Malawi Introduces Tax On Mobile Money. Critics Say This Threatens Financial Inclusion

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Written by Peter Pedroncelli
Nigerian fintech firm financial inclusion
Malawians using mobile money services will be paying more to send and receive funds after the introduction of a 1 percent tax on mobile money transactions. Photo by nappy from Pexels

Malawi has introduced a 1 percent tax on mobile money transactions and more than 7 million mobile money users could be affected.

Around $618.5 million worth of mobile money value was transacted between April and June 2019 in Malawi. Had the new tax been in place, it would have generated almost $6.2 million in additional revenue for the government in those three months alone.

Seven million Malawians are registered mobile money users, representing 42 percent of the population, according to Telecompaper.

As of June 2019, more than 45,000 mobile money agents operate in the country, according to figures from the Reserve Bank of Malawi.

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Critics of the mobile money tax say that it will threaten financial inclusion because mobile money operators are expected to pass the additional costs on to consumers, raising the cost of transactions and hitting the poor hardest.

In 2017, the Malawi government launched the 2016-2020 National Financial Inclusion Strategy which aims to increase the adult banked population to 55 percent by 2020, according to the World Bank.

Malawians with mobile money accounts grew from 8.4 percent in 2015 to 42.8 percent by 2018, boosting financial inclusion efforts, but critics fear that the new tax could stall or reverse those gains.

A law lecturer at the University of Malawi‘s Chancellor College, Sunduzwayo Madise said the tax will dissuade the unbanked and underbanked from using mobile money service and goes against the Malawi government’s financial inclusion agenda, ITWebAfrica reports.

“On one hand, mobile money service was touted by the government as a solution to empower rural people but on the other hand, the system has now decided to plot against the very people it should empower and will take from them the little that they have and fill up the tax purse,” Madise told The Nation newspaper.

In 2018, Uganda introduced a mobile money tax on users in the country. 

An initial 1 percent tax on all transactions was heavily protested and the public outcry prompted the government to adjust its tax plan.

The tax remains in effect in Uganda but it has been reduced to 0.5 percent and only applies to mobile money withdrawals, according to MWNation.