Uganda has an estimated population of 35 million people. Of these, according to the Uganda Bankers Association, only 5 million have formal bank accounts.

Statistics from the Uganda Communications Commission (UCC), the sector regulator, indicate that 18,5 million of the 19,5 million mobile phone bearers are registered for mobile money services across the various operators. This is more than half of Uganda’s population.

It is on this basis that MTN, the sector’s leading operator, launched a platform called MoKash, which enables customers to save and borrow money using their phones. Customers are now able to take out short-term loans at a reasonable fee, while simultaneously earning interest on their savings. This means that for the first time in Uganda users no longer have to wait in long queues or walk to formal banking institutions to save money or apply for a loan, as has been the case until now.

“This innovative service has the power to unlock the economic opportunity that is held by cash transactions and informal savings and lending models,” Samuel Odeke, the chief executive officer of Commercial Bank of Africa (CBA) Uganda, said in an interview with the Daily Monitor.

The World Bank estimates that the number of unbanked people in the world dropped by 20% to 2 billion from 2011 to 2014.

Odeke explained that MoKash is real banking with a commercial bank regulated by the Bank of Uganda and that it has the capability to reach those not previously reached by the banks.

“Traditional banking is out of reach for many people in the rural areas, especially in developing countries, but mobile banking has ushered people into the financial system in their droves. Financial inclusion, starting with a humble savings account, enables people to start businesses, invest in education and weather bad times,” he argued.

The World Bank estimates that the number of unbanked people in the world dropped by 20% to 2 billion from 2011 to 2014.

According to CBA, customers can earn up to 5% interest on their savings. Photo: Commercial Bank of Africa logo

According to CBA, customers can earn up to 5% interest on their savings. Photo: Commercial Bank of Africa logo

Increased access to banking services

Launching the product at the Kampala Serena Hotel, Uganda’s vice president, Edward Ssekandi, hailed MoKash as a testament to government’s efforts to create an environment for financial deepening.

“Through the Bank of Uganda, the government has already undertaken various projects to increase access to financial services and empower the users of financial services to make rational decisions in their personal finances so as to improve household incomes and meaningfully contribute to the economic growth of Uganda,” Ssekandi said.

With this innovation, Uganda joins its East African counterparts Tanzania and Kenya in the micro savings and loans business. In Kenya, 61% of the population with cell phones reported saving or receiving loans on their cell phones in the past year, while 39% of Tanzanians reported the same, according to the website Quartz Africa.

“This innovative service has the power to unlock the economic opportunity that is held by cash transactions and informal savings and lending models,” Mark Odeke, CEO, Commercial Bank of Africa.

“With MoKash, Ugandans can now securely save for future use in an interest-bearing savings account or they can take advantage of access to micro-loans. Should customers want to access micro-loans for their businesses or personal reasons, they can apply directly from their mobile phones,” Wim Vanhelleputte, the new chief executive officer of MTN Uganda, said at the launch of the service.

 

How it works

Mobile money users will have to transfer funds to a MoKash account if they want to save, immediately receiving a prompt on how much they can borrow. If they borrow, the money is instantly transferred to their mobile money accounts. However, only registered MTN subscribers qualify, if they have an active MTN mobile money account.

“Depending on the customer’s use of mobile money services, they will be assigned a loan limit but they can access greater or lesser amounts against this loan limit by just using their mobile phone,” explained Phrase Lubega, the general manager of financial services at MTN Uganda.

The maximum limit a customer can borrow is set at Shs1 million (about USD300) with a monthly interest of 9% for a month.

 

Interest on savings

Just like the loans, the savings accrue interest as well. According to Eric Murioki, the general manager of new business ventures at CBA, all customers who will save money will earn interest of up to 5%, depending on the amount in their MoKash account.