Is MTN Uganda on the verge of becoming a bank? Are Ugandan banks ready for this monster?

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By Moses kaketo
Imagine waking up one day to find MTN Uganda operating electric purses, issuing debit cards and prepaid cards, taking fixed deposits, and investing some of the money they get in bonds and securities.
Industry experts believe it to be fairly accurate.

The road to this mission [an MTN Uganda bank] could have started a few years ago. 2021 MTN Group announced a revised Ambition 2025 strategy. “Going forward, we believe that Ambition 2025 will position the business to capture the exciting opportunities across our markets ….’’ Said President and Chief Executive Officer Ralph Mupita
May 2021 saw the separation of the MTN business from the core telecom business, which resulted in the establishment and license of MTN Mobile Money Uganda Ltd. (MMMUL)

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In Uganda, around 40% of the adult population is unbanked- there lies the opportunity.with Uganda being a very informal market, 25 commercial banks, four microfinance deposit-taking institutions, three credit institutions and more than 300 non-deposit-taking microfinance institutions have missed big percentage of a potential customer base

Ambition 2015, the strategy

Part of the strategy has been to grow MOMO Pay merchants: the results are already out. As of February 2023, the MMMUL announced a MOMO pay merchant milestone with the number of business service crossing the 200,000 mark. We learned from reliable insiders that the goal is to increase this number by twofold, to 400,000.
MOMO merchant Merchants enable business to receive payments from customers and businesses for goods and services. They can also pay salaries, pay suppliers, transfer money to bank etc.
According to MTN audited financial results for the period ending December 2022: ‘‘the MoMoPay platform has gained significant traction….Our initiatives helped to drive a 27.8% expansion in the number of transactions on our platform to 2.6 billion and transaction value growth of 39.8% to Ugx. 92.3 trillion.’’
Moreover, MTN has added more Service Centers in emerging and current towns. Analysts predict that these [Service Centers] might be transformed into [MTN] bank branches where the more than 16 million MTN current customers could conduct financial transactions.

According to MTN, she has over 166,000 mobile money agents scattered all over the country. Analysts say, these agents could be important allies when the MTN bank dream comes true.

expand the ecosystem

According to experts, MTN is expected to expand her ecosystem at the next crucial stage of creating an MTN bank to offer large loans, trade on stock exchanges, trade in government securities, and accepting fixed deposits.
This is emphasized in the 2022 MTN FY report: ‘’In fintech we look forward to launching new products to drive growth in our MoMo verticals, with a priority to further accelerate growth in advanced services revenue.’’
Customers of MTN were able to purchase MTN shares in 2021 through MTN MoMo via USSD or the MyMTN app. According to observers, MTN users will soon be allowed to purchase government securities.

Loans: Via Mokash, MTN is currently providing microloans ranging from UGX 3,000 to UGX 1,000,000 at 9% monthly interest. MTN is already profitable from Mokash. Mokash features a savings function as well, Customers can save from as low as UGX. 50 shilling to any amount depending on their KYC.
According to analysts, the other significant next step will be to give slightly larger loans to customers by increasing loan offer [from the existing ugx. 1,000,000m limit]. In a same vein, MTN, which has been urging customers to save through Mokash, will soon begin accepting fixed deposits from clients.

MTN already makes international money transfers possible. All enrolled MTN MoMo users can send and receive money internationally thanks to MTN MoMo Remittance. The money received from outside of Uganda is credited in Ugandan shillings to the customer’s MoMo account. For the convenience of our customers, the currency changes in both circumstances are carried out automatically. Analysts claim, is already shrinking the remittance market for the banks.
The final stage

Analysts expect that soon, MTN-Uganda will be able to meet the standards for operating a commercial bank in Uganda as more transactions pass through her system. A similar development happened In Nigeria, MTN payment service bank was rolled out In April 2022.

MTN Uganda bank’s potential impact on Uganda banking industry

The Ugandan traditional financial services system will be greatly affected by the MTN bank license, even if it might not be similar to a conventional banking license given that it will allow MTN to accept deposits while also allowing its customers to open savings accounts.
MTN bank customers would ordinarily include individuals and small businesses, which will put MTN in direct competition with the over 20 existing commercial banks, who depends on deposit volumes and transactions from individuals and small businesses to remain profitable.

MTN Bank will also be able to issue debit, prepaid cards, and operate electronic purses. It can also invest some of the deposits they collect in bonds and Securities. This means the banks may just have to offer rates that are more competitive.

also read: A Bank on a Mission: How Equity is Shaking Up Uganda’s Banking Industry

Stanbic Bank Uganda fights back with FlexiPay

According to analysts, Stanbic Bank, Uganda’s largest commercial bank by assets and branch network is fully aware of MTN’s efforts and the threat they pose to her ability to survive in the long run. The market leader was forced to relaunch FlexiPay, a brand that is thought of as a counter brand
FlexiPay enables people without bank accounts to establish wallets, send and receive money, deposit money into their wallets using mobile money, and access their bank accounts using their phone numbers: other features: Send and receive money on your phone from other Flexipay users at no charge, Access to cross platform transactions i.e. deposit or withdraw cash between the App, Mobile Networks and your bank, Make bill payments with ease, Shop and pay multiple merchants for goods and services
However, the problem with FlexiPay is that it’s ran on a Bank model which is restrictive. Already the bank has been slow on opening bank agents-agency banking.

read: Is Wave mobile money currently just surviving?

For the time being, an MTN bank would have the most coverage and be the largest Bank by customer base & value with over 16 million customers, 400,000 [proposed] merchants, over 160,000 mobile money agents, & the many Service Centers dispersed across the country.

read: Fraud, insider dealing at Uganda Development Bank: 900m disappears just like that; could this be a tip of the iceberg?

About the author: The writer is a marketing and distribution expert. He sees business in everything. He loves writing business news, reviews, and analyses. Reach him on +256782507579 or Twitter: @mkaketo LinkedIn: Moses Kaketo

also read: A Bank on a Mission: How Equity is Shaking Up Uganda’s Banking Industry

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