VIDEO: XpressLoan receives $600 million from Ecobank Ghana, with a 4% default rate

With a 3.99% (US$23.94 million) non-performing loan rate, Ecobank Ghana has so far issued about US$600 million to 3.2 million Ghanaians through its microloan product, XpressLoan on MTN Mobile Money.

This was revealed by Owuraku Asare, Senior Banker and Digital Transformation Specialist of Ecobank, at the FinTech Summit at the current Mobile World Congress Africa 2023 in Rwanda.

About four years ago, Ecobank Ghana, MTN MobileMoney Limited, and Jumo established XpressLoan to offer low-cost, collateral-free microloans to consumers and small-business owners at an interest rate of 6.9%, which would be repaid in 30 days via the MTN MoMo platform.

Owuraku Asare claims that the program has benefited over 3.2 million Ghanaians to far, with an average loan amount of $34.71 per individual.

But eventually, some borrowers began to fall behind on their payments. They would either throw away their SIM cards to avoid paying back the loan altogether, or they would refuse to add money to their mobile wallets when it was time to make the payback.

Dan Sackey, the former managing director of Ecobank Ghana, voiced concerns last year about the high percentage of unpaid loans on the XpressLoans platform and urged the media to inform the public about the need of repaying microloans so that others can also profit.

Even though the US$23.94 million in unpaid microloans is a modest number in comparison to the US$600 million that has been disbursed so far, it is nevertheless a substantial sum of money.

Furthermore, Ecobank and its partners were expected to profit US$41.4 million from those loans at an interest rate of 6.9%. With US$23.94 million in unpaid debts, their remaining balance is just US$17.46 million.

However, Owuraku Asare tells Techfocus24 that because Ecobank and its partners have taken action to stop the NPL instances, there has been a noticeable drop in the rate of non-performing loans (NPLs) on the XpressLoan platform in recent times.

He clarified that although the loans have no collateral requirements, Ecobank and its partners are able to guarantee a repayment rate of more than 95% due to the high caliber of client data they gather and the scientific foundation of the entire operation.

Yes, there is a mechanism in place that prevents borrowers of Xpressloans and other MoMo loans from obtaining additional financial services until they repay their debts, all the way up to the regulatory level.

According to Owuraku Asare, the bank is now testing a US$5,000 digital loan product in Rwanda, which will eventually be expanded throughout its operating territories. This initiative is based on the success story of XpressLoan in Ghana, which has been copied in other markets.