UG Mobile Money Freeze: Are we putting all our eggs in one (digital) basket?

On the 18th of February at 8am, and for or the next two and a half days, money held in 13 million odd mobile wallets in Uganda was illiquid. Approximately 80,000 mobile money agents made nothing in commissions. If you were not lucky enough to have topped up sufficiently on your ‘Umeme’ pre-paid electricity, through mobile money of course, you would have to make do with candle light. Only a few alternative paypoints were available. This literal black-out was the result of a state directive issued to mobile network operators via the Uganda Communications Commision (UCC) to shut down mobile money and block access to some social media websites. This was apparently done to curb voter bribery and political dissidence on the day of election and during the counting of votes. Not too long after the ban was lifted, it was announced that incumbent President Yoweri Museveni was the winner of the election.

According to the UCC Executive Director, Mr. Godfrey Mutabazi, the commission acted on their mandate as captured in the Uganda Communictions Act. The mandate governs communications’ services and content. The act is arguably mute on Financial Services offered via the communications channels. In fact, Mobile Money Guidelines issued by the Bank of Uganda in 2013 squarely place the task of supervision of mobile money operations on the BoU. The situation reveals an all too familiar conundrum in the mobile money ecosystem where its regulation can not be sufficiently de-coupled from that relating to telecommunications. In the wake of the Arab Spring, several African states have taken to telecommunication shutdowns in foreboding political upheaval including in Egypt, Sudan, the Central African Republic, Niger, Democratic Republic of Congo, Congo-Brazzaville and Burundi, all in violation of international law.

MicroSave’s paper Connecting The Dots highlights the ‘Vulnerability Context’ when putting customer risk in perspective. Qualitative research done for the paper reveals that lack of liquidity and lack of assurance about the safety of digital funds are the key factors contributing to poor usage of digital financial services. Cash was and sadly is ultimately still king.

Given that the digital money ‘renaissance’ is also being led by Africa, is it time that the industry took a thorough look at the threat posed to the consumer by such systemic risk?