Mobile Money Transforms Credit Access in Uganda

Cash UGX Shillings Uganda - Mobile Money Transforms Credit Access in Uganda
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African Nations See Varied Trends in Credit Accessibility

Credit access in Uganda, while still relatively costly, has seen notable improvements due to the widespread adoption of mobile money. The Africa Trade Barometer report, which assesses various economic factors, including governance, infrastructure, trade openness, financial behavior, and credit accessibility, highlights Uganda’s positive shift in credit access compared to other African nations.

The report underscores that the growing prevalence of mobile money has made it increasingly convenient for Ugandans to obtain credit compared to their African counterparts. Notably, 49 percent of surveyed businesses in Uganda believe that accessing credit has become easier, representing an improvement from the previous figure of 38 percent.

Uganda’s performance places it second only to South Africa, where 50 percent of surveyed businesses have reported increased ease of credit access, marking a significant jump from 34 percent. The report underscores that more businesses in Uganda are finding it easier to secure credit, pointing out that although the cost of credit remains relatively high, mobile money has significantly expanded access to credit.

Mobile money serves as a pivotal driver of financial inclusion in Uganda. The government recognizes its potential to support private sector credit growth. In a groundbreaking move in August, the Ministry of Finance documented the contribution of mobile money loans to private sector credit. It was revealed that this contribution has grown to a monthly average of Shs33 billion, constituting 2.9 percent of private sector credit.

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In contrast, obtaining credit in certain African countries has become more challenging, with nations like Mozambique and Ghana experiencing a decline in credit access perception due to high costs.

The Africa Trade Barometer report provides a comprehensive comparison of the factors that either facilitate or hinder trade in ten key African markets. Its objective is to offer valuable insights into African markets, incorporating both qualitative and quantitative input from 2,554 firms across these economies. This information is further enriched by third-party sources, including the World Bank, International Trade Centre, and central banks.

Despite the positive trend in credit access, the report notes that Uganda struggles in terms of infrastructure perception as a trade facilitator. The country, along with others in the region, faces significant challenges such as inadequate roads, ports, airports, telecommunications, water supply disruptions, and complex customs and trade regulations. These infrastructure-related issues pose significant hurdles to the trade environment in Uganda.

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