KAMPALA–The Bank of Uganda has admitted to the lack of a robust regulatory framework for mobile money services in the country.
The disclosure was made by Justine Bagyenda, the executive director – Bank Supervision at BOU, during an interface with MPs on the Parliamentary committee on ICT.
“We don’t have regulation and we admit there is a lacuna. We need to have the national payments law to give BOU powers to regulate mobile money services,” she told MPs.
MPs on the committee have blamed the BOU for the laxity in the regulation of mobile money services in the country.
Legislators led by the committee chairperson Tororo North County MP Annet Nyakecho noted that the central bank had failed to effectively supervise the financial services offered by telecom companies leading to multiple irregularities.
The committee was meeting Bagyenda who represented the governor BOU, Tumusiime Mutebile, to explain the Central Banks’s role in the regulation and compliance of mobile money services.
Nyakecho and the Bukedea Woman MP, Anita Among, faulted telecom companies for offering a wide range of financial services to customers, including savings and loans which is allegedly outside the mandate of telecoms.
“The telcos are now doing real banking and yet they were just supposed to be doing transfer of money,” Nyakecho said.
The MPs further argued that the financial services are loosely regulated leading to incidents of fraud and high charges on services and interest.
Cuthbert Abigaba, the Kibaale County MP, relayed a personal experience where he was charged an exorbitant interest rate for borrowing money through a local telecom.
“I don’t know whether the executive director is comfortable when I tell her that I was charged an interest rate of 50% in 15 days,” he stated.
Bagyenda argued that much as there is an inadequate legal framework for the regulation of these services, the central bank supervises mobile money services through the commercial banks that partner with telecoms to offer the products to mobile subscribers.
She disclosed that BOU offers a letter of no objection to commercial banks willing to partner with telecoms to offer mobile money products.
She revealed that mobile money guidelines had come into force in 2003 to protect customers and limit fraud.
“The guidelines we issued commit the telcos to do as we wish because we issue these guidelines and we supervise banks therefore there is no gap,” she stated.
She noted in her brief to the committee that after consultations, the central bank came up with a national payments policy which was approved and BOU will soon be presenting a national payments law to Parliament in order to institute a robust legal and regulatory framework.
She also stated that the central bank does not supervise mobile money services directly but regulates the commercial banks that partner with telecoms.
Bagyenda said that BOU carries out periodic audits of the payment systems and ensures reconciliation of mobile money agent funds and the bank balances is done in accordance with the law.
However, the MPs were unconvinced with her explanation, insisting that in the interim the central bank had turned a blind eye to the financial services being conducted in the name of telecoms.
Among cross examined Bagyenda on the agreements between the central bank and the commercial banks on mobile money products and was specifically interested in the duties and obligations of the commercial banks spelt out in the agreements.
“Did they tell you in that agreement how much they would be charging? Did they also tell you that they would be giving out credit?” she pressed.
Bagyenda acknowledged that the bank was in the dark regarding the charges and additional products offered under the mobile money platforms.
“That one we are hearing it for the first time, they are not supposed to,” She replied in respect to mobile money loan services.
She reminded the MPs that she had already admitted to there being a shortfall in regulation in her submission noting that a National payment law was in the offing.
“That’s why in my submission I said there is a lacuna, we are going to have a national payments law to cure this one, that is why I said a no objection, I didn’t say regulation because we don’t have that,” she explained.
The committee will summon Bagyenda to appear before the committee again to clarify on a number of queries. One of these queries include the components of the agreements signed between the Central Bank and the commercial banks regarding the duties of the telecom companies.
Among noted that this will spell out for the MPs whether or not the telecom companies have taken on the roles of commercial banks illegally.
The MPs are also interesting in learning who determines the rates incurred by the end user and how the Central Bank can come in to determine that.