As the value of the mobile money transactions increase, non-performing assets or bad loans in banks have been increasing, see Figure 1.
Why? You may ask.
Banks are yet to integrate credit risk assessment between the Credit Reference Bureau and MoMo apps, which offer short term credit and quick fixes via the mobile phone. People prefer to take small loans over their mobile phones instead of servicing their loans. It is mobile money credit that is so convenient and easy to get.
Accordingly, customers find it responsive to their needs. This is something banks’ risk departments must think about, especially if a telecom company were to get a banking license or buy a bank! Telecoms have more robust and developed credit risk assessments of borrowers based on their mobile money histories.
Want to get the strategic moves banks must make to improve their loan quality? Attend our banking sector report launch this 14th August 2020 at 10 am, via Zoom. You can join from anywhere you are in the world free of charge.
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Copyright Mustapha B Mugisa, 2020. All rights reserved