Bernard Busuulwa
7 April 2008
Nairobi — Bank of Africa Uganda is to lose its six-year monopoly as Moneygram services super agent in Uganda following the planned entry of one of its local rivals into the increasingly lucrative money transfer services market.
According to industry sources who spoke to The EastAfrican, DFCU Bank Ltd is preparing to launch its own Moneygram service after acquiring a super agent's licence from Moneygram Services International.
A super agent's licence carries privileges such as a 2.3 per cent commission from Moneygram International for every money transfer transaction handled and a 2 per cent commission from every transaction handled by an affiliate sub-agent.
The move is expected to boost the bank's revenue base, expand coverage of Moneygram services in Uganda, which currently have only a limited presence compared with market rival Western union, and also boost the quality of service offered by Moneygram agents in the country.
Bank of Africa has 27 Moneygram service centres in Kampala, mainly dominated by sub-agency outlets operated by Stanbic Bank, another of its prominent local rivals.
But DFCU Bank intends to extend the service through its expanding network that will see seven more branches coming on board this year. It will also absorb the numerous leasing service points around the country as the assets and liabilities of the bank's sister entities are transferred in an ongoing integration process to its books.
The introduction of Moneygram services is also expected to enhance DFCU's reach the huge market of unbanked Ugandans.
The Moneygram service will help us tap the unbanked market for money transfer services. It will also boost our fee income. Together with our development finance products, it will enable us consolidate our market niche," said Grace Kavuma, the bank's chief finance officer.
Uganda's money transfer market has been growing rapidly in recent years on the back of rising foreign remittances from Ugandans working overseas, especially in Europe. New opportunities for export labour in the form of security guard services in Iraq have also boosted the country's foreign remittances.
According to the World Bank, $318 billion was recorded worldwide in remittance flows in 2007 with $240 billion going to developing countries. However, the Bank believes that the figures would be higher if remittances channelled through informal avenues were recorded.
It also noted that foreign remittances provide a lifeline for the poor, an essential source of foreign exchange and a stabilising force during times of economic turbulence.
The United States is considered the largest source of remittances ,with $42 million recorded in outflows during 2006.
Uganda recorded $856 million in remittance income during 2007, an increase of 5.2 per cent from the $814 million received in 2006.
Remittances constituted an estimated 8.7 per cent of GDP in 2006.
Uganda's brain drain today is ranked among the most severe in Africa. Between 1990 and 2000, the country lost 21.6 per cent of citizens with tertiary education to overseas employment, compared with Rwanda and Burundi, which lost 19 per cent of their skilled people, and Tanzania, which lost 15.8 per cent of its skilled work force within the same period.
These figures were compiled by the United Nations Conference on Trade and Development, which monitors trade and development trends globally.
Kenya received an estimated $1.3 billion in remittance income during 2007, an increase of 18 per cent from $1.1 billion in 2006. In 2006, $570 million of remittances was generated by workers' remittances.
Remittances accounted for 5.3 per cent of Kenya's GDP in 2006.
Tanzania, on the other hand, received only $14 million in remittances for both 2006 and 2007. Workers' remittances constituted only $8 million in 2006. Generally, remittances accounted for only 0.1 per cent of GDP in 2006.
With the entry of DCFU Bank into the Moneygram service market, Moneygram coverage is expected to grow, reducing its coverage gap when compared with its main rival, Western Union. DFCU currently boasts a countrywide network of service points, dominated by its leasing services, which will play a critical role in the out roll of the Moneygram product.
The focus of the out roll programme is rural areas, where there is still significant room for extension of money transfer services.
Currently, Western Union has 170 service locations across Uganda, compared with an estimated 100 locations for Moneygram services.
On the international front, Western Union has over 150 years of service, with 300,000 agent locations worldwide in over 200 countries. Moneygram covers 170 countries.
In the meantime, DFCU Bank is procuring additional software and training new staff to administer the new Moneygram service, whose launch date is yet to be announced.
The money transfer market in Uganda is reported to be growing at a rate of 5 to 7 per cent per year. In addition, the rising demand for money transfer services in the region, caused by high levels of overseas remittances and growing enrolment of students in European and American universities, has prompted plans for introduction of single fee charges for money transfers in East Africa by both Western Union and Moneygram later this year.
Be the first to Write a Comment!
Copyright © 2008 The East African. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
