By Mark Kawalya
Absa Bank Uganda has announced a sh19 billion loan facility to Mogo Loans, a visionary partner transforming Uganda’s informal economy by making electric bikes accessible to commercial riders. The structured loan will be repaid over a period of 30 months. The loan will empower hundreds of riders to own environmentally-friendly electric bikes that are cheaper to maintain and operate.
Absa’s commitment to supporting the transition to a low-carbon economy and enabling greater financial inclusion is evident in the partnership with Mogo Loans. According to World Bank data, nearly 72% of businesses, 78% of the labour force, and 51% of GDP is generated from the informal economy in Uganda. Mogo Uganda aims to reduce the size of the informal sector from 51% to 45% by 2025 according to the Private Sector Development programme of the National Development Plan III.
Mogo Uganda has demonstrated significant investment in Uganda, with a net loan portfolio totaling 28 million EUR. Most of this is funded primarily through equity, shareholder loans, and offshore debt. Absa’s involvement through local currency funding mitigates Mogo Uganda’s FX risk. It creates a perfect alignment between Absa’s Environmental, Social, and Governance (ESG) values and Mogo’s efforts to tackle unemployment in Uganda’s informal sector.
The electric bikes funded through this loan offer a groundbreaking solution to Uganda’s ‘boda boda’ industry, offering environmental friendliness and cost savings for riders. For just UGX 8,000, riders can charge their bikes for 80 kilometers, far more efficient than fossil fuel bikes, which cost UGX 10,000 for 70 kilometers.
The agreement was executed in September 2024, with the first tranche of UGX 5 billion disbursed. The phased release of funds will continue as needed by Mogo Loan for on-lending purposes, with full utilization expected by the end of 2024.
Absa Bank Uganda entered this partnership based on the strength of Mogo Loan’s corporate guarantees and the potential of the project. With this financing, Mogo Uganda projects that they will be able to reach 1000 electric motorbikes issued through the hire purchase arrangement by the end of November 2024. This will ease the financial burden on many informal operators who are often expected to pay upfront for these assets.
