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Telecom giant MTN has announced plans to significantly increase its mobile money lending, aiming to advance subscribers in Uganda more than Shs1 trillion in microloans this year. This initiative marks a doubling of MTN’s previous lending amount, which stood at Shs550 billion by the end of December 2023.
Mr. Richard Yego, the Managing Director of MTN Mobile Money, revealed the company’s ambitious lending goals in response to inquiries, stating that while previous focus had been on personal loans covering expenses like school fees and bills, this year, MTN would introduce agent and merchant loans. These new loan products will primarily focus on providing working capital and stock financing to support business growth.
Although Mr. Yego did not specify the implementation timeline, he mentioned that MTN had already established partnerships with several financial institutions, including KCB, NCBA, Post Bank, and Jumo, to facilitate the disbursement of the planned Shs1 trillion in loans.
MTN’s mobile money lending has been on a steady growth trajectory, increasing by an average of 10 percent annually over the past five years. In the period ending December 2022, approximately 945,185 mobile money subscribers borrowed Shs401 billion, representing a significant 30 percent surge from the Shs261 billion borrowed in the corresponding period of 2021.
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The rise in mobile money lending reflects an increasing demand for alternative credit sources in Uganda. Traditionally, access to credit had been limited to financial institutions, savings groups, and money lenders. However, mobile money loans have emerged as a pivotal solution, offering quick and accessible credit to individuals and businesses.
A report by the Ministry of Finance highlighted the growing prominence of mobile money loans, with monthly disbursements reaching Shs31.44 billion. These loans typically have short-term repayment periods ranging from 14 to 30 days and carry monthly interest rates of 8 percent to 12 percent.
The government has shown keen interest in mobile money lending, recognizing its role in private sector development and economic digitization. With an approval rate exceeding 95 percent, mobile money lending now contributes approximately 2.9 percent to the total loans extended to the private sector, amounting to Shs1.08 trillion.
For electronic money operators like telecom companies, mobile money lending has become a significant revenue stream. MTN, through its services like MoKash and MoSente, and competitors like Airtel with Wewole, operated by Jumo, continue to expand credit facilities, catering to the evolving financial needs of Ugandan consumers.
MTN anticipates further growth in credit applications following a recovery from slowed repayment rates in 2021. With these developments, mobile money lending is poised to play an increasingly vital role in Uganda’s financial landscape, providing accessible and efficient credit solutions to individuals and businesses alike.
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