Kampala, Uganda – The cost of education in Uganda can be overwhelming for many parents, with tuition fees paid every term or in a lump sum for the year. However, financial challenges make it difficult for some parents or guardians to meet these expenses, leading to a reliance on borrowing.
Commercial banks, microfinance institutions, and micro-lending financial technology (fintech) firms offer various loan products, but short-term credits with high interest rates can be challenging to repay within three months.
To address this issue, fintech companies like FURAHA are offering affordable school fees loans with lower interest rates. FURAHA has partnered with platforms like MoMopay of MTN and PegPay of Pegasus to make lending for tuition easier, convenient, and cheaper, with a loan interest rate of 5% per month.
According to Yustus Aribariho, a co-founder at FURAHA, the lack of proper financing mechanisms is a major problem, with only about 10% of children enrolled in Primary One able to complete Senior Six.
FURAHA’s loan product is designed to be safer, with the money paid directly into the school’s fees bank account, protecting against losses or misuse.
Aribariho, Co-Founder of Furaha, a fintech company also challenged the traditional narrative around financial inclusion, emphasizing the need for a more purpose-driven approach.
He argued that the current focus on providing small loans to individuals has failed to address the real challenges facing people in Africa. “We’re not just talking about access to credit, but what that credit is used for,” he said.
Aribariho highlighted the example of education, where the cost of school fees is a significant burden for many families. He noted that UNESCO estimates that the education funding gap in Sub-Saharan Africa is $70 billion, with 60% of children unable to access quality education due to financial constraints.
Furaha has partnered with Pegasus, a payment platform, to create a purpose-driven lending platform that addresses this specific need. The platform assesses creditworthiness and provides loans that are paid directly to schools, reducing the risk of misuse and ensuring that the funds are used for their intended purpose.
Aribariho emphasized the need for collaboration between like-minded players to create an ecosystem that solves real problems. “Banks have the resources, but traditional lending practices have failed to evolve,” he said. “We’re using data-driven models to assess creditworthiness and provide loans that meet people’s real needs.”
Furaha’s ambition is to impact 10 million kids across Africa in the next five years, a goal that Aribariho believes is achievable with the right partnerships and approach.
Ronald Azairwe, Managing Director of PegPay, run by Pegasus, described the company’s partnership with Furaha, a fintech firm, as a “natural fit” that addresses a critical need in the education sector.
Azairwe noted that PegPay’s product was designed to provide instant, inclusive, and secure services.
Azairwe highlighted the challenges faced by parents in paying school fees, which are typically due three times a year. He noted that many parents struggle to pay these fees in a lump sum, and that Furaha’s solution provides a welcome relief.
“Furaha has come in to say, ‘We know you want to pay this money, we will make it available to you now, and then you can pay it over time,'” Azairwe explained. “This helps parents to plan and budget, and it also helps schools to receive their fees in a timely manner.”
Azairwe also highlighted the potential for the partnership to expand beyond school fees, citing examples such as rent and utility bill payments. Azairwe noted that the solution will help to address the challenges faced by schools, which often struggle to operate due to delayed payments from parents.
FURAHA’s CEO, Denis Musinguzi, says that processing a school fees loan takes just a few minutes, thanks to the use of data from the National Identity Card to verify creditworthiness.
“The process is quick and easy, with customers simply needing to provide their national ID number, take a scan of it, and take a selfie. Furaha then provides a credit limit, which can be used to pay for school fees in weekly or monthly installments,” he said. “Furaha’s platform also offers a competitive interest rate of 5% per month, valid for three months, and a loan processing fee of 3% of the loan value. There are no penalties for early repayment, and customers can pay back the loan in installments”.
The company’s co-founder, Ian Fernandes, emphasizes the need for collaboration between different sectors to achieve financial inclusivity agendas.
