FILE - Ugandans use a mobile money point in Kampala, Uganda, Sept. 29, 2016.
FILE - Ugandans use a mobile money point in Kampala, Uganda, Sept. 29, 2016.

Ugandans will be able to buy government securities through a mobile money platform in a move by the east African country to become less dependent on commercial banks and institutional investors for its funding.

The government said in a statement on Tuesday that the measure, which was approved at a Cabinet meeting on Monday, would boost savings and investment among ordinary Ugandans as well as driving economic growth.

Ugandans with mobile money accounts, many of whom had limited access to banks, will now be able to directly buy government debt. The move follows a similar move by Kenya in 2017 and will also open the market up to Uganda's Diaspora.

Mobile money allows subscribers to transfer money and make payments for services and products via their mobile phones and has developed rapidly in Africa, where it is now widely used.

Of Uganda's population of 41 million, about 23.6 million are mobile phone subscribers.

MTN Uganda, a unit of South Africa's MTN Group is likely to be the main beneficiary of the change among telecoms operators as it has the largest mobile money customer base, followed by Airtel, a unit of India's Bharti Airtel.

Uganda has traditionally auctioned its debt — mainly Treasury bills and bonds — via bids submitted through commercial banks who act as primary dealers and the government expects the mobile money plan to cut its cost of borrowing.

"Widening the scope of investors reduces the dependence on a few players such as commercial banks, offshore players and institutional investors which tend to bid highly in the auctions given that Government has limited choice," it said.

Critics are concerned about Uganda's appetite for credit, which has seen its public debt reach 41.5 percent of gross domestic product (GDP) as of June.

They fear that escalating borrowing could spark a crisis like those in the 1990s and early 2000s before debt forgiveness by the World Bank on Uganda's loans.

The Bank of Uganda, the country's central bank, said last year that its debt stock including credit agreed but not yet disbursed had reached 50 percent of GDP.