Lack of creditworthiness, collateral, challenging repayment terms, and a knowledge gap in terms of financing schemes have been affecting phone financing schemes, GSM Association has stated in a report.
In a report titled ‘Making internet-enabled handsets more affordable,’ GSMA Senior Insights Manager, Anne Delaporte, said while handset financing offers a path to improving phone affordability, many underserved customers were likely to face a number of barriers to accessing financing.
The report stated that at the end of 2021, there were 3.2 billion people living in areas with mobile broadband coverage but not using mobile internet. It explained that while the cheapest Internet-enabled handset costs, on average, 19 per cent of monthly income across low- and middle-income countries, it costs 25 per cent in Sub-Saharan Africa.
It noted that though it is easy to assume that cheaper phones would lead to increased adoption, affordability is not only about cost, but also the buyer’s willingness to pay and whether the handset meets their needs and preferences.
It quoted the Terminals Director at Vodacom, Davide Tacchino, as saying, “Handset financing schemes are a successful reality in some markets, but they are quite complex economically speaking.
“For example, the impact on cash flows and on bad debt, and quite complex in terms of platforms and technologies to assess customer credit profile and lock the phone… but they can really move the needle and reduce the cost to connect.”
The report read in part, “Lack of creditworthiness: Using non-traditional data allows those who don’t have enough financial data to be credit scored.
“Lack of collateral: By using the phone as collateral, financing options can be extended to almost anyone, including customers who cannot be credit scored. The expansion of remote locking technologies allows lenders to lock the handset.”
The report further said Offering micro-repayments (such as daily instalments) or flexible payments can reduce the burden for those who receive daily wages or who earn their income irregularly (e.g. seasonal effect of farmer’s income).
“Limited understanding of financing schemes: Partnering with organisations and distributors (formal and informal) that have extended their network in underserved areas to educate retailers and customers, particularly to explain the repayment process and modalities.”
GSMA argued that implementers of device financing schemes should contextualise how they operate and focus on a customer-centric approach to achieving their goal. It added that other barriers that could impact device financing include lack of ID, being unbanked, or inability to make a down payment.
Phones have become very important in today’s digital world. But phones are expensive and in regions like Sub-Saharan Africa, the ownership gap is more than the global average. Experts have argued that the region would need to rely on device financing schemes to bridge this ownership gap.
In Kenya, Safaricom, in partnership with Google started a device financing scheme. Safaricom currently has about 500,000 active customers paying for their handset in instalments.
While announcing a device financing scheme, the Chief Marketing Officer of MTN Nigeria, Adia Sowho, said, “Smartphones have become the computer for many Nigerians today.
“Unfortunately, the high costs of these devices have made them out of reach for many. Factors such as forex fluctuation, chipset shortages, and inflation are continuously driving up the cost of phones.”
According to MTN, it has financed over 20,000 devices under its scheme and intends to finance 1,000 units of devices daily in 2023.
