Borrowers to access loans through mobile handsets

Feb 09, 2016

Customers will also use their new bank accounts to effectively save any amount of money through the mobile money platform, as well as withdraw from the account at their pleasure

The evolution of technology and integration of the banking and telecom sectors has birthed a new product that will enable telecom subscribers to access loans and savings in banks through their mobile handsets.
 
The micro savings and loans product, soon to be offered by the Commercial Bank of Africa (CBA), will also add to the banking statistics at least 8 million potential new bank accounts, from existing mobile phone subscribers.

The service will be offered through MTN.
 
According to statistics from the Uganda Bankers Association, there are only 5 million Ugandans with formal bank accounts, while millions, especially in the hard-to-reach areas, could be brought on board using technology.
 
"We have already integrated our technology with MTN to offer this service in Uganda, and are only waiting for the Central Bank to give their approval so we can begin. By March this year, we hope to be in business," said the CBA chief executive, Samuel Odeke.
 
"The mobile subscriber will be required to open an account with the bank, and will be subject to all the regulatory requirements of a bank account in Uganda. We shall however, use existing customer details that MTN collects during registration of the SIM card to cross-reference with the national ID system to enable instant and remote account opening," he added.
 
This means customers will be able to open a bank account instantly from their phone. He said  once approved, MTN customers will be able to access small loans basing on their transactional history on mobile money and airtime purchases, and the loan amount will increase depending on their repayment history.
 
Customers will also use their new bank accounts to effectively save any amount of money through the mobile money platform, as well as withdraw from the account at their pleasure at the various mobile money points of sale in the country.
 
"This is the first such product on the Ugandan market, and is expected to ease the burden to borrowers from money lenders and loan shirks," the CBA group head of marketing, Chris Pasha said.
 
They were speaking on the sidelines of the launch of the CBA in Uganda, at the Tweed towers in Kampala on Monday.
 
According to the product development manager, Joseph Ntale, individual loans will carry a tenure of one month, attracting a small interest rate, and will range from sh10,000 to sh1.5m.
 
He said CBA will be responsible for maintaining a dedicated management information system, regulatory compliance, report to the credit reference bureau and provide capital to fund the loan portfolio.
 
"As soon as customers have opened an account with us using their phones, they will be able to apply for a loan, even if they have had no previous banking history. They will also instantly check their loan limit and, if approved, receive a loan in a matter of seconds," he said.
 
According to the Bank of Uganda, the number of people using the various mobile money platforms increased by 52.4 % to 14 million in 2013/14.
 
The Uganda Communications Commission's telecom subscribers and penetration data of June 2014 also indicated Uganda boasts of at least 19.5 million mobile phone users.
 
Also, according to Information from the ministry of finance, the volume of money transacted through the mobile money platform rose to over sh24 trillion in 2014, from sh14 trillion in 2013
 
This rapid growth of mobile money, according to deputy governor Louis Kasekende, has attracted banks and other financial institutions to play a role in exploiting its potential to rally savings in the formal financial services sector.

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