The Bank of Ghana last Friday announced that it has designated digital credit services as a new Non-Bank Financial Service under the First Schedule of the Non-Bank Financial Institutions Act, Act 774.
The central bank explained in a public notice that the move “forms part of ongoing efforts to broaden access to the financial system with the view to promote financial inclusion”.
The BoG explained that its Public Notice does not confer automatic authorization or license to provide digital credit services on all entities which currently provide services and operate under the First Schedule of Act 774, but in due course it will “issue a Directive to lay out the licensing requirements for the provision of Digital Credit Services.”
The central bank’s decision to begin directly regulating the operations of digital credit operators, finally brings them under a regulatory framework that specifically addresses their activities.
Up till now, each one has been licensed and regulated as one form of non-bank financial institution or the other – micro-financier, digital payments provider or financial technology (fintech) firm, rather than as a provider of credit using digital means.
Consequently, Digital credit providers in Ghana operate at the intersection of mobile money, fintech innovation, and traditional financial regulation. Their model is designed to give individuals and SMEs fast access to small, short-term loans without the paperwork or collateral that banks usually demand.
Borrowers typically download a mobile app or use a USSD code. .Providers use Ghana Card (through the National Identification Authority database), mobile money account details, and phone metadata (e.g., SIM registration, call/SMS history) to verify identity and reduce fraud.
Creditworthiness is checked by analyzing airtime usage and mobile money activity, assessing smartphone data such as GPS, contact lists, repayment history, etc or checking with licensed credit bureaus like XDS Data Ghana, HudsonPrice, or Dunn & Bradstreet Ghana.
Once approved, loans are disbursed instantly into a mobile money wallet or sometimes directly to a bank account. Loan sizes are small at first – as low as GHc 50–100, but limits increase with good repayment behavior and can exceed GHc 5,000 on some apps.
To collect their loans back, providers often set up scheduled deductions from the borrower’s mobile money wallet or borrowers can repay through the app or via USSD.
Repaying on time improves the borrower’s score and raises future loan limits but late repayment usually attracts daily interest or penalty fees, and repeated default may lead to blacklisting at credit bureaus.
Up till now, digital lenders must be licensed either as Specialized Deposit-Taking Institutions (SDIs) or Payment Service Providers (PSPs). but these regulatory frameworks only address fair disclosure of interest rates and fees, data protection rules and reporting to credit bureaus rather than the specifics of digital credit services.
Impending specific regulation is expected to reign in over-indebtedness caused by easy access which sometimes leads to borrowers juggling multiple loans; high default rates, especially among first-time borrowers without financial discipline; and unregulated apps operating without BoG approval, charging hidden fees and harassing defaulters.
Prominent digital credit providers in Ghana include Fido Micro Credit, a licensed microfinance institution and MTN Quick Loan, a mobile-money-based lending service. Other operational and licensed platforms include SikaPurse, CedisPay, Miniloan, FundCedi, GhanaLending, and CediBoom Instant Personal Loan. These provide varied loan amounts, mostly short-term, through mobile app interfaces.
Digital credit services offer several attractions to borrowers. They are fast, with loan approval and disbursement in minutes, they do not require collateral and offer financial inclusion as they target the unbanked and underbanked who cannot access traditional loans.
