The Benefits of Fin-tech Loan Platforms in Uganda.
Updated: Oct 11
“ Another Fin-tech, Finablr a mobile network application that pre-qualifies and links borrowers secured by collateral to registered lenders in Uganda, gives the ability to any Ugandan who wants to earn money through lending and gaining an interest, a platform to earn passive income through lending to potential borrowers at flexible interest rates ”
In Uganda, according to Findex 2021,Close to 77% of Ugandans borrow money – but only 31% borrow from a formal financial institution.
Access to traditional financial services can be limited, Fin-tech lending platforms have emerged as a force of transformation. These platforms are not only reshaping the financial landscape but are also leaving a profound social impact on communities across the country.
In this article, we'll explore how Fin-tech lending is driving positive change, empowering individuals and businesses, and fostering economic growth in Uganda.
Financial Inclusion: Bridging the Gap
One of the most significant social impacts of Fin-tech lending is its role in promoting financial inclusion. In a country where a significant portion of the population is under-banked, Fin-tech lending platforms provide an accessible avenue for individuals and small businesses to access much-needed credit.
As a result of the work of fin-tech companies, the financial inclusion rate in Uganda has increased significantly in recent years.
According to the World Bank, the financial inclusion rate in Uganda was 43% in 2011. By 2022, the financial inclusion rate had increased to 75%.
Fin-tech lending has emerged as a lifeline for micro-entrepreneurs and small businesses in Uganda. These enterprises often struggle to secure loans from traditional banks due to stringent eligibility criteria. Fin-tech lending platforms offer them an opportunity to grow their businesses, create jobs, and contribute to the local economy.
For example, Numida loans which support semi-formal micro and small businesses with digital working capital loans of $100-$5000 disbursed via mobile money and payable in 1 -6 month period have managed ever since launch in June 2017, to have provided over $725,000 of unsecured credit to more than 1,700 Ugandan small businesses, 36% of which are led by women.
Numida clients increase their median monthly revenue by 32% and double their full-time, paid staff within six months.
Through such Fin-tech platforms like Numida, Micro-Entrepreneurs have been able to grow their businesses despite access to formal financial institutions.
Job Creation and Economic Growth
As small businesses thrive with the help of Fin-tech loans, they often expand their operations, leading to job creation within the community. This not only addresses issues of unemployment but also stimulates economic growth at the grassroots level.
According to a report by the Financial Sector Deepening Uganda (FSD Uganda), the fin-tech sector in Uganda created over 10,000 jobs in 2022. This is expected to increase to over 20,000 jobs by 2025.
Fostering Entrepreneurship and Income generating opportunities.
Fin-tech lending platforms encourage innovation and entrepreneurship by providing a platform for aspiring business owners to access the capital they need. This has led to the emergence of a vibrant entrepreneurial ecosystem, with startups and innovative businesses springing up across in Uganda.
For example, Clinic Pesa a digital platform for managing medical expense savings, micro-loans and payments. Provides its users with the option to withdraw savings at the end of the year with a 5% interest.
Another Fin-tech, Finablr a mobile network application that pre-qualifies and links borrowers secured by collateral to registered lenders in Uganda, gives the ability to any Ugandan who wants to earn money through lending and gaining an interest, a platform to earn passive income through lending to potential borrowers at flexible interest rates.
Financial Literacy and Education.
Fin-tech companies in Uganda are actively promoting financial literacy and education through their digital platforms.
Fin-techs like Chipper Cash are democratizing access to investment opportunities by offering educational resources and simplified investment platforms. These platforms provide users with the information they need to understand different investment options, assess their risks and returns, and choose the ones that align with their financial goals.
By empowering individuals with knowledge and skills to make informed financial decisions, fin-techs are fostering a culture of responsible financial management. Enhanced financial literacy leads to increased savings, better investment decisions, and improved economic resilience at both the individual and community levels.
Fin-tech lending is more than just a financial transaction; it's a catalyst for positive impact in Uganda. By promoting financial inclusion, empowering micro-entrepreneurs, creating jobs, and fostering education, Fin-tech lending platforms are playing a pivotal role in building a more inclusive and prosperous future for communities across the country. As these platforms continue to evolve, their impact on development is poised to grow even further, unlocking new opportunities for individuals and businesses alike.