Losses as innovators and CEOs fight for Agent Banking

Losses as innovators and CEOs fight for Agent Banking. Innovators and Bank CEOs fight for ownership of Agent Banking business platform in Uganda.

According to Business Focus several banks within Uganda’s banking industry recently experienced issues in the agency/mobile banking platform, whereby those who had taken loans using their mobile banking app and paid using the same platform found themselves maintained as debtors due to failure by the platform to make reconciliations.

In other instances, bank agents retained the money and could not transfer it through the system to the right bank customers, leaving banks counting losses estimated in billions.

In a  statement dated September 1, 2021, Stanbic Bank Uganda acknowledged the error and threatened to legally take on bank agents who had failed to remit the money.

“Stanbic Bank Uganda has countered fraudulent activity by a few of its banking agents aimed at defrauding the bank through a process flow error that affected some third-party agent banking transactions.

In liaison with law enforcement, the bank is undertaking measures aimed at recovering from the implicated agents who sought to benefit from the error by retaining funds that should have been remitted to the bank,” Statement Release.

It is also worth noting that Stanbic bank is one of the 12 banks that were sued in 2012 over copyright infringement by the developers of online banking software in Uganda called POS-Banking and banks are destined for more inconveniences if they do not come to an agreement with the innovators.

The flip of things in the deal

The court battle, already existing in the High Court Commercial Division, has the developers of POS Banking; Nicholas Lugonjo and Henry Owarwo Mugumya accusing 12 banks namely; Centenary, Stanbic, Finance Trust, Barclays currently ABSA Uganda, Bank of Africa,  DFCU, KCB, Post Bank, Housing Finance,  Exim, Diamond Trust and Equity Banks in Uganda of copyright infringement and unjust enrichment.

They are also seeking an order for all monies gained from the use of the software to be accounted for and remitted to them.

The developers claim the copyright was registered by Lugonjo and was issued with a certificate of registration No. 13 of 2012 on May 9, 2012. In 2013, Lugonjo approached the banks with the hope of interesting them in the software as an innovative way of developing the banking sector for profit.

The Banks insisted that he disclose to them all the nitty-gritty pertaining to his innovation which he obligingly did with the hope that once they pick an interest, they will partner with him in the implementation and pass on loyalties to him.

To both Lugonjo and Owarwo’s shock, after receiving most of the details of the software, the banks turned them away and all the requests for subsequent meetings were turned down.

“The plaintiffs came to learn that the defendants had conspired and began to lobby for the inclusion of Agent Banking in Uganda’s banking industry which was subsequently provided for through the Financial Institutions (Agency Banking) Regulations 2017,” the two innovators allege in their suit before Justice Jean Rwakakoko.

It gets hotter and CEOs are Implicated

It is said that after securing the Agency Banking regulation in 2017, three top Bank Managers convinced the leadership of their umbrella body, Uganda Bankers’ Association to form a company that would manage online/agency banking in Uganda.

They then entered into an agreement with Eclectics International Limited, a company registered in Mauritius to partner with the Agent Banking Company of Uganda Ltd to run the online banking business.

Records from the Company Registry show that the owners of Agent Banking Company of Uganda Ltd are; Centenary Bank MD Fabian Kasi, Anne Nakawunde of Finance Trust Bank, and Wilbroad Humphrey, the CEO at Uganda Bankers’ Association. The others are Paul Mbugwa and Sebi A. Sultan, both Kenyans, and managers of Eclectics International Limited a company registered in Mauritius.

 Mauritius is one of the leading tax havens in the world which exercises high secrecy in regard to tax compliance issues of companies registered there similar to other offshore countries like Cyprus, Estonia, and Gibraltar.

It is estimated that most banks have a minimum of 2000 agents countrywide and the value of transactions through the agent banking system is in trillions of shillings, so with the tides against the banks for a technology whose ownership is being challenged, the predictability of the future of this fast-growing banking business becomes uncertain.

It is said the lapses arose from the underutilization of some of the key components of the software which the innovators have vowed not to disclose.

Also, read; FRAUD: CID probes Local Government Ministry, UPPC over security stamps