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Uganda mobile money transfers hit $400m

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KAMPALA – Uganda's central bank last year recorded tremendous increases in the use of mobile money transfer services with the amount transferred by customers hitting one trillion Uganda Shillings ($400m).
The number of registered mobile money customers also increased from 552,000 in 2009 to about 2 million in 2010.
The telecom companies that offer mobile money transfer services are MTN Uganda, Uganda telecom and Airtel.

"As the market grows, Bank of Uganda will continue to strengthen its oversight of these services, with particular attention paid to those banking institutions through which the funds are transferred, to protect customer's funds and reduce the risk of disruption to other financial services," indicated Robert Mbabazire the BOU assistant director supervision.
The use of mobile money transfers started in Uganda in March 2009 and participating firms are required to have a robust risk management framework.
Though rumours have it that some mobile money agents reimburse fake money to their customers due to lack of technology.

"We shall critically look into that matter. It's mainly because most of the agents lack technology," promised Bernard Ssekabira the BOU director supervision.
The bank stated that in 2010, commercial bank profits went up as a result of an improvement of the cost to income ratio from 82.2% at the end of 2009 to 70.7% at the end of 2010.
The banks earnings also increased to Ush268.7b ($107m) compared to Ush236.1b ($94.4m) in December 2010. Reduced volumes of losses were recorded by some new banks and consequently, all the major indicators of profitability for new banks improved markedly. Return on assets improved to 3% and return on equity rose to 16.9% from 12.7% as at the end of December 2009.

"Using the returns submitted by banks, stress tests were conducted to estimate the effect of specific shocks on bank's soundness.
The tests were aimed at determining the losses which banks would incur, and the consequent impact of these losses on their capital," added Mbabazire.
It was noted that there was a decline in net interest margin, decrease in interest income on government securities, depreciation of the Uganda shilling against the US dollar, increase in non-performing loans and 100% loan loss of each bank's largest borrowers.

Adverse shocks to net interest income, income received from government securities, increase in non- performing loans and depreciation of the Uganda shilling all have roughly similar impact on the capital position of the banking system.

For each of these shocks, the capital adequacy of only two banks is pushed below the statutory minimum, with the overall capital shortfall being in the range of Ughs154m to Ugsh807m.
The resultant shortfall is considered minor given that Uganda's banking system has an aggregate total capital of Ugsh1, 473b.

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