The Fact Behind BoG’s Caution to MoMo Loan Defaulters

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People walk past the Bank of Ghana in Accra, Ghana. Photo by: REUTERS / Zohra Bensemra
Bank of Ghana

Out of the blue on Wednesday, September 28, 2022, the Bank of Ghana issued a subtle threat to defaulters of mobile money loans, asking them to pay their loans or be blacklisted by credit bureaus of all regulated financial institutions in the country.

The threat was specifically targeted at defaulters who have refused to register their SIM cards to avoid being traced. Indeed, the ongoing SIM registration with the Ghana Card makes everything about the SIM holder visible to regulators and organizations – bank accounts, residential address and more. So, if you owe on the mobile money platform, the money can probably be taken from your bank account if you refuse to pay.

I am not too sure if that is legal, but some insurance companies have been found to engage in that practice of taking moneys from other accounts in a policyholder’s name for premiums, even where the policyholder has provided a completely different account details for the purpose. I have personally been a victim of that unethical conduct, but the regulator did nothing about my case.

So, it is understandable why someone who owes mobile money loans would want to avoid registering his or her SIM card to prevent regulators and organizations from having visibility of all his or her other details.

Is the threat the fix?

But is a threat to blacklist such persons the ultimate fix for this problem? I read the central bank’s press release and I found it quite interesting for a number of reasons.

Firstly, a press release simply means the stakeholders in that industry want the media to join the effort at getting defaulters to pay. But they are refusing to do one very simple thing – telling us how many people owe MoMo loans and how much they owe in total.

I don’t know why the stakeholders in that space are shying away from that information. We had a press conference with the MD of one of the banks that run a mobile money loan service on MTN. We specifically asked for those two numbers but he deliberately swerved the question and rather asked the media to help them encourage defaulters to repay their loans. A top executive of another mobile money loan platform directly told me those numbers are “internal business information” so he can’t share.

All they keep saying is the default rate is high, but everyone is refusing to share the numbers. First year in journalism school, I learnt that numbers and pictures tell the story better then plenty words. The way to get the media to really buy into the fight is to show us the NUMBERS. It is not enough to say the default rate is significant without showing us the hard evidence – volume and value.

Secondly, it is very interesting that the BoG has chosen to use a subtle threat about credit worthiness records to fix this problem, when in fact, a greater majority of those defaulters are not people who really care much about their credit records, and would probably never go to any regulated financial institution for loans.

Mobile money loans are micro loans, or if you like, nano loans. The institutions that give MoMo loans claim they do so on the basis of data and not demographics. But they know that a greater majority of people who take and default on MoMo loans can’t afford bank loans. They will hardly walk to a bank or any regulated financial institutions and go through the long and cumbersome procedures for loans. So, I don’t know what the BoG thinks it is doing by threatening to make financial institutions blacklist them.

Besides, the names on a lot of the phone numbers linked to the MoMo loans most likely belong to non-existent people. How did that come about? The telcos seem to have taken advantage of the flaws in the previous SIM registration exercise years back, and registered people for mobile money without actually confirming their IDs properly. At the time, all national IDs were allowed for SIM registration, and because there was no ID verification system, anybody could create fake IDs and use it to register a SIM card.

Bad SIM Registration

The practice-in-chief then was that even telcos agents were pre-registering SIM cards with fake IDs and selling them to people who do not have the time and patience to wait for SIM cards to be registered in their own names.

But to get a mobile money wallet registered on your SIM card, one needed to visit the respective telco’s customer service center and show proof of SIM ownership with an ID that matches the one on the SIM. Many people were unable to that and yet they have mobile money wallets on SIM cards registered in the names of non-existent persons with fake IDs.

So, the million “eCedi” question is – who are the BoG seeking to blacklist – the users of those phone numbers or the non-existent people who’s fake IDs were used to register the SIM cards? BoG needs to investigate that. They need to find out from the telcos how so many people got MoMo wallets on SIM cards registered in other people’s names.

Any telco that allowed agents to register MoMo wallets also have questions to answer. In this day and age of increased digital fraud, how did telcos allow their agents, some of whom are criminals themselves, to create mobile money wallets remotely?

New SIM cards

Again, I wonder why it has not occurred to the BoG and the MoMo loan stakeholders that while they are busy focusing on the holders of the defaulting SIM cards, maybe the users of those SIMs have actually registered completely new SIMs in their own names and have thrown the bad SIMs with the MoMo loans in the bin.

BoG should be looking at those issues instead of threatening to blacklist largely non-existent people and people who would most likely never seek loans from any regulated institution.

Having said that, I am also reliably informed that a few of those defaulters have also been caught wanting recently, while trying to get car and or home loans. Some lady was said to have gone for a car loan at one of the banks and was confronted with some GHS200 MoMo loan she was owing. She had to go clear the loan, and that even raised questions about her credit worthiness as well.

Home Loans Boom

Speaking of home loans, that is the REAL REASON why BoG is pushing the MoMo loans defaulters to go pay those small loans and improve their credit rating.

Techgh24 is reliably informed that there is a home loan and mortgage boom in the pipeline and BoG wants ordinary Ghanaians to be the main beneficiaries. But a lot of those people have MoMo loans to pay. So, the central bank is on a mission to help them clear their loans and qualify for the affordable home loans about to hit the country with a bang. 

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