{"id":31300,"date":"2022-05-21T18:05:04","date_gmt":"2022-05-21T18:05:04","guid":{"rendered":"https:\/\/www.africa-press.net\/uganda\/all-news\/fintechs-offer-value-trap-opportunity-for-borrowers"},"modified":"2022-05-21T18:12:44","modified_gmt":"2022-05-21T18:12:44","slug":"fintechs-offer-value-trap-opportunity-for-borrowers","status":"publish","type":"post","link":"https:\/\/www.africa-press.net\/uganda\/all-news\/fintechs-offer-value-trap-opportunity-for-borrowers","title":{"rendered":"Fintechs offer value trap, opportunity for borrowers"},"content":{"rendered":"

Africa-Press – Uganda. <\/strong><\/span>Experts are urging virtual borrowers to proceed with caution as the soaring cost of living drives many into the arms of lenders.<\/p>\n

The convenience and presence of virtual spaces on the Internet have seen a number of unsuspecting virtual borrowers fall prey to predatory lenders in the recent past.<\/p>\n

The modus operandi of a number of \u201cmobile lending apps\u201d has invited a number of questions, with many of their clients prone to being fleeced.<\/p>\n

Anecdotal evidence has shown that by the time a transaction is wired to the customer\u2019s mobile phone, nearly half of the amount applied for has been deducted for various flimsy reasons.<\/p>\n

For instance, each \u201csoft loan\u201d one applies for is charged dues such as service fee, risk management fee and even organisation fee before it is deposited. All of this is before the interest on the cash loan is deducted.<\/p>\n

Uganda Communications Commission (UCC) has described the mobile lending apps that the predatory lenders use as agile.<\/p>\n

The UCC executive director, Ms Irene Kaggwa-Sewankambo, likens the situation to when \u201cloan sharks or money lenders first exploded in the financial scene\u201d in the country.<\/p>\n

Due diligence<\/b><\/p>\n

Ms Kaggwa says even after doing their homework, the people that the apps target should \u201calways be cautious.\u201d<\/p>\n

The UCC regulates the telecommunications services and infrastructure on which the predators literally hide in plain sight. The regulator works in tandem with the central bank that provides technical advice and chips in with interventions when necessary to guarantee security of the digital financial or fintech industry.<\/p>\n

\u201cThere has been a debate about what kind of regulatory oversight is required over fintechs and digital financial services to protect consumers and in respect to fair competition when compared to requirements on traditional financial institutions,\u201d Ms Kaggwa said.<\/p>\n

\u201cWhile some of the requirements placed on traditional financial institutions may be onerous to fintech or digital financial services, there is still a need to protect consumers from exploitation,\u201d she added.<\/p>\n

Ms Kaggwa says the ubiquitousness of the Internet \u201cadds another twist to this puzzle\u201d in the sense that the operation of players in different jurisdictions brings about many uncertainties.<\/p>\n

\u201cFor example, how sure are you about who they claim they are, where they are situated, where would you find them if they suddenly went off air?\u201d she said, adding, \u201cSo Ugandans should be very careful and do due diligence. Evaluate the risks before transaction. What is easy may turn out more expensive in the long run.\u201d<\/p>\n

When contacted, the director of research at the Bank of Uganda (BoU), Mr Adam Mugume, said: \u201cMobile lending apps are not under the category of BoU Supervised Financial Institutions.\u201d<\/p>\n

What this effectively means is that the central bank cannot sanction the predatory lenders. The National Payments Systems Act 2022 formalised the regulatory oversight of BoU over digital financial services like mobile money operating in the country. The central bank admits to powerlessness when it comes to predatory lenders whose web of deceit could be transnational.<\/p>\n

\u201cConsumers should be advised to disassociate from unregulated financial service providers. Otherwise when they face challenges, no regulatory institution would have the mandate to intervene on their behalf,\u201d Mr Mugume warned, adding, \u201cIf consumer of financial services feels cheated by a financial services provider supervised by BoU, we have a customer complaint desk that handles such complaints.\u201d<\/p>\n

Seismic shift<\/b><\/p>\n

Fintech startups in Uganda have on their part asked that a broad brush not be used while issuing condemnation.<\/p>\n

Mr Innocent Kawooya\u2014 whose HiPipo Foundation was awarded the Best Financial Inclusion Organisation in East Africa at the Fintech Awards 2022, says bad apples should be set aside. He advises against throwing the baby out with the bath water.<\/p>\n

He said: \u201cFor many years banks and other players in Uganda\u2019s formal financial system failed to achieve a target of more than a few million people uniquely borrowing money.\u201d<\/p>\n

He puts the travails of traditional banks down to \u201cunattainable\u2026Know Your Customer requirements\u201d that among others requires borrowers to have collateral, rock solid employment record, and proof of earning a regular salary.<\/p>\n

\u201cWe now are witnessing a seismic shift in how lending is done,\u201d he says, adding, \u201cFirst it was the mobile network operators partnering with banks, as we are seeing with NCBA and MTN Uganda, and Jumo\u2019s partnership with Airtel. The latter have, for example, introduced micro-loans as low as $2, which you get on your phone in real time, and can pay back at just nine percent interest after a period of a month.\u201d<\/p>\n

Mr Kawooya further reveals that other players like Card Pesa and Numida who can allow \u201ca borrower\u2026to repay within a week at the same fixed interest rate\u201d have joined the space.<\/p>\n

\u201cThe attitudes that governed lending for long are being erased,\u201d Mr Kawooya notes, adding, \u201cThe players in the micro lending space have no qualms about offering credit lower than $300. They readily target the long underserved\u2014like farmers\u2014as long as, say, the village chairperson knows them.\u201d<\/p>\n

Mr Kawooya admits that \u201cthe costs are still so high for most low income users\u201d, but he hastens to add that \u201ca concerted effort needs to made to build meaningful collaborations especially on buildings rails and rules for new age digital lending platforms to ensure that they are made more affordable for the end user.\u201d<\/p>\n

For More News And Analysis About Uganda<\/a> Follow Africa-Press<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Africa-Press – Uganda. Experts are urging virtual borrowers to proceed with caution as the soaring cost of living drives many into the arms of lenders. The convenience and presence of virtual spaces on the Internet have seen a number of unsuspecting virtual borrowers fall prey to predatory lenders in the recent past. The modus operandi […]<\/p>\n","protected":false},"author":84,"featured_media":31299,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,8,12],"tags":[233,240,234],"class_list":["post-31300","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-homepage-english","category-policy","tag-africa-press","tag-africa-press-uganda","tag-uganda"],"yoast_head":"\nFintechs offer value trap, opportunity for borrowers - Uganda<\/title>\n<meta name=\"description\" content=\"Experts are urging virtual borrowers to proceed with caution as the soaring cost of living drives many into the arms of ...\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.africa-press.net\/uganda\/all-news\/fintechs-offer-value-trap-opportunity-for-borrowers\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Fintechs offer value trap, opportunity for borrowers\" \/>\n<meta property=\"og:description\" content=\"Experts are urging virtual borrowers to proceed with caution as the soaring cost of living drives many into the arms of ...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.africa-press.net\/uganda\/all-news\/fintechs-offer-value-trap-opportunity-for-borrowers\" \/>\n<meta property=\"og:site_name\" content=\"Uganda\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/AfricaPressTunisiaa\" \/>\n<meta property=\"article:published_time\" content=\"2022-05-21T18:05:04+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-05-21T18:12:44+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/static.africa-press.net\/uganda\/sites\/34\/2022\/05\/postQueueImg_5-62892b8616e75.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"800\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"cfeditoren\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"cfeditoren\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.africa-press.net\/uganda\/all-news\/fintechs-offer-value-trap-opportunity-for-borrowers#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.africa-press.net\/uganda\/all-news\/fintechs-offer-value-trap-opportunity-for-borrowers\"},\"author\":{\"name\":\"cfeditoren\",\"@id\":\"https:\/\/www.africa-press.net\/uganda\/#\/schema\/person\/068c7ab4e9634ae78ec5d54ec46598bb\"},\"headline\":\"Fintechs offer value trap, opportunity for borrowers\",\"datePublished\":\"2022-05-21T18:05:04+00:00\",\"dateModified\":\"2022-05-21T18:12:44+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.africa-press.net\/uganda\/all-news\/fintechs-offer-value-trap-opportunity-for-borrowers\"},\"wordCount\":900,\"commentCount\":0,\"image\":{\"@id\":\"https:\/\/www.africa-press.net\/uganda\/all-news\/fintechs-offer-value-trap-opportunity-for-borrowers#primaryimage\"},\"thumbnailUrl\":\"https:\/\/static.africa-press.net\/uganda\/sites\/34\/2022\/05\/postQueueImg_5-62892b8616e75.jpg\",\"keywords\":[\"Africa Press\",\"Africa Press-Uganda\",\"uganda\"],\"articleSection\":[\"all news\",\"homepage-english\",\"policy\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.africa-press.net\/uganda\/all-news\/fintechs-offer-value-trap-opportunity-for-borrowers#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.africa-press.net\/uganda\/all-news\/fintechs-offer-value-trap-opportunity-for-borrowers\",\"url\":\"https:\/\/www.africa-press.net\/uganda\/all-news\/fintechs-offer-value-trap-opportunity-for-borrowers\",\"name\":\"Fintechs offer value trap, opportunity for borrowers - 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