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gnuGrid CRB and Airtel mobile commerce Uganda limited (amcul) launch Uganda’s first-ever mobile credit scoring system

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GnuGrid CRB, Uganda’s first and only indigenous credit reference bureau to be licensed by the Bank of Uganda and Airtel Mobile Commerce Uganda Limited, a provider of affordable and secure financial services in Uganda have unveiled Uganda’s first-ever mobile credit scoring system.

Aptly named, Mobile Credit Score, the solution has been developed with the support and regulatory guidance from the Bank of Uganda and the Uganda Microfinance Regulatory Authority.

Unlike the traditional and more conservative credit reports available on the market today, which rely only on credit history supplied by regulated financial institutions, the more innovative and proactive gnuGrid CRB and AMCUL Mobile Credit Score goes beyond that and relies on over 400 alternative data points such as client mobile financial behaviour to create a more comprehensive and inclusive credit score.

“The future of lending is undeniably digital, at gnuGrid CRB we are at the forefront of this transformation. The use of alternative data, complemented by a hybrid of conventional banking data, forms the backbone of our approach. This ensures a holistic and inclusive evaluation of individuals’ creditworthiness, opening doors for a broader spectrum of borrowers who may have been overlooked in traditional lending models,” David Opio Obwangamoi, the Executive Director of gnuGrid CRB told stakeholders at the breakfast launch held at the Kampala Serena Hotel.

“One of the profound impacts of this credit scoring system is its ability to enhance reputational collateral; we understand that a good credit score is not just a number, it is a reflection of financial responsibility and trustworthiness. By providing lenders with a comprehensive and accurate assessment of creditworthiness, we are not just facilitating loans; we are building a foundation of trust within the financial ecosystem. This, in turn, will empower individuals to establish and strengthen their financial identities,” Mr. Opio added.

The solution will enable millions of Airtel subscribers to access affordable credit. The service will subsequently be extended to Airtel’s lending partners and all lenders within Uganda’s financial ecosystem, which includes Tier I-IV financial institutions as well as Non-Bank Payment Service Providers and Payment System Operators licensed under the National Payment Systems Act, 2020.

Under the Uganda National Financial Inclusion Strategy (NFIS) II (2023 – 2028), which aims to reduce poverty and promote economic growth through affordable and quality financial services, the government seeks to increase access to formal financial institutions (banks, non-banks, including mobile money) from 66% in 2021 to 75% by 2028 as well as increase private credit bureau coverage from 6.9% of adults in 2019 to 15% by 2028.

According to the World Bank’s Global Findex Database 2021 (Findex 2021), 66% of Ugandan adults are estimated to have access to a regulated financial account – a rise that has been driven by the penetration of mobile money. The report also notes that close to 77% of Ugandans borrow money – but only 31% borrow from a formal financial institution.

Findex 2021 also notes that while digital financial services (DFS) have enabled more Ugandans to access formal financial services – payments are the most prominent formal financial transaction at 64%. Formal saving and borrowing remain low, at 32% and 29% respectively.

One of the stumbling blocks to catalysing the immense potential of digital lending has been how to innovatively work around the classic way of assessing creditworthiness and other challenges such as lack of access to collateral, especially for women and the youth. Alternative data-driven credit scoring and other innovative digital lending models such as those being heralded by this new mobile credit scoring system have emerged as strong alternatives for effective and efficient loan origination, risk assessment, disbursements, repayments as well as performance tracking.

Efficient and cost-effective borrowing and lending

Commenting about the Mobile Credit Score, Japhet Aritho, the AMCUL Managing Director, said: “For AMCUL (Airtel Money Uganda), this partnership signifies a leap towards financial inclusion, empowering more people with access to credit. It’s about recognising the potential in each of our customers and supporting their aspirations. It’s about being a catalyst for growth and development in our communities”.

“As we embark on this exciting journey, we are not just offering a service; we are unlocking potential. We are creating opportunities. And most importantly, we are building a future where financial barriers are reduced, and dreams are within reach,” Mr. Aritho added.

Benefits to lenders include enabling the filtering out of high-risk borrowers; supporting business sustainability by minimising credit defaults as well as supporting the creation of tailor-made new products that will grow customer bases and clientele. Lenders will also be able to reduce the operational costs of lending, such as risk assessment and insurance. The resulting efficiency and cost reduction are expected to translate into reduced cost of money in the medium term, especially for genuine and credit-worthy borrowers.

Borrowers will also be able to know their creditworthiness/financial health instantly; which will in turn help them to improve their creditworthiness, access credit faster, as well as sustainably grow their loan limits.

“Financial inclusion is not just a goal; it’s a journey that empowers individuals, communities, and entire economies. With the introduction of our mobile credit score, we aim to extend the benefits of financial services to last-mile users, especially focusing on the youth and women of Uganda. We believe in the potential of every individual to contribute to the economic growth of our nation. Through this innovative credit scoring system, we are breaking barriers and providing opportunities for those who have been traditionally underserved,” Opio reiterated.

“This innovation is a testament to our commitment to fostering financial inclusion, a cause that resonates deeply with our mission at gnuGrid CRB,” he concluded. 

Stakeholders speak out

Speaking at the launch event, several government and private sector stakeholders, hailed the Mobile Credit Score as a transformative and ground-breaking development in the financial landscape of Uganda as well as a significant milestone in the journey towards financial inclusion up to the last mile person.

The Commissioner, Financial Services at the Ministry of Finance, Planning and Economic Development and the guest of honour at the launch, Mr. Moses Ogwapus said that the Mobile Credit Score was a “ground-breaking development that aligns seamlessly with the broader national core principles of financial inclusion, responsible lending, and the use of technology for economic empowerment”.

“The focus on financial inclusion, especially reaching the last mile customers, youth, and women, is a key pillar of our national economic development strategy. Microfinance institutions, particularly Tier IV, are crucial in delivering financial services to these underserved populations. The mobile credit scoring system unveiled today has the potential to revolutionise the way these institutions operate, making them more effective in reaching the grassroots and contributing to poverty alleviation”.

Pascal Mukisa, the Head of CRB Services, in the Department of Non-Banking Financial Institutions at the Bank of Uganda, said the use of alternative data in credit scoring, “creates a 360-degree understanding of who a prospective borrower is and what is his or her ability to repay”.

“As a regulator overseeing the sector, we recognise the importance of these advancements and the contribution they make to the stability, efficiency and inclusivity of our financial system. Let us celebrate this milestone and recognise the potential of alternative data and alternative credit scoring in transforming our financial lives and driving economic progress,” he said.

He hailed gnuGrid for standing out as the only indigenous CRB.

“Initially, we thought that credit information sharing was only a space for international companies from developed countries. But I’m glad and excited to present a local initiative that started from scratch and surprisingly, within a very short period, is now driving the innovation that we’ve all been waiting for,” he added.

Wilbrod Owor, Executive Director of Uganda Bankers’ Association (UBA), said that the partnership between GnuGrid CRB and Airtel Mobile Commerce Uganda Limited will unlock and unleash the huge untapped potential at the bottom of the pyramid. 

“For a long time, we used to have a perception, and perhaps we still do, that borrowers down there are very risky and the majority are in agriculture. If we maintain this perception without a solution, it means that our country will remain underdeveloped forever because that’s where the biggest portion of our population is,” Mr. Owor said.

“There is a huge potential, an opportunity to unlock potential at the bottom of the pyramid that credit scoring, using alternative data, is bringing out. The power of partnerships and collaboration brings out the power of synergies, technology and data that can be harnessed to scale up access to credit,” Owor aded..

Edith Tusuubira, the Executive Director of Uganda Microfinance Regulatory Authority (UMRA) applauded the credit score as a good step forward in unlocking financial access, especially for the youth who are the biggest consumers of digital financial services.

“Our mean age is 15.7 years. Most Ugandans are below 30 years; 77% of Ugandans are 25 years and below. They have moved away from paper transactions. Digitising access to financial services, especially bringing it to their mobile phones, is one step ahead in many right directions. I would like to thank and commend this partnership between gnuGrid CRB and Airtel Mobile Commerce Uganda Limited,” she said.

“The World Bank has already recognised credit rating and scoring as a crucial part of expanding access to finance. This is just one of the right steps in a good direction,” she added. 

Giles Aijukwe, the Chief Executive Officer at Letshego Uganda, said that the Mobile Credit Score will help the financial services industry address the problem of lender-customer information asymmetry.

“We in the financial services space, especially the lenders, are in the business of risk. In the past, the lender and the borrower treated each other with suspicion, yet we are supposed to be in a very symbiotic relationship. We give you a hand as a borrower, and you then have a responsibility to pay back,” he said.

“The first thing that this mobile credit scoring has done for us the lenders, especially those of us lending to the bottom of the pyramid is to solve the challenge of information asymmetry. That’s the biggest risk we deal with. Lenders are not sure that the information they are getting from borrowers is sufficient enough to make a decision. With this Mobile Credit Scoring, there are many data sets that this application can bring together and do a triangulation and assign a weight/rating based on your transaction behaviour with your telecom provider. Because we already have about 40% of information from other KYC channels and the traditional credit reference bureau information, this gives us a very reasonable amount of information on how to deal with the customer. It covers the gap of information asymmetry,” added Mr. Aijukwe.

Quoting the World Bank figures, Patrick Oketa, the Executive Director of Financial Sector Deepening Uganda (FSDU), said that previous methods of credit scoring only favoured the 9.1% of the population that have had access to credit before leaving out the other 90% that haven’t.

“The 90% who are unborrowed is a massive market. GnuGrid and Airtel Mobile Commerce Uganda Limited are demonstrating that alternative credit scoring is the way to go. Because this is the only way that we’re going to be able to bring the 90% that aren’t included, for access to formal credit,” said Mr. Oketa.

He added that FSDU is closely working with the MasterCard Foundation, “to enable as many of the grassroots players through Micro, Small and Medium Enterprises (MSMEs) to be able to access credit at market rates.

“Our role is to enable as many enterprises that will bring work to youth, and women down at the grassroots to be able to have access to credit, grow their businesses, and grow this economy,” he added. 

On his part, Arnold Byarugaba, the Country MSME Lead at Mastercard Foundation said that the Mobile Credit Score would complement the Mastercard Foundation’s work of enabling financial access to the last mile of the population, especially the women and the youth, who do not have access to physical collateral. 

“The traditional banking models and how credit is essentially assessed, is largely dependent on collateral, financial records etc. Yet, if you think about the typical person, at the last mile, they are very comfortable saving money on their phone. They are also very comfortable saving their money within SACCO or Village Savings and Loan Associations. A large population, up to 90%, is accessing credit through that mechanism. Alternative data is demystifying that because it is telling us that there are many ways you can assess someone, especially one who hasn’t accessed formal financial services before such as borrowing,” he said.  

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