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Uganda calls on mobile money to cultivate new debt investors

Reuters  |  KAMPALA 

By Elias Biryabarema

(Reuters) - Ugandans will be able to buy government securities through a mobile money platform in a move by the east African country to become less dependent on commercial banks and institutional investors for its funding.

The government said in a statement on Tuesday that the measure, which was approved at a cabinet meeting on Monday, would boost savings and investment among ordinary Ugandans as well as driving economic growth.

Ugandans with mobile money accounts, many of whom had limited access to banks, will now be able to directly buy government debt. The move follows a similar move by in 2017 and will also open the market up to Uganda's Diaspora.

Mobile money allows subscribers to transfer money and make payments for services and products via their and has developed rapidly in Africa, where it is now widely used.

Of Uganda's population of 41 million, about 23.6 million are mobile phone subscribers.

MTN Uganda, a unit of South Africa's is likely to be the main beneficiary of the change among as it has the largest mobile money customer base, followed by Airtel, a unit of India's

has traditionally auctioned its debt - mainly Treasury bills and bonds - via bids submitted through commercial banks who act as primary dealers and the government expects the mobile money plan to cut its cost of borrowing.

"Widening the scope of investors reduces the dependence on a few players such as commercial banks, offshore players and institutional investors which tend to bid highly in the auctions given that Government has limited choice," it said.

Critics are concerned about Uganda's appetite for credit, which has seen its public debt reach 41.5 percent of (GDP) as of June.

They fear that escalating borrowing could spark a crisis like those in the 1990s and early 2000s before debt forgiveness by the on Uganda's loans.

The of Uganda, the country's central bank, said last year that its debt stock including credit agreed but not yet disbursed had reached 50 percent of GDP.

(Reporting by Elias Biryabarema; editing by and Alexander Smith)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, February 12 2019. 17:41 IST
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