Passing the Buck - Money Transfer Systems in Uganda and Tanzania: The Practice and Potential for Products
This paper explores the demand and supply situation of money transfer services in Tanzania and Uganda. It finds that there is a high demand for such services, and clients sometimes pay up to 35% of the transfer value as fee, to the transferring agency.
The author finds that companies, traders, government departments and individuals use a variety of means, formal, semiformal and informal, to transfer money:
- Banks and non-banking financial institutions such as Western Union and Money Gram;
- Semi formal arrangements, such as courier companies;
- Informal carriage of cash through friends, relatives or truck and transport service providers.
The choice of a particular means depends on the users? perception of risk and convenience. The volume of cash carried in a single transaction varies widely. However, lower volume transactions carry a higher cost which may go up to 35% of the amount transferred.
The paper concludes with the suggestion that while providing transfer services may appear profitable, microfinance institutions (MFIs) should not take it as a fool proof product. MFIs must take care of issues such as internal controls and capacity, cost, and risk of managing the liquidity that such a service requires.
