Malawi's minister of Finance, Economic Planning and Development Joseph Mwanamvekha is under fire for introducing a 1% withholding tax on all mobile money transactions.

In his 2019/2020 national budget, presented recently to parliament, Mwanamvekha said the tax will ensure that more people are motivated to contribute towards national building and government has a scope to improve service delivery.

However critics have voiced concern that the tax will threaten financial inclusion because mobile money operators will raise the cost of transactions.

A law lecturer at the University of Malawi's Chancellor College Sunduzwayo Madise said the tax will disempower the unbanked and underbanked, and said it seems as if the government has changed or abandoned its agenda.

Madise was quoted by the local Nation newspaper saying "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."

Consumer Association of Malawi (CAMA) executive director John Kapito said the tax is a war against the poor.

"This is an insult that has come in this budget, which as consumers, we feel it is targeted at punishing the most vulnerable groups who are mostly in rural areas doing small businesses," he said.

The latest figures from the Reserve Bank of Malawi shows that as of June 2019, the total number of registered mobile money subscribers was 7 million, with only 37.4% of subscribers using the service during the second quarter of this year.

The report also show that there are 45, 929 mobile money agents 81.1% located in urban and semi-urban areas while 18.9% are in rural areas.