Digital lending takes shape in Uganda’s strides towards cashless economy

At first Mobile Money was developed to help one transfer money from one network to another but this has changed in the recent past as many are now using the same platform to access financial help in terms of loans of any amount without collateral.

This move has left many commercial banks with either few or none of their customers ready to go up the chain to access a loan especially those that require one to have collateral.

Alex Kahwa a business man who runs a grocery shop in Wakiso says ever since he learnt of the Wewole option on Airtel his business has turned around especially in times when he needs capital to bring more stock

“Most times I buy my stock during the week which requires over Ugx 1,000,000 to buy different food stuffs so most times I get quick cash from my Wewole account of upto Ugx 1,500,000 every Wednesday which I usually pay back by Saturday” he added.

As you walk around in the city center you will notice long queues or a crowd around a mobile money stall, withdrawing or depositing money on their account not because they don’t have bank accounts but because it is convenient and faster

There are about 24 million people in Uganda who use mobile phones services out of these 88 percent are registered for mobile money services and have mobile accounts this is nearly three times the number of people in Uganda who have bank accounts

With most of them using the platforms Mokash and Wewole options across the networks of MTN and Airtel networks.

Information from the MTN website shows that Mokash is a service that provides customers ability to save and borrow money using their phones.

Giving a customer the opportunity to borrow between Ugx 3,000 up to Ugx 1,600,000 without collateral rather at an interest which cuts across commercial banks as well

Some the rates as per the Mokash website stand at , between Ugx 1- Ugx 300,000 there is an interest of 2 percent, Ugx 300,001- Ugx 800,000 with a 3 percent interest, Ugx 800,001 – Ugx 1,600,000 with a 4 percent interest and Ugx 1,600,000 with a 5 percent interest.

Edward Banasula an owner of a mobile money stall in down town Kampala says in week he gets close to 10 clients asking how the wewole option works across different networks

“After briefing them about it there and there most them get loans from their phones and want you to help them access it in terms of withdraw” he added.

Due to the bureaucracy in the various processes including account opening and applying for a loan sometimes it can take up to a month to process a loan in a commercial bank while borrowing small amounts between Ugx 100,000- Ugx 1,000,000 is in most cases relatively difficult.

This has led to the huge uptake of mobile money financial services prompting banks to introduce Agent Banking to counter this with hope of bringing the services closer to their clients.

Agent Banking has so far been taken up by over 5 commercials like Centenary, Dfcu, Equity, Stanbic and Stanchart banks among others

Though banks have introduced various options where people can access finance many of the people have failed to embrace it

Though Uganda’s financial inclusion may have increased from 57 percent in 2006 to 78 percent in 2018 the impact of changing consumer dynamics, product innovations and the effect of economic conditions on peoples financial behavior remains to be seen

According to Bank of Uganda the total value of mobile money transactions grew from Ugx 37.4 trillion in June 2016 to Ugx 63 trillion in June 2017 while the numbers of registered customers increased from 19.6 million to 22.9 million.

Currently only 17 percent of Uganda’s populations have bank accounts  either alone or jointly owned with another person with most of the population giving reason why they opened up bank accounts related to saving or keeping their money safe.

With the current growth in mobile money usage commercial banks have to rethink besides having banking agents to bring the services closer

Just recently in Nigeria MTN launched Mobile Money making it the biggest market in Africa, Nigeria’s launch has been seen as a significant move to bridge the gap of financial inclusion in Nigeria.

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