Uganda: Bank Seeks Government Approval to Give Mobile Money Loans

The Kenyan owned Commercial Bank of Africa (CBA) is seeking approval from Bank of Uganda (BoU) to replicate a model that allows customers to borrow money from the bank using mobile money. The same platform, known as M-Shwari in Kenya, also allows customers save money using mobile money.

In Kenya, the bank started the initiative in partnership with Safaricom in 2013.

Speaking to journalists at the official launch of the bank on Monday, Mr Samuel Odeke, the CEO CBA Uganda, said the product would improve the saving culture and provide short term loans to micro-enterprises at "competitive" interest rates.

"The mobile product we want to launch is a very impressive one designed by Mobile Network Operators (MNOs). At the moment, we are seeking the approval of the central bank before we can launch the product at least by the end of the first quarter of 2016," he revealed.

CBA, which is only in its second year of operations in Uganda, is looking to leverage this micro-lending and saving tool to leapfrog its peers in the sector. In just two years of launching the product in Kenya, customers had grown to 12 million, with deposits worth Ksh153b (Shs5.5 trillion) and loans of Ksh30b (Shs984.8b) by June 2015.

The M-Shwari product allows customers to save for a short term while also increasing access to credit options in the future. The customer builds a credit profile and gets a loan depending on the interest payments. Loan disbursements and approval are all done by using the mobile handset.

"We are working with the mobile operator, MTN to test the product that will help develop the culture of savings and access to financial services. There are various regulatory requirements we have to meet as prescribed by BoU," Mr Odeke added.

According to Mr Ben Sekabira, the director banking BoU, adoption of technological innovations make banking more adaptable, affordable and useful to better meet the customers'.

"Bank of Uganda is keen to support innovations and we approve new products suggested by licensed financial institutions provided that they can be properly managed by these institutions," he said. He also added the traditional model of commercial banking, which has been around for decades, is now being transformed by the use of technology.

Dr William Muheirwe, the board chairman CBA Uganda, revealed that the shareholders had injected about Shs50b in capital for growth prospects of the bank in a "difficult and entrepreneurial market."

Performance

In Uganda, banks have already been leveraging on mobile money services but none has secured approval of BoU to use the platform to provide loans. In just five years, mobile money accounts have grown from 10,000 to 19.5 million, with transactions valued at Shs24trillion. Commercial banks, on the other hand, hold around six million accounts shared among 25 institutions.

SOURCE:THE MONITOR