Mystery shopping assessment of credit cost disclosures

A May 2020 report by Innovations for Poverty Action (IPA), funded by FSD Africa and FSD Uganda, evaluates compliance with consumer protection frameworks in Uganda's credit market. Through 1,102 mystery shopping visits to Tier 1-4 lenders in Kampala, Mbarara, and Gulu, the study found significant gaps in the disclosure of the total cost of credit, interest rates, and late payment penalties. The report highlights that inexperienced borrowers and women receive less information and fewer explanations than experienced male borrowers, and that written disclosure materials, such as key facts documents, are rarely provided during initial sales visits.

• Loan officers failed to consistently provide information on the total cost of credit, disclosing it in only 50% of mystery shopping visits. Tier 1 lenders were the least likely to disclose this information, at 41% of visits, despite Bank of Uganda guidelines requiring it.
• There is a significant disparity in information disclosure based on borrower experience. Experienced shoppers received information on the total cost of credit in 68% of cases, compared to only 12% for inexperienced shoppers. Additionally, experienced shoppers were provided with interest rate information in 98% of visits, while inexperienced shoppers received it in 69% of visits.
• Gender bias exists in the spontaneous provision of cost information. Women were less likely than men to be spontaneously given information on the total cost of credit (29% vs 41%) and interest rates (28% vs 59%). Furthermore, only 23% of women received an explanation of the total cost of credit, compared to 66% of men.
• Written disclosure materials are rarely provided during first visits. Only 6% of shoppers were shown a key facts document, and payment plans were shown in only 12% of visits. Among collected leaflets, fewer than 40% stated interest rates, and none displayed the total cost of credit more prominently than the interest rate, violating Bank of Uganda guidelines.
• Disclosure of late payment penalties is low, with information shared in only 39% of visits, despite 96% of the institutions studied actually charging such penalties. The revelation of these penalties was heavily dependent on the shopper asking for the information; only 8% of inexperienced shoppers were informed of penalties, compared to 54% of experienced shoppers.
• Interest rate calculation methods vary by institution tier and loan size, often contradicting regulations. While UMRA requires a declining balance method for Tier 4 institutions, 86% of Tier 4 institutions that provided calculation info used a flat rate. Flat rates were most common for smaller loans, with 72% of UGX 1 million loans calculated on a flat balance basis.
• The number of non-interest fees charged by commercial banks has increased over time. Analysis of Bank of Uganda data from 2005 to 2019 shows the average number of non-interest charges rose from just over two per loan in 2005 to more than four per loan in 2019.
• There is a lack of standardization in the naming of fees, which hinders consumer comparison. For example, the report notes that "application fees" and "processing fees" are often used to refer to the same charge.

APA

Atuhumuza, E., Mazer, R., Smits, J., & Ssempiira, J. (2020). Mystery shopping assessment of credit cost disclosures. FSD Africa. https://fsdafrica.org/wp-content/uploads/2025/05/IPA-Report-08.05.20.pdf

Chicago

Atuhumuza, Elly, Rafe Mazer, Joeri Smits, and Julius Ssempiira. Mystery shopping assessment of credit cost disclosures. FSD Africa, 2020. https://fsdafrica.org/wp-content/uploads/2025/05/IPA-Report-08.05.20.pdf.

Wikipedia

{{cite report |last1=Atuhumuza |first1=Elly |last2=Mazer |first2=Rafe |last3=Smits |first3=Joeri |last4=Ssempiira |first4=Julius |title=Mystery shopping assessment of credit cost disclosures |publisher=FSD Africa |date=May 2020 |url=https://fsdafrica.org/wp-content/uploads/2025/05/IPA-Report-08.05.20.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{atuhumuza2020mystery, author = {Atuhumuza, Elly and Mazer, Rafe and Smits, Joeri and Ssempiira, Julius}, title = {{Mystery shopping assessment of credit cost disclosures}}, institution = {FSD Africa}, year = {2020}, month = may, url = {https://fsdafrica.org/wp-content/uploads/2025/05/IPA-Report-08.05.20.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }