While mobile carriers and application developers like Google wrangle over virtual wallets and payment systems, carriers in parts of the developing world have long since implemented near-seamless mobile payments. “Mobile money,” or electronic payments via mobile phones, has displaced cash in parts of Africa. The remarkably easy and efficient system evolved as a market-based solution to real economic needs, but is now threatened by the heavy hand of corrupt governments.

The Globe and Mail describes how the system operates [1] in Somalia. Telesom is the mobile telecommunications company offering the service named “Zaad”:

No smartphone, no fancy app required. Additionally, subscribers can transfer money from one person to another and pay monthly bills. Indeed, mobile money services evolved from person-to-person remittances in areas where banks and money-wiring branches are often unavailable.

By all accounts, the service has achieved stunning success. In Kenya, 17 million people (out of an adult population of 19 million) subscribe to M-PESA, the mobile money service offered by the country’s top carrier, Safaricom. The equivalent of one-third of the country’s GDP in cash moves [2] through the system annually.

Of course, governments in those nations could not resist interference. Beginning in January 2013, Kenya’s government slapped a tax of 10% on all mobile money transactions. Immediately, the value of transactions flowing through the service dropped by 1%. Within three months, volume [2] had fallen an additional 5%.

Now the government of Uganda intends to follow Kenya’s path. The Ugandan government hopes to make up for a $214 million budget shortfall caused by the suspension of foreign aid due to corruption [3] charges. Rather than stealing from foreign aid donors, the Ugandan government has turned to stealing even more from its beleaguered citizens. As Simon Mpagi, a Ugandan mobile services vendor, told the BBC [4]:

“They steal our taxes and donor money... leaving public services to near-collapse, and now when donors get angry and cut them off, then they come to us and punish us again by raising taxes to grab even the little income we struggle to make.”

By the end of 2012, the Ugandan central bank reported [5] that almost 9 million people use mobile money services in Uganda.

Once again an enormously popular service, one born of an innovative free-market solution, beneficial to the people, is raided by rapacious governments. Sadly, we have seen this tragic history repeated  many times before.