At the start of the year when we were disbursing about 200 loans a day, we set ourselves what we felt was an aggressive target of 1,000 paylaterng loans issued on a daily basis. We felt it was ambitious not because of a lack of demand (who hasn’t got a friend that needs a loan?) but rather the challenge to risk-assess 1,000 people that we had never met, living in all states of Nigeria and then disburse within a short time frame to their bank accounts.
Today, we are happy to say that over 60% of these 1,000 loans are disbursed within 1 minute with the rest all under 5 minutes and they span a range of N7,500 to N200k for first time borrowers. The inevitable question is “yes, great but are you profitable? Any monkey can give out loans — but are you collecting?” Our mothers taught us not to boast, so let’s say that our default is between 10% and 20%, but trust us that its a manageable number. If you don’t believe us then look out for us early next year — if you are right, then we won’t be around!!!
Whilst we are pleased with the team effort that has got us so far, we are not content. Our mantra is “credit for all” and there are too many within Nigeria who don’t have access to credit. We only give @paylaterng loans via smartphones so the 60% of Nigerians that have feature phones unfortunately are excluded. Moreover, for most local banks, “financial inclusion” is just another way of saying “let me provide another channel to take your savings”. Less than 10% of customers have accessed loans from any formal financial institution but you don’t see banks showing the same energy to grow their retail assets as they do their retail deposits.
We are also unhappy with the cost of borrowing but with a cost of funds at around 30% and inflation running at around 15%, we have no choice.
Now if we were a commercial bank with cost of funds at 2–3% a year, then you would see us do magic. Alas we are not. But we are working hard to try and bring the cost of funds down and hoping Development Finance Institutions such as @AfDB_Group , @KFW and @IFC_org will help us access long term notes denominated in local -currency. Trust us when we say that if we get this Christmas gift, we will match the rates the commercial banks give to their customers for *secured* loans.
So what’s next after breaking 1,000?
Really the sky is the limit, but our focus right now is on breaking the stigma that banks have to lending to their customers. Every day thousands of people that we have never met apply to us for loans to fund their businesses, emergencies, rent, education. Many of them are first time applicants, but to all we give a quick decision and prompt execution to the qualified ones. All these customers already have banks — most of these customers have been rejected by their banks because their loan amounts were too small, or they had no collateral but ultimately because the banks haven’t taken the effort to reciprocate the trust millions of their customers have given.
“Our next goal is to keep amassing large numbers of customers so that we can break the stigma that the so-called lowly worker is not trustworthy”
Our next goal is to keep amassing large numbers of customers so that we can break the stigma that the so-called lowly worker is not trustworthy, or that if you give that first-time entrepreneur a loan (s)he will not pay back.
As always, we like to stress that this is not something we can do on our own. We’ve been lucky to work with all parts of the financial ecosystem from switches, banks, telcos and payment processors. All parts need to function well for us to provide the best execution to our customers.
We thank all our customers, partners and supporters, and look forward to working more together in breaking barriers to inclusive finance.