Recently, MTN Uganda launched MoKash, a micro-loans and savings product. The product which is offered in partnership with Commercial Bank of Africa (CBA), allows customers to save and borrow money through their phone while earning interest on savings. Customers can activate the service by dialing *165*5#. Loan amounts start at Shs3,000 with a maximum of Shs1m. We spoke to Phrase Lubega, General Manager MTN Financial Services, about the new product.
Why should one join MoKash?
Convenience. You can transact from anywhere at any time. There is no need to sign any documents to open up and transact with a MoKash account. The interest rates are competitive, there is no collateral required, no forms to fill, no queues to join.
So how does the savings part work?
Customers can save up to any amount. Shs50 is the minimum amount and customers can choose to schedule savings to happen automatically, say daily, weekly or monthly. The money gets transferred from their Mobile Money account. Interest rates on savings vary from 2% to 5%.
Who is eligible for a MoKash loan?
In order to qualify for a loan a customer needs to have been an MTN Mobile Money subscriber for a minimum of six months, save on MoKash and actively use other MTN services such as voice, Mobile Internet and MTN Mobile Money.
What are the loan repayment periods like?
The MoKash loan is payable within 30 days. However, you can repay the loan before the due date and borrow again. You can also pay back your loan in installments within the 30-day period. If you pay the loan in less than 30 days you increase chances to grow your MoKash loan limit.
What happens if a customer fails to pay?
If a customer doesn’t pay their loan obligation in 30 days they have an opportunity to extend their loan for an extra 30 days with a facilitation fee of 9% on the balance of the principal. If they are still unable to pay their loan after the additional 30 days, their loan limit will be reduced which will affect their future borrowing capability. They however will not incur a further facilitation fee.
Are you not worried that Ugandan borrowers tend to default a lot?
The model used in determining the loan limit is based on the customers past and present utilisation of MTN services and enables us to do responsible lending in predicting their future behavior.
What transaction charges should customers expect?
Unlike traditional banking, with MoKash no minimum is balance required. There are no ledger fees and no transactional charges while moving money between MoKash and MTN Mobile Money.
How are loan repayments handled?
If a customer has funds in their MoKash savings account or their Mobile Money account, then the loan is automatically repaid from these accounts.
How is a borrower’s loan limit determined?
The loan limit is determined by the customer’s utilisation of services like MTN Voice, MTN Mobile Money and MTN Data and also by how long the customer has been on the MTN network, their average MoKash savings balance and loan performance.