Absa Bank Uganda has announced the conclusion of a shs19 billion loan facility to Mogo Loans, a visionary partner transforming Uganda’s informal economy by making electric bikes accessible to commercial riders.
Absa’s funding will support Mogo Loans in their mission to provide affordable loans to commercial riders, commonly known as ‘boda boda’ operators, to acquire electric bikes on hire purchase.
The structured loan will be repaid over a maximum period of 30 months, empowering hundreds of riders to own environmentally-friendly electric bikes that are cheaper to maintain and operate.
Speaking at the memorandum of understanding (MOU) signing ceremony, David Wandera, the Head of Markets for Absa Bank Uganda said the deal underscores the bank’s commitment to supporting the transition to a low-carbon economy and enabling even greater financial inclusion.
“We are aware that a significant share of economic activity is within the informal sector, however, access to financial services remains the main obstacle for growth of informal businesses and could be a possible incentive for them to formalise. This partnership goes beyond a typical loan transaction. We are pleased to enter this unique arrangement with Mogo Loans, which will drive greater financial inclusion, delivering credit to the last mile, while also contributing to a green economy.”
According to World Bank data, nearly 72% of businesses, 78% of the labour force, and 51% of gross domestic product (GDP) is generated from the informal economy in Uganda.
Uganda envisages 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, funded primarily through equity, shareholder loans, and offshore debt. Absa’s involvement through local currency funding mitigates Mogo Uganda’s FX risk, creating a perfect alignment between Absa’s Environmental, Social, and Governance (ESG) values and Mogo’s efforts to tackle unemployment in Uganda’s informal sector,” said Mikhail Vydryn, the Mogo
Uganda CEO.
“Since our launch in May, we have successfully financed nearly 870 e-boda units, enabling our clients to travel over 2.5 million kilometers using clean electricity. This initiative has not only resulted in a significant reduction of approximately 70 tonnes of CO₂ emissions but has also created substantial economic benefits for the riders,” Mikhail emphasized.
The electric bikes funded through this loan offer a groundbreaking solution to Uganda’s ‘boda boda’ industry.
With no emissions, they are environmentally friendly, aligning with global trends toward greener transportation. The bikes also present significant cost savings for riders.
For just shs8,000, riders can charge their bikes for 80 kilometres, far more efficient than fossil fuel bikes, which cost shs10,000 for 70 kilometres.
The lower operational and maintenance costs make this an innovative and economically viable alternative.
The agreement was executed in September 2024, with the first tranche of shs5 billion disbursed.
The phased release of funds will continue as needed by Mogo Loan for on-lending purposes, with full utilisation expected by the end of 2024. This phased approach ensures the customer can align loan disbursements with their operational needs, reinforcing flexibility and support throughout the deal lifecycle.
Speaking about the facility, the bank pointed out that this was a landmark agreement, requiring navigation of complex negotiations and multi-jurisdictional legal frameworks to protect all parties involved.
“Despite the lack of tangible security, Absa Bank Uganda confidently entered this partnership based on the strength of Mogo Loan’s corporate guarantees and the potential of the project. At Absa Bank, we believe that our clients’ stories are central to everything we do. Every transaction we engage in is a testament to our commitment to empower, uplift, and transform the communities we serve. This partnership with Mogo Loan reflects our ongoing investment in solutions that address local challenges while promoting sustainable growth,” Wandera said.
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, easing the financial burden on many informal operators who are often expected to pay upfront for these assets with large sums of money they may not have.
