The impact of government regulation on financial inclusion : a case study of mobile money service in Uganda

Abstract

The purpose of the study was to establish the impact of regulation on financial inclusion in Uganda using Mobile Money as a case study in Kampala central. The study based on the various specific objectives such as level of financial inclusion driven by Mobile Money in Uganda, the regulation related challenges that hinder mobile money operations penetration and financial inclusion and strategies key stakeholders can use to enhance financial inclusion through innovation underpinned by mobile money services. The study used a cross sectional study design using a quantitative and qualitative approach on the sample size of 148 Households and Mobile Money agents in Kampala central. On the level of utilization of Mobile Money Services (MMS) the study found that although MMS were mostly used for airtime purchase, MMS were promoting financial inclusion as 7 in every 10 HH members often used MMS of cash withdraws and deposits while 6 in every 10 HH member used mobile money to settle bills. It was found that 60% of the city suburb communities found it difficult to deposit savings on their MM Accounts. MMS were rarely used for access to credit and handling of international remittances. The study found technical challenges in the use of MMS with network breakdown being the highest constraint. Utilization of MMS was also constrained by security issues such mobile robberies and fraud on MMS Agents. High transaction costs were significant barriers to MMS access and utilization in order to enhance the financial inclusion through use of MMS. The study recommends that Mobile telecommunications operators should benchmark and invest in technology to ensure network availability to enable customers transact 24/7. Mobile telecommunications operators should conduct community sensitization and education programs through awareness interventions. Mobile telecommunications operators in liaison with MFIs and commercial banks or related financial institutions should deploy complementary and alternative e-banking platforms devices. The Ministry of Finance through Bank of Uganda should develop financial inclusion policies that recognize MMS in regular financial transactions and settlements.