MTN Mobile Money (MoMo) Loan: A complete rip-off on the poor, vulnerable and struggling masses?

Attention:

Bank of Ghana (BoG)

Securities and Exchange Commission (SEC)

About three months ago, MTN MoMo Loan increased the monthly rate of interest from 6.9% to 8.9%. With the previous monthly rate of 6.9%, the annual rate would be 82.8%.

With the previous monthly rate of 6.9%, if you borrow GHC 1,000 from MTN MoMo Loan, you first incur a withdrawal charge of GHC 10 to withdraw the loan from your MoMo wallet, plus the interest of GHC 69. This brings the total cost of the one-month loan to GHC 79. 

If you borrow GHC 2000 but are not able to withdraw the entire GhHC2000 in one transaction from a MoMo Agent, then you incur a withdrawal charge of GHC 20 to withdraw the loan from your MoMo wallet, plus the interest of GHC 138. This brings the total cost of the one-month loan of GHC 2,000 to GHC 158.

After the increment of the monthly interest rate to 8.9%, the monthly interest on a loan of GHC 1,000 is now GHC 89, plus the withdrawal charge of GHC 10; bringing the total cost of the one-month loan to GHC 99.

For a loan of GHC 2000, the total monthly cost is now GHC 198; that is the withdrawal charge of GHC 20 plus the interest of GHC 178. With the new monthly rate of 8.9%, the annual rate of interest on the MTN MoMo Loan would be 106.8%.

Is this not a complete rip-off or "exploitation" of the poor and struggling masses who patronise the MTN MoMo Loan as a last resort? 

Well, as if that is not enough, MTN has now introduced a further charge of a processing fee of 1% for a monthly loan transaction that does not involve the use of paper or stationery between the borrower and the lender. 

Henceforth, if you borrow an amount of GHC 1,000 from MTN MoMo Loan for a month, you pay GHC 10 for the processing fee (deducted from the loan), GHC 10 for withdrawal of the loan from your MoMo wallet, plus the interest of GHC 89, making a total of GHC 109. 

If you borrow GHC 2,000 you pay a processing fee of GHC 20 (deducted from the loan), withdrawal charges of GHC 10 to GHC 20 to withdraw the loan from your MoMo wallet (depending on how you do the withdrawal), plus the interest of GHC 178. This brings the total cost of a one-month MTN MoMo Loan of GHC 2,000 to GHC 218.

Is MTN not having a filled day off for the poor and struggling masses whose last resort is the MoMo loan? Does this not amount to an exploitation of the poor and struggling masses by MTN? 

On September 11, 2023, I borrowed GHC 2,000 from MTN MoMo Loan. As can be seen from the accompanying text messages of the transaction below, the entire loan amount of GHC 2,000 was deposited into my MoMo wallet: 

XpressLoan: Loan of GHC 2,000 successful. GHC 2,177.99 will be collected from your MTN Account on 11/10/2023. Funded by Ecobank. http://termsmobile.com/mghxpressloan XpressLoan: Your loan has successfully been paid into your MoMo wallet on 11/09/2023 at 4:16 p.m. Kindly call 100 if you did not initiate this loan request. Thank you.

On October 11, 2023 (exactly one month), I employed whatever means necessary to make sure the loan amount and interest of GHC 2,178 was in my wallet to settle the loan. Well, right after settling, I put in a request for a new facility. I had to return the money to their owners. Guess what happened this time. 

I was shocked to see that MTN has now introduced a new charge - a processing fee of 1%. With the increment in the rate of interest, MTN sent out notification messages to subscribers. However, with the introduction of the processing fee, there was no prior notification to subscribers.

So, for the very first time, I was charged a processing fee of GHC 20 for my new loan of GHC 2,000 on October 11. The processing fee was deducted from the loan amount. As a  result, GHC 1,980 was paid into my wallet; not the entire loan amount of GHC 2,000 as was done a month before on September 11.

 

Below are my MTN MoMo transaction text messages on October 11, 2023: 

XpressLoan: GHC 2,177.99 will be deducted from your account today to repay your loan. Failure to repay will result in a 12.5% late payment fee. (This was a reminder message sent to me as my loan settlement was due in a few hours)

XpressLoan: Thank you for settling your loan. Dial *170# to see if you qualify for another loan.  GHC 1,980 was paid to your MTN Account. A processing fee of 1%(GHS 20) was charged on your loan amount. Funded by Ecobank http://termsmobile.com/mghxpressloan. 

But for the fact that I had to return monies that were paid into my MoMo wallet to enable me to settle the old loan that was due, I would not have proceeded with the new application. Sadly, I found myself in a catch-22 situation. 

This is the plight of the poor and the masses of this country, who have no choice but to resort to this outrageous and exploitative MoMo Loan scheme by MTN and its affiliate partners Ecobank.

I became aware of the MTN MoMo Loan sometime in 2019 when a National Service Personnel at an establishment pleaded with me to transfer GHC 500 into her MoMo wallet to enable her to settle her overdue loan. She said she would reapply for a new one right after settling the old one, and transfer the GHC 500 back to my wallet. She was hard-pressed, trying as much as possible to avoid a late penalty charge from MTN. 

This was before E-Levy was introduced. Guess what the charges would be today for such a transfer from my wallet to hers; and the reverse transfer by the struggling NSS personnel.  During COVID-19 lockdowns months later, I decided to try MTN MoMo Loan myself. For my first application, I was granted GHC 80. For years of my continuous patronage of the service, my loan limit is now GHC 2,220. 

In my now five years of patronage, only once did I incur a late penalty charge. Outrageously, the penalty charge was applied to the entire loan amount, even though I had settled more than two-thirds of the amount before the deadline for the late penalty charge.

About three months ago, when the rate was increased from 6.9% to 8.9%, I decided not to patronise MTN MoMo Loan any longer. My reason for not wanting to patronise the service again was that I found the new rate of 8.9% to be outrageous and a complete rip-off.  Well, it is easier said than done. As the saying goes:

"If wishes were horses", most Microfinance and Savings and Loans companies operate a monthly interest rate of 5%.  So, for MTN to be charging a monthly rate of 6.9% for its MoMo loan was a bit on the high side.

But for the fact that it is an instant electronic service and a lifeline when one needs it the most, sometimes even for health or medical emergencies, it was somehow worth resorting to as a lifesaver. 

But for MTN to arbitrarily increase the rate from 6.9% to 8.9% barely three months ago, and to now start charging a processing fee for an electronic service transfer, leaves much to be desired. 

I think this is a complete rip-off on the poor and struggling masses of this country, who unfortunately are the ones who patronise MTN MoMo Loan.  Is there a consumer protection watchdog in this country? Is BoG and SEC aware of these rates and charges by MTN?

Is BoG and SEC regulating MTN on these charges?

Is Corporate governance failing the poor and vulnerable and the masses of this country?