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Need Fast Cash to Finish Your Home Construction? Consider Online Lending

Online lending is becoming the trend for commercial banks. Image source: Plus News

UGANDA, Kampala | Real Muloodi News | Many Ugandans construct their houses in stages, owing to limited funds. However, the sooner you can move into your newly constructed home, the sooner you can stop paying rent.

Therefore, sometimes it can make financial sense to take a small loan to finish your home construction so you can move in faster. The money you save in rent can be used to pay back the loan. 

Consider Michael Chris Adonyo, a young 26-year-old average income earner, who built a USh64 million 3-bedroomed house.

When Michael was at the roofing stage of his construction, he began researching loans on the internet. He learned about the Centenary Bank’s Home Improvement Loan, which offers attractive interest rates for homeowners wishing to finance the construction or renovation of their homes. These loans had much lower interest rates compared to a business or personal loans, so he approached the bank.

“I got small loans which I would pay before six months. Because I am self-employed, there is no stable income, so I can’t get lump sum of money at once. When I take a USh 4 million loan, they break it down so I can pay it every month. I would give in my incomplete house or land title as loan security. The better the house in value, the bigger the loans I would get. It was also scary that if I didn’t pay the loan, they would take our house,” says Michael.

“To finish the roof, I got USh 7 million in home improvement loans, to be paid back in 9 months. In total, I paid back USh 7.6 million. The interest rate was less than 10%, and I could decide to pay after a year or less,” he explains.

By diligently paying back the loans, he has now built a credit history with the bank. Therefore, obtaining loans in the future will be easier for further additions to his home, or for future investment in properties.

Most banks will offer a range of secured-leaning products to finish your home construction. Such loans include Home Improvement Loans such as  the one Michael took out with Centenary Bank. Or you could take a House Completion Loan, like that offered by Stanbic Bank. Such loans will require you to put up your land or building as security.

However, these days you can even get short-term unsecured bank loans on-line, which do not require you to put up your home as security.

Several banks in Uganda have introduced unsecured loan products where the bank loans are processed online via a computer or the mobile phone, with the phone only being used as a channel to process the credit and receive the money from the bank.

Unsecured loans, such as those given online and via mobile phones, are typically smaller in quantity, payable over shorter periods of time, and have higher interest rates than traditional loans.

The banks claim that these products are intended at reaching Ugandans who lack appropriate security under traditional banking rules and that they are simple to handle for the banks and also time-saving because they are quick.

A mobile phone (feature or smartphone), a savings history, and a bank financial card are among the requirements for the borrower.

A bank financial card allows banks to record one’s credit information to the credit reference bureau, as security for the loan. It contains information on a borrower’s payment history for all loans processed by any financial institution, and it may be accessed by any bank when determining a borrower’s creditworthiness.

Getting a financial card is time-consuming but an important process for first-time borrowers.

Online Lending: Unsecured Loans

Housing Finance Bank

Housing Finance Bank Uganda has partnered with Airtel Mobile Commerce and digital lending platform provider YABX, to enable Airtel Money customers to access quick loans when they do not have sufficient funds in their wallet.

“We need to remain proactive while coming up with solutions that relate to the needs of customers in our ecosystems,” Michael K. Mugabi, Managing Director of Housing Finance Bank, spoke about their rapid access online lending solutions in collaboration with Airtel.

He added: “Our purpose as a bank is to enable homeownership and provide financial independence to Ugandans.”

To access the Quick loans service, Airtel money customers can dial *185*7*10# to opt In and check their eligibility.

Centenary Bank

Centenary Bank’s Cente Mobile Loan service is a micro loan service that can be accessed via USSD (*211#) and the Cente Mobile Application

The Cente Mobile lending service has a minimum loan amount of USh5,000 and a maximum loan amount of USh5 million, with terms of 1, 2, or 3 months.

According to Centenary Bank, these online lending services are accessed by shortcodes (USSD) on any form of mobile phone or smartphone applications, which provide customers with a self-service method “to conveniently access small quick loans instantly for purposes of emergencies,”

Late payments are charged 1% per day on the outstanding balance up to a maximum of 15%, with interest rates averaging 7% per month for the loan term selected. All of this is intended to encourage the borrower to pay on time.

Dfcu Bank

Dfcu Bank offers the dfcu Mobi loan; an automated online lending solution available to individual customers on their internet banking platform. Customers can now  access instant short-term loans, without the need for collateral, as well as make the loan repayments in the comfort of their homes/work premises.

“We have harnessed the power of technology to deliver our services and products more efficiently to our customers, and we have stripped away from a large chunk of processes required in the usual mode of accessing loans,” said Dfcu Head of Personal Banking, Miranda Bageine Musoke, on the six-month-old Dfcu Mobi loan.

Stanbic Bank

Stanbic Bank’s online lending programme provides short-term loans ranging from 10,000 to 2 million shillings with a 30-day repayment period, although there is a possibility for early repayment with no penalties. Bageine claims that it was intended to meet clients’ low-cost emergency needs.

“Most of our customers, we have reassessed them so you will get that money in less than 30 seconds,” says Israel Arinaitwe, Head of Personal Markets at Stanbic Bank Uganda. “You probably don’t have access to a bank, and on any mobile phone, even kabiriti, you can dial *290# and get 2 million into your account in a moment.”

Equity Bank

Equity Uganda’s Equity Eazzy Loan programme offers customers who have been with the bank for at least six months rapid loans of up to three million shillings.

On a declining balance basis, interest rates range from 4% to 9% per month, but the loans also include 5% in insurance, processing, and appraisal fees.


These digitally processed micro loans were a response to emergency financial needs, according to the bankers, and are an outgrowth of mobile money lending products.

Salary earners are the primary target of banks for online lending, since in the event of default, the system automatically deducts funds from the borrower’s bank account, resulting in a low default rate.

Former Bank of Uganda (BOU) Governor Emmanuel Tumusiime-Mutebile anticipated the dominance of digital technology in the banking sector before his death and warned those who were hesitant of negative consequences.

“There will continue to be disruption in the banking sector. Institutions that fail to keep up might lose out and at the very worst be pushed out of business in the long run, however, this disruption to bank business models works in the interest of customers and the general populace,” he said.

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