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Covid-19 Cashless Boom Pushes Mobile Money Transactions to Shs79.7 Trillion

The financial sector also saw the value of the currency in circulation grow by 24 percent from Shs4.6 trillion in FY2018/19 to Shs5.71 trillion in FY 2019/20.
posted onOctober 22, 2020

The payments sector in Uganda continued to register growth in the 2019/2020 financial year despite some disruptions induced by the Covid-19 pandemic, especially in the last quarter.

According to a report released Wednesday by the Bank of Uganda (BoU), the value of transactions processed on the mobile money platform increased by 19.10 percent to Shs79.7 trillion compared to Shs66.9 trillion in 2019 while the volume of transactions increased by 22.1 percent to 3.1 billion from 2.5 billion in the previous year.

BoU attributed the growth to the introduction of new mobile money products and increased usage of digital solutions to mitigate the Covid-19 risks from handling paper money.

“The number of active users for mobile payments increased by 12.9 percent to 17.5 million in the year under review from 15.5 million in the previous year,” the report says.

In its telecommunications industry report released this past week, the Uganda Communications Commission (UCC) showed that mobile money accounts had grown to 25.9 million as of the end of June.

“At the end of June 2020, the number of registered mobile money accounts had grown to 25.9 million accounts from 25.5 million at the end of March 2020. This growth translated into a quarter on quarter growth of 2% despite a drop in mobile subscriptions of 11% between March and June 2020,” UCC reported, adding that 21 million accounts hand partaken in at least one billable mobile money transaction in the 90 days preceding June 30.

In the banking sector, the central bank says commercial banks registered strong growth in assets, despite the emergence of several shocks including the Covid-19 pandemic.

“The total assets of the banking sector increased by 18.2 percent, from Shs30.3 trillion in June 2019 to Shs35.8 trillion in June 2020,” reads the report.

“Asset growth was mainly on account of a rise in gross loans and advances by 14.0 percent from Shs13.6 trillion in June 2019 to Shs15.5 trillion in June 2020. In addition, banks' holdings of government securities rose by 16.0 percent to Shs7.7 trillion over the same period.”

Customer deposits also rose by 21.4 percent from Shs21.0 trillion to Shs25.5 trillion over the year ended June 2020.

However, the central bank says, the asset quality of commercial banks deteriorated over the year ended June 2020.

“The aggregate industry ratio of non-performing loans to gross loans rose from 3.8 percent to 6.0 percent. The stock of non-performing loans increased by 73.5 percent from Shs515.1 billion in June 2019 to Shs899.5 billion in June 2020, partly driven by the slowdown in economic growth and shocks to households and businesses from the Covid-19 pandemic.”

The financial sector also saw the value of the currency in circulation grow by 24 percent from Shs4.6 trillion in FY2018/19 to Shs5.71 trillion in FY 2019/20.

The value of banknotes increased by Shs1.1trn from Shs4.42 in 2018/19 to Shs5.52trn in 2019/20 while coins increased by Shs11.5 billion from Shs117.1 billion in 2018/19 to Shs188.6bn in 2019/20.

BoU says the growth was fulled by increased commercial bank withdraws from the central bank, which exceeded their deposits by Shs1.1trn.

"This net change reflected the public's increase in demand for money to finance their economic activities," reads the report.

According to BoU data, 10.4 million EFT (Electronic Funds Transfer) transactions were made in 2020 at a value of Shs31.7 trillion, compared to 9.9 million transactions at a value of Shs27.91 trillion in 2019. 1.22 million cheques were issued at a value of Shs6.88 trillion compared to 1.45 million at a value of 7.98 in 2019.

“The most transacted currencies during the financial year were UGX and USD, while GBP, EUR and KES remained low…. there was a decrease in both the value and volumes of Uganda shilling denominated cheques transacted during the year under review by 13.78 percent and 15.86 percent respectively,” says BoU.

“EFT Payment instructions continued to grow both in value and volume due to the increasing usage by the government and corporates. EFTs grew by 13.6 percent and 5 percent in value and volume respectively. The low growth is attributed to the slowdown in the economic activity due to the Covid-19 Pandemic.”

Remittances and forex

At end of June 30, 2020, the report shows, the forex bureau and money remittance sub-sector comprised of 212 foreign exchange bureaus with a total of 302 outlets.

The money remitters as of the same date were 78 with a total of 221 outlets. 16 new forex bureaus were licensed during the year to June 2020 while 2 institutions permanently exited the subsector.

The total assets reduced by 29.7 percent, from Shs167.2 billion at the end of June 2019 to Shs127.5 billion at end of June 2020.

“Total capital and reserves held by the sub-sector as at end of June 2020 stood at Shs78.8 billion, a marginal decline of 7.7 7percent, from the Shs73.6 billion held as at end of June 2019,” the report shows.

“The sub-sector registered a profit before tax of Shs12 billion for the year ended June 2020. On the other hand, total sales of foreign currency amounted to Shs12.9 trillion during the year while net money remittance inflows for the year amounted to US$275.9 million.”

The central bank says the total value of the investment portfolio for the Money Remittance Fund stood at Shs8.8 billion as at end of June 2020, an increase of Shs1.3 billion million from Shs7.5 billion as of June 30, 2019, reflecting an annual return of 17.3 percent.

The annual return was driven by the positive performance on the fixed income and money market assets, officials say.

The sector was significantly affected by the necessary measures instituted by the government to address the Covid-19 pandemic, leading to the temporary closure of several locations for forex bureaus and money remittance companies.

As of June 30, 2020, approximately 12 percent of the bureaus remained temporarily closed.

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