Nonetheless, it’s well proven that credit can be used to inject much needed capital into small businesses operating across different sectors. From this point, the rise of profit making business owners would put a dent in Nigeria’s high unemployment rate and improve overall production that would help tackle the country’s high inflation rate.
Beyond economic cushions, credit also serves to improve living standards, as it could help you purchase high-value items, pay for rent, or make a timely and important investment.
Despite these measurable benefits, major financial institutions have largely shied away from giving personal loans to consumers.
Consumer lending stood at N1.4 trillion in 2020, but this amount only went to very few people. Per Efina, only 3% of Nigerian adults accessed credit from a regulated financial institution. With big banks preferring to deal with large corporations, a bunch of new kids have taken the stage.
Dynamic fintech startups like Carbon and Fairmoney have stolen the consumer lending limelight in recent years, offering collateral free personal loans of varying sizes. In 2020, both companies disbursed a combined $156 million (N62.4 billion), and have been painfully growing in leaps and bounds.
While most Nigerian banks cringe at the sight of a high (read unknown) risk profile, these lending companies use technology to build a bespoke credit ecosystem from scratch, albeit with some losses along the way.
For context, Nigeria’s credit landscape is quite tough, and very few companies can afford the services of already existing credit bureaus. Even if they could, it would likely not be enough to really democratize lending in Nigeria. Going the Carbon route would also be expensive.
Being unable to execute best practices for digital lending, smaller lending companies either limit their vision or employ underhanded practices in offering and recovering loans to Nigerians.
It is noteworthy that while financial institutions disbursed consumer loans of 2 trillion in 2021, the entire potential market is worth as high as N74 trillion. Hence, the growing trend of small companies jumping into the digital lending space starts to make sense.
However, how can these companies succeed when the technology required to capture the lending market is quite expensive, and expertise is hard to come by? Moreso, how do they ensure that they don’t go the way of unethical providers like Sokoloan?
Lessons from the cloud
To get a full picture of this solution, we’d have to take a quick glance at the broader technology industry. As more businesses became Internet-enabled, the needs of these businesses have drastically changed.
Companies have to deal with tons of data, and their websites begging to display a need for higher speeds, less latency and more features. All these become possible with cloud computing.
Companies like Amazon, Google, and Microsoft now offer cloud services for several businesses, and it eliminates the need to build huge space, and funds consuming servers to store and compute data on the Internet. Our explanation is oversimplified, but hold on.
What if there was cloud technology available for small lenders at a relatively tiny cost? It would provide algorithms for credit scoring, measures for loan recovery, integration into Nigeria’s vast financial space and lot’s more.
Lendsqr has cracked the lending code
In 2022, Lendsqr developed a robust ecosystem that would provide everything a lending company needs to lend in 5 mins. Did we mention a tiny fraction of the cost? Well, Lendsqr is offering its entire ecosystem to lenders for free, and will only make its own cut when the company does.
Lendsqr’s cloud lending solution promises to make life easier for lenders as it offers them up to 300 data variables for them to choose from. These collated data would help startups determine which loan applications to accept and reject.
This is even more important considering the fact that lending companies (nay fintech companies) are constantly plagued by fraudsters who keep borrowing funds from company to company.
Lendsqr also has a loan recovery engine that relentlessly badgers defaulters until their payment is made.
Interestingly, Lendsqr is taking a community driven approach to its technology ecosystem. It currently has one of the largest blacklists in Nigeria’s financial space, gained from parsing information from all the registered lenders on the Lendsqr platform.
“And what we are doing isn’t rocket science. Think about it like this; when you flag a spam email in Gmail, billions of email boxes get protected — it’s community immunity for players who otherwise would have to learn the hard way about people they should not give loans to,” says Adedeji Olowe, Founder of Lendsqr.
He maintains that financial services players don’t have to worry about size; as everyone gets the kind of protection available to the biggest players.
Lendsqr’s onboarding process currently takes 5 minutes, and it would be interesting to see how increasing adoption of the platform would shape lending in Nigeria in the coming years.
