Since the introduction of mobile money in Uganda in 2009, the country has not gone beyond basic mobile products like airtime top-ups and bill payments, which offer little incentive for continued usage and new subscriber uptake. That should not be the case anymore: Mobile Telephone Networks (MTN) is pushing Uganda into a new era with a more advanced and unprecedented mobile savings and loan product to be launched this month.

 The MTN mobile savings and loan product results from a partnership between MTN and Commercial Bank of Africa, and is inspired by M-Shwari in Kenya and M-Pawa in the United Republic of Tanzania.[1] It aims at encouraging savings while improving access to microcredit for the unserved and underserved, thus bridging the savings and credit provision gap in Uganda.

The product features an opt-in procedure that can be initiated and completed with a mobile phone. The tiered interest rate for savings can reach 5 percent per month, whilst loans ranging from U Sh 5,000 to U Sh 1,000,000 (roughly US$1.50–US$300.00[2]) are offered with a 9-percent facilitation fee for a period of 30 days. The basic requirements to sign up are the following:

1. A mobile money account
2. At least six months of voice, data or mobile money usage
3. An acceptable identification document[3]

Adoption of mobile products in rural areas has been set back by challenges arising from the extensive geographical distribution of sparse populations and an unmistakable divide between the urban and the rural. Compared to urban areas, rural geographies are plagued by weak infrastructure, lack of sufficient network coverage and agent availability, low incomes and higher illiteracy levels that render mass market product approaches ineffective. In short, the one-size-fits-all approach just does not work.

In view of the fact that 84 percent (31 million) of Uganda’s population lives in a rural area and more than 50 percent is a low-income earner,^[4] the Mobile Money for the Poor (MM4P) programme in Uganda provided technical assistance to MTN Uganda to help them design a market strategy with the rural end user in mind. This work resulted in an MM4P-funded quantitative demand-side study carried out by PHB Development to understand saving and lending behavioural patterns in Uganda.

The study involved 24 focus-group sessions with 202 participants and 17 one-on-one agent interviews in 14 locations across Uganda. From Lira to Fort Portal, Kapchorwa to Lambu, and Bundibugyo to Oyam, an unmistakable pattern began to reveal itself: saving and borrowing behaviours were deeply influenced by cultural and religious beliefs and values so deeply entrenched that they are difficult to change.

Most profound of all, a natural categorization and profile of three main customer groups emerged based upon distinct saving and lending habits and future needs:

1. Rural women
2. Small-scale farmers
3. Micro-entrepreneurs

 

Rural women

The rural woman aspires to adequately provide for her family and secure family members’ future in the long term. Considering Uganda’s high literacy levels (74 percent of the adult population[5]), she is literate but cannot speak English or Luganda (one of Uganda’s major languages) and is more likely to share ownership of a phone—or even not own one—than her male counterpart. Only 14 percent of the rural women participants are banked. Rather, their main methods of saving are through saving groups (25 percent); mobile money, if they have a mobile phone (23 percent); keeping money at home (15 percent); and purchasing livestock to resell when there is need for funds (6 percent). Mobile money is particularly valued due to PIN security and convenience of access to money at any time. The major reasons for saving are to provide for the family’s basic needs, to assist family members and relatives, to pay school fees and to cover medical and other family emergencies.

The rural woman is credit averse and fears consequences of defaulting on payment, more so with formal institutions. Only 27 percent take loans, mostly from saving groups or from family/friends, and 5 percent borrow from banks/microfinance institutions (MFIs). The main reasons for taking loans are family and medical emergencies, school fees and daily household expenses. 

The rural woman perceives the following benefit from the MTN mobile savings and loan product: the ability to save small amounts frequently, effortlessly and privately, because her sources of income are varied and generally of low value. The loan recovery process for the MTN mobile savings and loan product is therefore ideal and preferred over methods used by other financial service providers.[6]

Direct engagement, through market activations and community forums at marketplaces, religious gatherings and saving-group meetings, should be effective in driving awareness and usage with this customer group.

 

Small-scale farmers

Small-scale farmers’ aspirations are financial security and stability, particularly when their crops are off season. Their levels of literacy vary, but men are more likely to be literate than women. Estimated to total 2.5 million in rural Uganda,^[7] they are dedicated to farming and diversifying their crops to ensure year-long yields; a few engage in other income-earning activities. 

Of those assessed, 36 percent save through mobile money, 28 percent save through saving groups, 11 percent keep their savings at home, 9 percent prefer to buy livestock and 8 percent save in banks/MFIs. Savings are mainly used to offset expenses related to farming, emergencies, school fees and bills.

Of the farmer participants, 42 percent take loans mainly from saving groups because they can get them quickly and without paperwork while 6 percent borrow from banks/MFIs (this group cites collateral requirements as a drawback to these loan products). Loans are taken to boost agricultural productivity, pay school fees and cover medical and family emergencies.

Considering that farmers have seasonal income and may sometimes suffer crop failure, valued attributes of loan products are repayment periods pegged to harvest times, attractive interest rates on savings and ability to easily access funds when required.

A combination of awareness campaigns and engagement activities targeting farmer meetings and agricultural events will drive awareness and adoption.

 

Micro-entrepreneurs

Micro-entrepreneurs who participated in the study aspire to expand and diversify their business enterprises, which are typically informal. They are mostly literate and are the most diverse of the three groups, situated in rural, peri-urban and urban areas.

Principal saving methods are mobile money (36 percent), banks/MFIs (35 percent), saving groups (15 percent) and home (12 percent). Mobile money is mainly used for saving small amounts for shorter periods because of its simplicity and ease of access. Savings are mainly for big purchases, future use, education (school fees), bills, transportation and family emergencies. Extra income is reinvested in the business.

They mainly acquire loans from saving groups (23 percent), banks/MFIs (20 percent) and money lenders (3 percent) to expand their business, purchase supplies and pay for emergencies.

Valued attributes are quick loan processing, longer loan duration to realize returns on investment (three months and above) and tailored loans for entrepreneurs with lower interest rates.

Micro-entrepreneurs are knowledgeable about financial service products at their disposal, hence awareness drives action.

 

Expected outcomes of customer profiling

The MTN mobile savings and loan product is oriented to the mass market, and the profiles identified are subsets of broader MTN market segments: Youth, Mass & Emerging, Traders, High Values and Progressives. Though the MTN mobile savings and loan product is in its nascent stages, the following outcomes are anticipated:

1. Insights from the three profiles will guide initiatives towards improving customer experience and create a better understanding of customer saving and credit needs, which will in turn influence future product refinements and marketing communication for subsequent project phases.
2. Messaging and experiential engagement for the MTN mobile savings and loan product will be clear and direct, targeting media and occasions with the widest outreach and utmost relevance to the three profiles. Messaging can be geared towards the ideas of ‘extra cash’ or ‘cash advance,’ which resonate better with these profiles.
3. Radio was identified as a medium that reaches all three profiles and so will be used to communicate in languages customers understand. Other mass communication channels such as television, print and billboards can include elements that resonate with the three profiles to widen reach.
4. Customer acquisition will be more specific, targeting the three profiles at specific gatherings through the use of community influencers, ambassadors and testimonials to cause a ripple effect.  

Identifying the three customer profiles is a major step towards gaining a deeper understanding of potential barriers to adoption for rural users and identifying scalable solutions. Feedback obtained will form an important framework for future engagement in rural areas alongside other planned marketing activities.

The views expressed in this publication are those of the author(s) and do not necessarily represent the views of UNCDF, the United Nations or any of its affiliated organizations or its Member States.