Slightly over one in every three Ugandans have a bank account, with a reported 16.5 million Ugandans still using traditional saving methods such as physical cash, livestock and agriculture.
With only 16 million bank accounts in the country, over half of the population has no access to savings or credit through financial institutions, as drivers of capital investment and, ultimately a higher rate of economic growth.
Digital financial services, however, are playing a pivotal role in plugging this divide as various institutions are partnering to enhance access to financial services for the unbanked.
Take for instance the MoKash platform in which customers of Ugandan mobile telecommunications company MTN can save from as low as Shs50 and borrow amounts from Shs3000 to Shs1 million. NCBA Bank in partnership with MTN issued over 4.7 Million loans worth UShs 435 Billion in 2020 alone.
Stephen Mutana, MTN Uganda’s general manager for mobile Financial services notes that “The system has recorded a high uptake for credit as it allows for structured payments within a period of thirty days.”
Over 2.5 Million customers have saved nearly UShs 16 Billion on the platform.
Instant access to credit
Clare Muhindo, a resident of Kira Municipality in Wakiso testifies to the quick credit relief afforded by the facility which she has used since 2016.
“It always comes in handy when I am not able to access cash, day or night and I pay back as soon as I can. My loan limit keeps growing because of my good pay back culture,” she says.
On an online platform, another user John Wakhata noted that he no longer relies on people for financial relief but instead utilizes mobile credit.
COVID-19 financial relief
As multiple individuals and businesses experienced a hemorrhage in revenue streams during COVID-19, financial service providers in Uganda offered reprieve to their borrowers on mobile money platforms.
On the MTN Mokash platform, loan repayments were deferred by 30 days and deferments maintained over the course of the year.
Penalties for late loan payments were also deferred by 30 days.
“Due to the changing financial landscape during COVID-19, MTN engaged its partner NCBA to further ease not only access to quick finance but also easy repayment for our customers,” the MTN Uganda General Manager for financial services reveals.
A working paper by George Wilson Ssonko and Duncan Roy Kawooya from Bank of Uganda notes that digital financial services have numerous benefits which can expand the delivery of financial services to the bottom of the pyramid clients through innovative technologies like mobile phone-enabled solutions, electronic money models, and digital payment platforms.
“Some of the benefits include cost reduction and lower surcharges on account of maximizing economies of scale; enhanced accessibility / outreach; increased efficiency; better quality service; increased speed, security, and transparency of transactions; potential for product customization; as well as convenience,” the work paper reveals.