Mobile phone money transfers grow fast

Increased  use of mobile money transfers enables authorities to track informal funds in circulation and help in drawing up better monetary and macroeconomic policies.

At the moment the Bank of Tanzania (BoT) captured 35 per cent of 2.32tr/- total money on circulation. The amount captured is relatively low to correct disequilibrium in the economy.

Last week, Vodacom Tanzania alone transacted through M-Pesa 35bn/- a day and the trend is escalating unabated. While the number of active M-Pesa subscribers' stood at three million.

"This is attributed to the fact that the service is safe and reliable and available throughout the country," Vodacom's Managing Director, Mr Rene Meza said.

This huge transactions achieved per day cannot be over emphasis, as it comes at an epoch when only about 35 per cent of 2.32tr/- of total money in circulation are in formal channels at the end of July.

BoT Governor, Prof Benno Ndulu, once said that the mobile money transfer has enabled the central bank to capture more money in circulations."At the moment only 35 per cent of the total money in circulation is in the formal sector. The rest is not,"  Prof Ndulu said.

Economically, capturing a small percentage of money in circulation derails quick efforts of correcting disequilibrium in inflation, exchange rates and extended broad money supply (M3).

This is because in combating, say demand push inflation, the central bank mops up excess liquidity in circulation by floating a Treasury bill. But if big portion of money is out of the formal system this becomes difficult.

The mobile phone providers are helping the central bank to channel monies from informal to the formal system, as these transactions are captured through BoT channels.According to the regulations, mobile phones have to have a trustee account for such services deposited by agents at various banks of their choice.

And banks are adding value to mobile phone transactions by discharging their services.Therefore the more under pillow banks are finding their ways through mobile transactions, the better for the BoT to control all the money in circulation and to strategise their macroeconomic fundamentals.

Money transactions aside, let's look at the amount Vodacom is transacting per day. According to them this is 35bn/-, gross income. This is huge amount per day meaning in every hour, M-Pesa is transacting 1.46bn/- or 24.33m/- a minute.

This is not a small sum of cash. In every passing hour, Vodacom, the largest mobile phone provider in terms of subscribers, is roughly generated 1.46bn/-, enough to foot its wage bill per month.

Suppose, out of its gross earning of 35bn/- a day, the firm if makes a one-per cent net profit which is the lowest estimation, it pocket  350m/- a day or 5.83m/- a minute as a net profit coming form M-Pesa portfolio alone.

In this case, should the phone service provider firm pay Value Added Tax (VAT) of 18 per cent only on their one-per cent profit comes to 63m/- a day from M-Pesa only.

Should the business, if estimated to transact the same amount to the rest of the year, the firm is supposed to pay 5.67bn/- as VAT by December. This estimation is based only on one-per cent profit.However, Vodacom has never feature anywhere among top ten taxpayers cooperate of this land.

When asked recently, the Vodacom MD, Mr Meza, said the important thing was to glance at the taxation issue in a wider context since looking corporate tax as one line item in income statement is probably a very narrow view.

"Because you're not looking at everything else that are affecting corporate tax and one of them being investments in this country," the Vodacom MD said.

"I can assure you there are not many companies that have invested over one trillion shillings in the last 10 years in infrastructure. We have built 1,300 towers across the country.

"So when you look at the broader picture, related to the corporate tax, which hasn't been our key contribution in the market; in terms of VAT, excise duty we generated via offering these services to customers and the 5bn/- in CSR to support the community, that is other aspect we have to look at," Mr Meza said.

M-Pesa was launched in 2008 and has turned up to be the saviour of those who could not easily access banking services and affordable and reliable means of money transfer both locally and internationally.
Source: The Daily News,, reported by Abduel Elinaza
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