The report attributes the rise to the penetration of mobile money, although most of them are still unable to borrow. The Findex 2021 reports that while close to 77 per cent of adult Ugandans borrow money, only 31 per cent borrow from a formal financial institution.

The report 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 per cent. Formal saving and borrowing remains low, at 32 per cent and 29 per cent respectively.

Experts attribute this to lack of a reliable credit scoring system for users of digital financial services as most lenders are still stuck to the classic way of assessing creditworthiness and ability to repay, which considers transaction history, collateral, just to mention a few.

To solve this, GnuGrid CRB and Airtel Mobile Commerce Uganda Limited have innovated an alternative data-based credit scoring system. The Mobile Credit Score, unlike the traditional and more conservative credit scoring system, relies on more than 400 alternative data points such as client mobile financial behaviour to create a more comprehensive and inclusive credit score.

The credit score is linked to one’s National Identity Number, meaning that users can be traced across various sim-cards. The solution will enable more than 14 million Airtel subscribers to access affordable credit, should they require it.

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.

“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 last week.

“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,” Opio added.

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,” 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, a joint statement from gnuGrid CRB and Airtel Money noted.

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. Speaking at the launch event, Moses Ogwapus, the commissioner, Financial Services at the ministry of Finance, Planning and Economic Development, and the guest of honour at the launch, 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 and what his or her ability to repay is.”

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