because we needed the existing agents to be profitable. But now we have realised that with the customer base growing we should be able to get more access points, so we are resuming agent recruitment. The recruitment of 4 more trustee banks in the recent past has given us an extra 20,000+ touch points where our agents can access float and we will continue to invest more in increasing both footprints and ensuring that our agents have more liquidity.
One of our critical deliverables continues to be customer recruitment. Our telco parent company recently celebrated the 20 millionth customer this April, yet we closed Q1 2024 with 12.36 million active MoMo users. As the telco sells SIMCards to customers, we want to ensure that our penetration also continues to grow. We want every customer who holds an MTN SIM card to at least be able to a transaction. We are so deliberate about that and getting more users to be able to transact by themselves.
Every transaction you make with us builds a profile against which customers can borrow to fulfil their dreams and so much more. Other than borrowing, those who want to save money can also save in partnership with KCB Bank and get good interest. There’s also MoCash with NCBA Bank and well as Clinic Pesa for saving for future medical emergencies. There is also Xeno Investment for future investment- maybe there’s an investment objective in 3 years- so you can save for it with My Xeno Investment.
On the payments side, we have made good strides, especially on our FMCG Digital Suite that we launched in July 2022 with Uganda Breweries. We have onboarded several players in the FMCG ecosystem- big-time FMCG players. It has massive potential because then it links us to the distributors, the retailers, the farmers who are providing the raw materials and finally, the consumer that’s going to consume the product. Taking care of that entire chain is very crucial because then it drives again the payments segment. But for us to gain more payments, we have to introduce these stock financing elements to motivate the merchants to accept MTN MoMo payments. Today some of the merchants are reluctant to accept digital payments and will come up with all sorts of excuses.
E-commerce is also one other emerging trend that we have touched but not fully. It has a massive potential if we put in some good focus on it. We have a sister e-commerce company called Group Fincommerce that is in the pipeline. We have already soft-launched it. That is crucial because we can tap into customers who don’t physically walk into these outlets. Some customers are happy with home or office delivery. We are going to be able to tap into customers who love to transact online and it is a virgin area. We have partnered with Jumia, but yes, we believe there is a massive opportunity with our sister company as well. We initially wanted to do it ourselves, but the Central Bank guided us that our license did not allow us to do that. So a new entity was set up. We are going to partner with them and provide the payment option. That is a big growth area for us.
The other area I talked about earlier is getting closer collaboration with the government on payments⏤ both Government to Person (G2P) and Person to Government (P2G). On the G2P front we, in 2023 partnered with PostBank to disburse a cumulative total of over UGX467 billion of the Parish Development Model cash to hundreds of thousands of beneficiaries through the bank’s Wendi e-wallet. We believe there is still a lot of room to partner with the government to further digitise G2P payments such as the Social Assistance Grants for Empowerment (SAGE) for the elderly. Digitising these payments enhances efficiency⏤ more than 200,000 beneficiaries were able to get the money in their wallets in less than 5 minutes⏤ but it also enhances transparency, traceability and accountability.
On P2G, we have tried to a bigger extent, I mean, you can pay for a passport, driving permit and taxes using mobile money, but what about the reverse lane⏤ government making payments to individuals and businesses? The government is always making different payments to individuals and payments e.g. the Sage Payments, but they are going out in cash. There is a big opportunity there as well.
Regarding loans, there is quite a homework there. We have sorted the consumer by and large, except for the overdraft facility which is being fine-tuned, but the big work remains for the merchant’s ⏤ two new loan products we want to do⏤ stock financing and term loans as well. We also have to do a similar arrangement for our agents ⏤ for float financing but also term loans to recapitalise their business and other business needs. Empowering our agents with more capital to be able to serve our customers better is key. If we can fix lending to our customers, merchants and agents, we will be able to fuel a lot more in the economy.
There are also other areas like remittances⏤ we will be focusing on opening more corridors in many other countries We talked about giving convenience to the customer who goes to any MTN market ⏤ MTN MoMo is operating in in 16 countries in Africa. If you went to any of the 16 countries, the experience should be the same as though you are in your own country⏤ whether you are making a payment or a withdrawal. That is another big one.
The other area is micro-insurance whose uptake is so low. There’s an opportunity to get customers to take up more microinsurance. We have AYO our subsidiary entity that we’re working with, but we can also work with other insurance companies to be able to churn out insurance, including for our ecosystem. For example, how do we insure our own MoMo agents? Some agents have been beaten up and robbed and sometimes unfortunately killed. We want to try and roll out an insurance policy for them. This has to be at an industry level and not just MTN because agents are shared. So partnering with our fellow providers, we should be able to roll out an insurance scheme for the agents where they pay a small premium and then we insure their stock- against all these risks, including very common employee theft. If we can address that, there will be more confidence in the agents to invest more. This will be done in partnership with insurance companies.
We are continuing to enhance the platforms as well- security-wise. The ISO/IEC 27001:2013 certification we got, is a big endorsement of the security features on our platform. The Bank of Uganda also applauded us at last year’s Bankers Conference at Serena for setting the pace and doing a fantastic job in fighting fraud. Fighting cybercrime remains a big focus because it can derail all these gains. After all, criminals are also evolving every day in terms of new ideas. We also have to stay awake and thwart as many attempts as possible.
More strategic partnerships, such as the interoperability of merchants to drive payments are critical.
There have been quite several achievements that we have had together with this fantastic team of very brilliant individuals. Of course, we have had great support from the Central Bank and the quick approvals for the new products that we have been able to launch. We have a good relationship with the central bank. But we are hungry for more. We believe this year should give us a much more compelling story. This time next year when we speak again, we should be celebrating more with a better and rosier story.