The interest rate on MoMo loans will increase

Amid rising money market interest rates, Letshego Ghana Managing Director Arnold Parker revealed that interest rates on Qwikloans will rise in the coming weeks.

Qwikloan, an innovative financial solution from Letshego Ghana and MTN Mobile Money (MoMo), offers short-term, unsecured, fast and convenient loans to MTN mobile money subscribers – currently totaling 42 million since his creation.

Briefing investors and other stakeholders during the Fact Behind the Figures held at the Ghana Stock Exchange (GSE), Mr. Parker said, “Without certain actions that we have taken, what would have happened is that not only margins would have decreased, but our interest expense would have exceeded interest income; because as we speak, the Treasury bill rate is higher than our interest rate”.

Currently, the interest rate on a 30-day Qwik loan is 6.8%. However, borrowers who default on the loans are penalized with a charge of 12.5%.

On the other hand, Treasury rates fell from 12.52% at the beginning of January 2022 to 24.68% on June 20, 2022.

“So, unfortunately for our customers, we had to revise our rates as soon as possible,” the CEO said.

Mr Parker further disclosed that the number of loans was around 42 million. “In terms of disbursements, we are disbursing an average of GH¢10 million in loans per day. This therefore represents approximately 300 million GH¢ per month. That’s 2.6 billion GH¢ per year, technically.

“So it was a great learning experience to go out with our partners Jumo and MTN; it took a lot of learning, understanding customer behavior, understanding repayment behavior, being able to schedule loans and repayments in a way that ensures collections stay optimal.

“So it’s a work in progress. There is much more to do in this space. And hopefully in the years to come, that’s what we’ll be paying more attention to,” the CEO emphasized.

He mentioned that the E-levy and Ghana Card slightly affected the number of loans.

Most mobile money users have reduced the number of funds held in their mobile wallets in order to avoid electronic debit fees. This has reduced the loan amounts to which clients are entitled.

However, it is certain that customers will eventually realize the exemptions – which should keep them coming back to the platform.

“I’m sure; eventually when they realize there’s a lot of exemptions, maybe they’ll come back. And so what we’ve seen is that because they’re not using often their wallet, they are now also eligible for lower amounts. And so those are the learnings, and we immediately need to reprogram our algorithms to take care of that,” he said.

James V. Hayes