Uganda is seeking to shore up electronic and mobile money transactions by moving away from cheque payments for amounts above the equivalent of about $2,800 in local and foreign currency starting Jan. 15.
“The Bank of Uganda has lowered limits on the value of cheque payments to promote e-payments. The public is urged to use alternative electronic payments options such as electronic funds transfer and mobile money among others, governor of the Bank of Uganda, Emmanuel Tumusiime-Mutebile said in the Jan.10 notice.
For Uganda, new research shows that the value of the country’s mobile money sector of about 27 million registered accounts, has topped $46 billion and is projected to grow at a compounded annual average growth rate of 26.6% over the next five years.
It is against this backdrop that the Bank of Uganda is seeking to drum up further usage of electronic and digital payments instead of cheque payments for both local currency and foreign currency transactions.
More African countries are moving towards electronic and digital payments
By curbing cheque payments, Uganda joins a small club of African countries that have totally banned the use of bank cheques. These include South Africa which ruled out use of cheques in 2020 and Lesotho whose banks stopped processing these monetary instruments in 2021.
Mobile money and electronic payments are fast blossoming in Uganda and elsewhere in Africa, a region that according to GSMA—the global grouping of mobile network operators—saw the value of mobile wallet payments surge 23% to $495 billion by the end of 2020.
Covid-19 and related movement restrictions have resulted in a major boost to electronic payments across Africa and the trend is projected to continue. Some regional banks have been closing physical bank branches while others are opening virtual and digital only banking operations.
This is affecting cheque payments that traditionally require one to visit physical bank branches. The push for faster payments settlements is also acting against cheque payments which take lengthy periods to process and settle.
Cheque payments are however still popular in a few African countries such as Kenya, where payments made through cheques rose 8.2% in the first half of 2021. This is despite Kenya’s resounding success with mobile money and digital payments over the years, putting it ahead across much of the continent and likely a result of the higher daily transaction limits that cheques allow for compared to mobile money.
Increased usage of mobile money and electronic payments platforms will also play to the advantage of President Yoweri Museveni’s government as it currently levies a 0.5% tax on these digital and mobile payments, joining an increasingly growing list of other continental countries that have similar statutory fees, with Cameroon being the latest to impose such a levy.
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This content was originally published here.