A partnership between MTN Uganda and CBA recently brought to the Ugandan market the micro savings and loans product, MoKash. A week after the launch, CBA reported that over 80,000 mobile subscribers had signed up for the MoKash loans and savings product on mobile money in the first 48 hours. We don’t have latest figures but it’s expected that the growth continued on a high as more people got to know about the product.

If however you are one of those people who have not yet embraced the mobile loans idea, we’ve listed some differences between MoKash and regular bank loans to help you understand this better and how it could help you in your micro enterprise or in your personal finances.

Processing time
One of the biggest advantages that MoKash has over traditional loans is the instant loan processing. Whereas in a bank you have to fill in forms and wait days or even weeks to get an answer from the bank, with MoKash the moment you apply for the loan, you simply wait a couple of seconds to receive a notification that you have received the funds in your account.

This fast turnaround time means if you run into trouble and you need cash real quick, MoKash will sort you out instantly.

Repayment period
MoKash loans must be paid back in a period of 1 month, with an option to roll it over to the second month. This is a much shorter period than most bank loans which are usually a year or longer. This means that you use MoKash for short term needs.

For example, you might have had a slower week than usual, and your suppliers expect payment the next day and you are short. MoKash will give you the cash to pay off your suppliers and you can pay back MoKash during the course of the next weeks when business picks up again.

Vetting creditworthiness
If you’ve ever applied for a loan in the bank you might remember losing count of the number of forms you had to fill, and the number of times you signed. That is part of the process that the bank goes through to assess your creditworthiness. Now there are no forms to fill with MoKash, they use data they have on you, using artificial intelligence to assess you.

Some of the factors they use include how long you have been on MTN, your airtime and data usage patterns, your Mobile Money usage and others. Some documentation we’ve seen seems to suggest that MTN and CBA may also check with the Credit Reference Bureau for your borrowing reputation and it might also be factored in. That’s how your loan limit is arrived at.

Then once you start using MoKash, how you save, borrow and repay is also monitored and contributes to future assessment. So you need to save regularly, and to pay back promptly when you borrow.

Collateral
Yes, no collateral or security needed for a MoKash loan. Apart from salary loans, you must have collateral for nearly every other loan product in the traditional banking system. The provision of loans with no collateral means that many more people are able to get loans.

Loan amounts
If you have tried to get a MoKash loan, you already know your loan limit. The limit varies depending on your personal score, but is up to UGX 1m. Most people we’ve talked to complained that the limit was too low, but for an instant loan with no paperwork or collateral security, and for the intended purpose, I believe it’s good enough. The good thing is that when you build a solid record, your limit will be increased over time.

So MoKash amount limit means that you cannot borrow to build a house or buy a car, but it is sufficient for some cash shortfalls or if you’d like to restock your small business and pay back as customers purchase your goods.

Transaction costs
Another big advantage with MoKash is that there are no transaction costs for operating between your mobile money and MoKash savings account. With traditional banks and loans, you will be charged for several things when the loan is disbursed, sometimes up to 10% of the loan amount. So you can enjoy free transactions on MoKash and MTN Mobile Money.

If you still have more questions about MoKash you can read more of our articles about it or contact MTN Uganda or CBA directly.