Fintech, mobile money, and Uganda’s revenue puzzle

Across Africa, the rise of financial technology, popularly known as fintech, has been nothing short of transformative. In just over a decade, the continent has leapfrogged traditional banking models, replacing brick-and-mortar counters with mobile phones and digital wallets.

From Lagos to Kigali, millions who once lived outside the reach of banks now transact, borrow, save, and even invest using nothing more than a handset. Africa today is recognised as the world’s laboratory for digital finance.

According to GSMA, mobile money volumes on the continent now exceed US$800 billion annually, with East Africa leading the charge. Uganda sits at the heart of this digital revolution.

By the end of 2024, the country had over 50.5 million registered mobile money accounts, transforming a once cash-heavy economy into a digital-first financial landscape. This shift has been driven by a mix of regulatory foresight, technological innovation, and the sheer need for accessible financial services.

In 2024 alone, Ugandans moved an average of Shs 435 billion daily through MTN Mobile Money, adding up to about Shs 159 trillion for the year. This underscores mobile money’s central role in Uganda’s economy, powering everything from school fees and utility bills to remittances and business payments.

FROM SIMPLE TRANSFERS TO COMPLEX FINANCIAL SERVICES

The growth trajectory is striking. In 2023, there were 1,607 mobile money accounts per 1,000 adults, up from 1,304 in 2021, meaning many Ugandans now operate more than one account.

What began as a tool for simple transfers has evolved into a platform for micro-savings, nano-credit, micro-insurance, and pay-as-you-go models for solar power and smartphones. For Uganda’s vast informal sector and rural communities, these services represent financial tools that were previously unimaginable.

THE TAX QUESTION

With this expansion has come a thorny issue: taxation. The Uganda Revenue Authority (URA) currently imposes a 0.5 per cent excise duty on mobile money withdrawals and a 15 per cent duty on fees charged by banks and non-bank operators for transfers.

While these measures aim to broaden the tax base, they have also triggered disputes. In 2024, MTN Uganda faced a Shs 260 billion ($70.9 million) tax demand from URA, centred on excise duty and VAT for services provided over five years.

The standoff highlights how difficult it is to tax a sector that is expanding faster than traditional tax frameworks can adapt. URA has since begun exploring tools such as e-invoicing and real-time reporting to improve compliance, while also working with neighbours through the Pan-African Payment and Settlement System (PAPSS) to harmonise cross-border taxation within the East African Community.

LESSONS

From the region Uganda’s neighbours offer useful lessons. In Kenya, M-Pesa’s success has been built on scale, disciplined use of data, and strict market supervision.

Tanzania’s experience shows the risks of overreach—levies on electronic transfers introduced in 2021 sparked a public outcry and were quickly rolled back, a reminder that heavy taxation can drive people back to cash.

Rwanda, meanwhile, has invested heavily in its Rwanda National Digital Payment System (RNDPS), creating instant, interoperable transfers between banks and wallets that have especially benefited small and medium-sized enterprises.

Together, these examples underline a central lesson: sustaining fintech growth requires a careful balance between innovation and regulation.

BUILDING TRUST, BUILDING RESILIENCE

For Uganda to fully capitalise on its digital finance boom, citizens and businesses need to act strategically. Keeping proper digital transaction records strengthens creditworthiness. Using only licensed platforms under the National Payment Systems Act ensures safety.

Exploring value-added products, solar on pay-as-you-go, micro-insurance, digital savings can build resilience. And staying informed about tax obligations allows for smarter financial planning. But above all, trust is the bedrock.

Recently, a storm on Twitter, sparked by Dr Jimmy Spire’s complaints about unexplained mobile money losses, snowballed into a national debate. Dozens of users echoed his concerns, prompting Airtel Uganda’s managing director to issue a public reassurance.

While necessary, the episode underscored how fragile trust in fintech can be. If users begin to doubt the safety of mobile money, adoption could stall, no matter the innovation.

THE ROAD AHEAD

Uganda now stands at a crossroads. The groundwork, mass adoption of mobile money is done. The next phase is about quality: inclusivity, affordability, interoperability, security and consumer protection.

That means smart investments in payment infrastructure, risk-based know your customer, predictable taxation policies, and transparent dispute-resolution systems. Fintech has given Uganda a once-in-a-generation opportunity to leapfrog old economic barriers. Whether that promise is realised depends not just on innovation and taxation, but on something more delicate: the ability to build—and keep—public trust. The writer is a chartered accountant, analyst and tax advisor.