Mobile Money subscribers borrowed UGX 31.44 billion in August, as reported by the Ministry of Finance. These loans, characterized by short-term microloans with monthly interest rates between 8 percent and 12 percent, require a minimum repayment period of 30 days without the option of extending the loan. This marks the first instance of the Ministry of Finance including mobile money loans within the private sector credit category, reflecting the growing significance of digital microloans in the credit ecosystem.
Efforts to assess previous contributions of mobile money loans to private sector credit were inconclusive at the time of this report. Nevertheless, the Performance of the Economy report for September acknowledges the emergence of mobile money credit as a valuable alternative for micro-borrowers, particularly those lacking collateral.
The report highlights the benefits of digitizing the economy and underscores growth potential in this domain, with a majority of loan applications receiving approval. In August, mobile money loans accounted for UGX 31.44 billion, with an approval rate exceeding 95 percent, contributing 2.9 percent to the total loans extended to the private sector.
The report further reveals that private sector credit was valued at UGX 1.08 trillion in August, representing a 2.7 percent decrease from the UGX 1.12 trillion figure in July. Of the UGX 1.08 trillion, loans were disbursed for 65.7 percent of applications, an improvement from the 61 percent approval rate in July.
During this period, loans granted for personal and household purposes, including mobile money loans, increased from UGX 298.83 billion in July to UGX 345.86 billion, while loans for agriculture expanded from UGX 133.9 billion to UGX 160.5 billion.
Although the contribution of mobile money loans remains modest, the government sees potential for growth due to the increasing digitization of the economy. Despite the lack of specific data on the average number of Ugandans utilizing this platform for borrowing, mobile money loans have experienced steady growth over the past five years, providing micro-borrowers with an alternative source of credit.
Mobile money loans have also become a significant revenue source for electronic money operators, with telecom companies benefiting the most. For example, over the last two years, loans approved through MTN mobile money have grown to an average of UGX 355.5 billion, even in the face of disruptions caused by COVID-19 and economic uncertainties, which hampered private sector credit growth.
In the year ending December 2022, MTN mobile money credit increased by UGX 91 billion, rising to UGX 401 billion from UGX 310 billion in 2021, with the number of loan applications reaching 15.3 million. Telecom companies continue to introduce credit facilities, including MTN’s MoKash and MoSente, operated through NCBA and Jumo, respectively, and Airtel’s Wewole, also operated by Jumo, among others.
MTN has recently indicated that credit applications, which had slowed in 2021 due to poor repayment, have rebounded since 2022 and are expected to grow further.
Here’s a table summarizing the key data:
| Month | Mobile Money Loans | Approval Rate | Private Sector Credit |
|---|---|---|---|
| August | Shs31.44 billion | Above 95% | UGX 1.08 trillion |
| July | – | – | UGX 1.12 trillion |
Note: The report does not provide detailed information on the average number of Ugandans borrowing through the mobile money platform.
