The mobile money sector in Africa remains the most active of all regions of the world according to the GSM Association (GSMA), a coordinating body representing the interests of players in the telecommunications industry. the report shows that registered mobile money accounts in Africa stood at just over half a billion in 2020, up 12 percentage points from the previous year. The value of transactions reached $ 495 billion, up 23 percentage points.
East Africa accounts for the bulk of mobile money transactions in Africa, followed by West Africa. The GSMA report shows that West African deal value has experienced the highest growth after rising 46 percentage points to $ 178 billion (the second highest value after that of East Africa).
Basically, mobile money allows users to send and receive money, as well as pay utility bills – but in advanced situations like Africa, the wallet transforms phone numbers. phone subscribers into a kind of proxy for bank accounts.
As it grows, mobile money has become a launching pad for digital lenders, who use customers’ mobile money transaction history to determine how much instant credit to extend to borrowers – money that is then directly deposited into customers’ mobile money wallets.
MTN Uganda’s mobile overdraft credit
Innovative mobile money-based products include the all-new MoMoAdvance, an overdraft by MTN Uganda, the country’s largest telecommunications company, and a subsidiary of the MTN group – whose other affiliates are present in the southern, western and central regions of Africa.
MoMoAdvance was launched following a pilot program that started at the end of 2020, and it allows MTN clients to overdraft its MoMo wallet (mobile money). Users will be charged an access fee of 2.75% of the borrowed amount and daily interest of 0.5% on the outstanding balance for up to 45 days.
“MTN MoMoAdvance will offer MTN MoMo customers the ability to transact beyond their MoMo wallet balance and repay later… noted MTN Mobile Financial Services, Managing Director, Stephen Mutana.
MoMoAdvance borrows heavily from a similar overdraft product, Fuliza, through Kenya’s largest telephone company, Safaricom, which was launched in January 2019, and allows subscribers to transact even when they don’t have enough. of funds in their M-Pesa mobile wallets.
Overdraft services are based on a borrowing limit set by a client’s transaction history, while the overdraft amount and accrued interest are deducted from clients’ portfolios each time they are reloaded. Fuliza has grown in popularity over the past three years among M-Pesa users, with Safaricom now granting around $ 12 million in overdraft loans every day.
Fuliza is offered in partnership with KCB and NCBA, both of which are Kenyan banks with a regional presence. MTN Uganda has also partnered with NCBA for its MoMoAdvance loan, and it is now likely that the bank will establish such partnerships in other East African countries, Rwanda and Tanzania, where it is already. present.
Mobile money overdraft products offer a competitive advantage to telecom operators as lending applications continue to enter African markets. The apps have intensified competition for mobile lending services owned by telecommunications companies, such as MoKash from MTN Uganda and M-Shwari from Safaricom, which allow customers to borrow short-term loans and repay within 30 days.
These innovative and easily accessible digital lending services have made credit accessible to a majority of people in Africa, who were previously excluded from formal financial institutions due to a lack of banking history. However, most emerging digital lenders charge predatory interest, often attributed to the high-risk environment in which they work. Indeed, the regulatory environment is gradually adapting to formalize the sector, ultimately leading to better pricing for users while protecting service providers. losses.