MTN lends out Shs340b amid rising demand for micro loans

The trend in MTN’s mobile money micro loans shows increased demand for credit among small holder borrowers. Photo / Edgar R Batte 

What you need to know:

  • At least 945,185 MTN mobile money subscribers borrowed in the period between January and October 
  • The number of borrowers were just below 1 percent of MTN's 10.6 million Fintech subscribers
  • During the period, MTN said, disbursed loans grew by 277 percent from 3.27 million to 12.28 million
  • Airtel Money declined a request to avail details of the performance of its Airtel Money micro loans  

At least 945,185 MTN mobile money subscribers borrowed about Shs339.7b in the 10 months to October, according to data obtained from MTN Mobile Money Limited. 

In details covering the period between January and October, MTN’s micro loan book grew by 30 percent from Shs261.4b lent out in the same period last year to Shs339.7b, while the number of disbursed loans grew by 277 percent from 3.27 million to 12.28 million. 

MTN, which currently operates three micro loan products, including MoKash and MoSente, which have a repayment period of one month and MoMo Advance, a short-term facility, has seen massive growth in its micro credit segment, signalling increased demand in credit among micro borrowers. 

During the period, MTN recorded a 20 percent growth in the number of borrowers, increasing from 785,638 to 945,185. 

MoKash remains MTN ’s largest loan product even as it registered declines during the period. 

For instance, data indicates, MoKash borrowers, which is MTN’s oldest loan product, reduced from 785,638 between January and October 2021 to 766,765, representing a decline of 2 percent. 

Similarly, the value of loans under MoKash dropped from Shs261.4b to Shs242.75b, while disbursed loans reduced from 3,256,132 to 3,244,149. 

Mr Richard Yego, the MTN Mobile Money managing director, yesterday told Monitor the declines under MoKash could have been caused by the introduction of new loan products this year. 

“We now have three loan products, so as we introduce new products they kind of cannibalise the existing [one]. So, the existing [product] remains the most popular but then people tend to switch because the new products give customers alternatives,” he said. 

MTN recently indicated that its Fintech users, which includes mobile money, had grown to 10.6 million, generating revenue of Shs470.6b.

The details above, however, indicate that the 945,185 borrowers registered during January and October, are just under 1 percent of MTN’s 10.6 million users. 

Airtel declined a request to avail Monitor with the performance of its Airtel Money loan facilities, with Mr David Birungi, the telecom’s public relations manager, noting: “This is proprietary financial information I am unable to disclose such information”. 

However, Mr Yego indicated that the  improved performance in MTN loan products was a recovery from the 2020 decline, which registered a drop of between 20 and 25 percent.  

The drop, he said, had been occasioned by Covid-19 disruptions that affected customers affordability and eligibility as a result of active loans going bad.  

Mr Yego also noted that majority of borrowers, which is more than 50 percent, fall within the Shs20,000 transaction category, while the middle class, although few, transact some of the biggest loan amounts. 

The repayment rate, MTN indicated, currently stands at between 92 percent and 96 percent, which Mr Yego said, is an indication that, save for a few loans that are later written off, “people generally repay this money”.

Mobile money is currently regulated by Bank of Uganda under the National Payments System Act. 

However, even with such growth, the MTN Mobile Money loan book remains way below some of Uganda’s largest lenders such as Stanbic - Shs3.8 trillion – and Dfcu – at Shs2.4 trillion. 

Writing off a mobile money loan

Mobile money loans are provided in partnership with financial institutions. Whereas the repayment rates stand at between 92 percent and 96 percent, in some events some micro loans provided through mobile money are written off. 

According to Mr Yego, the banking partners are guided by either Uganda Microfinance Regulatory Authority or Bank of Uganda regulations to write off a loan. 

Whereas some loans, he says, are written off within 180 days of now repayment others take as much as 360 days or may be one and half years.

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