MTN Uganda has introduced a new overdraft feature for users of its MoMo mobile money feature and this may be one of the best decisions that the subsidiary of MTN Group may have made as digital lending is becoming a norm in Africa and the world at large.
Called MoMoAdvance, the overdraft feature was first launched in late 2020 as a pilot program. With the feature, MTN users can make overdraws on their MoMo mobile wallets. This, however, attracts an access fee of 2.75 percent of the borrowed amount and a daily interest of 0.5 percent on the outstanding balance for a maximum period of 45 days.
The MoMoAdvance feature isn’t the first of its kind in Africa. Fuliza, a similar overdraft product, provided by Safaricom which is Kenya’s biggest telecom company, may have been the inspiration for MTN Uganda’s MoMoAdvance. Fuliza came into play in 2019 and gives users the ability to complete their transactions when they have limited or insufficient funds in their M-Pesa mobile wallets.
According to MTN Mobile Financial Service General Manager Stephen Mutana, “MTN MoMoAdvance will offer the MTN MoMo customers the convenience of transacting beyond their MoMo wallet balance and pay back later… we believe that it will give them the convenience to transact seamlessly beyond their wallet balances during times of need then pay back later”.
MTN MoMoAdvance determines a user’s overdraft limit based on their transaction history. Repayment of the overdrawn amounts, as well as accrued interest, are deducted from MoMo wallets upon the user’s next top-up.
This overdraft lending feature is growing quite fast in Africa. In Nigeria for example, there is Kuda. Kuda is a digital-only bank that allows users to overdraw when they have insufficient balances. Kenya’s Fuliza is another overdraft lender and has also gained huge appeal among M-Pesa users and Safaricom says it is now giving out overdraft loans worth about $12 million on a daily basis.
While 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 credit. It is expected that the bank will continue to establish such partnerships in other East African countries Rwanda and Tanzania, where it is already operational.
Credit options like MTN Uganda’s MoMoAdvance will continue to help increase financial inclusion in Africa, and it really great to see companies outside of finance venturing into the financial space.