The festive season is a period of giving and to many…receiving.
Thank you for reading this post, don't forget to subscribe!But for those of you planning to send mobile money to a friend or loved one this festive season, here is one simple rule:
First, ask which line is “safe” or else the system will just chop off whatever you have sent and you will not have helped that person at all.
Ever since the major telecom companies introduced their various micro-loan services (Airtel’s “Wewole” and MTN’s “MoKash”), many Ugandans have found it convenient to access small loans to wriggle out of financial emergencies. All one needs is a registered sim card, a short history of transacting mobile money and they are good to go.
People can borrow as low as Shs 5000 or as high as Shs 1 million depending on their financial history. Many small businesses in Uganda survive on these loans to stay afloat. As they borrow and pay back in time, their creditworthiness with the firms improves and so does the loan amount.
According to Uganda’s Banking Sector Report for 2023, Ugandans borrowed Shs 41 billion in micro-loans offered by telecom firms that year. The report projected that the figure would grow to Shs 50 billion by the end of this year.
Yet this ease of accessing micro-loans has also come with several headaches.
Borrowers who fail to meet repayment deadlines face automatic deductions from any incoming mobile money transfers. As a result, many Ugandans have been effectively locked out of their mobile money accounts during the most critical time of the year.
The fear of losing hard-earned cash to loan deductions has pushed many Ugandans to adopt unconventional solutions. To bypass their obligations, they now rely on the mobile money accounts of friends and relatives. It is stressful.
“I had no choice but to use my sister’s phone number,” says Esther Namutebi, a trader in Nakawa Market. “Every time I receive money on my line, MTN deducts it for the loan I’m yet to pay. This festive season, I’ve shifted all my transactions to her line.”
For many borrowers, the initial intention was to repay their loans promptly. However, the high cost of living, compounded by inflation and stagnant incomes, has made repayment increasingly difficult. What was once seen as a temporary solution to a financial shortfall has now spiraled into a long-term burden.
“I took a loan of Shs 50,000 to pay my son’s school fees,” says James Lule, a boda boda rider in Kampala. “But with fuel prices going up and fewer customers, I have struggled to repay. Now, I can’t even receive money for my Christmas shopping without deductions.”
Some financial experts have suggested a temporary freeze on automatic deductions to give borrowers a chance to recover financially.
“The current system is too rigid,” argues Moses Mukasa, a business consultant based in Namugongo
“While it is understandable that companies want their money back, the blanket deduction policy ignores the financial realities of many Ugandans. A more humane approach is needed, especially during the holidays.”
Sarah Nakyobe, a financial literacy trainer advises people to borrow only what they need and have a clear plan for repayment. Otherwise, the convenience of quick cash can quickly turn into a trap.
Yet for many people planning to have a blast this festive season, they have been hit by the reality that micro-loans are a double-edged sword. They may offer quick financial relief but the repayment challenges have left thousands in a precarious position in this festive season.
So, reader on which phone number should I send you mobile money as a small token of appreciating your loyalty to Bbeg Media?
Most of us are victims on this one. However, I appreciate the telecom companies for providing us with that quick cash because at times you might be stuck and that money comes to your rescue.