Access to loans from traditional Nigerian financial institutions is difficult for individuals and small entrepreneurs, if not almost impossible. On rare occasions where available, the process is physically rigorous, slow and lengthy; almost invalidating the necessity for the financial credit. Most times, entrepreneurs looking to grow their businesses may end up giving up and even dumping their dreams.
Small and Medium Enterprises (SMEs) are critical to the development of any economy as they possess great potentials for employment generation, improvement of local technology, output diversification, development of indigenous entrepreneurship and forward integration with large-scale industries.
This article seeks to clinically examine some online lending startups randomly selected from a long list, with a view to analyzing them and highlighting some areas of improvement to the operators.
Loan applications are made using the Android mobile app which has over 50,000 downloads already from the Google Play Store. Once the user fills the form, the machine learning algorithm takes care of the rest.
Loans up to ₦30,000, with interest only for the number of days you take the loan at 1% daily, are approved in less than 24 hours. Users can also buy airtime and recharge their phone lines instantly without leaving the QuickCheck app. Plans are also underway to introduce debit cards.
The machine learning algorithm predicts user behavior and evaluates loan applications. This is a competitive advantage against traditional banking because the algorithm can be updated very quickly to match current market trends.
Feedback from Users
However, a check on the app review from Google app store shows that more still needs to be done to meet customers’ growing demands. Several complaints ranging from delay in granting loans despite a good credit score, to the platform rejecting details of credit cards and making illegal deductions.
A user named Akan who applied for a loan on 11th January 2018 wrote, “I am disappointed at your service. You declined my request without giving me any reason for 4x. What have I done wrong that you can’t let me know? Why caused deductions in my account if you were not willing to give me a loan. Please review your application process so that it doesn’t look like a scam.”
Also, a user named Adefunke wrote on January 8, 2018, “I will appreciate it if you can respond to this review, why are you not giving me the loan. I have a good credit score so what is the problem. Pls, do not say my card set up because I did that a long time ago. That’s not an issue for me. Awaiting your response. Thank you.”
There are however some customers who expressed satisfaction with the platforms but complained about the new version of the app which has slowed down operations and load disbursement on the platform.
According to Agnes, “Been using this app for the past 6 months and been effective. This new update deleted my saved card. Upon request to add a card to disburse loan, the new update debited my GTBank MasterCard twice (#200) yesterday yet the card wasn’t added to the updated card. Please kindly look into it and add my card automatically.
However, responding to difficulties experienced by customers, QuickCheck informed Nairametrics that the platform uses a machine learning algorithm to determine eligibility for a loan and factors like current location and device information are needed. The management also attributed the recent card rejection to an infrastructure update of their system and that if any illegal deduction is made, refund is carried out ASAP.
This platform provides short-term loan facilities to help cover unexpected expenses or urgent cash needs. With just an Android device and basic requirements, users can apply for a Paylater loan 24/7 with a quick application process that lets you know your status within minutes, and credits your account immediately. Once the user downloads the app, he/she should sign in or sign up for identification. This will take the user to a brief registration/application form. The user then indicates how much he/she will like to borrow. The app will display the available loan offer in the app and user can view his/her expected repayment(s). Successful applicants will be notified within minutes. The platform gives loans up to N1,000,000.
Feedback from users
A review of the feedback from users of the platform shows a high level of satisfaction and customers’ confidence in the platform. Oyebamiji, a user of the platform said, “I have waited so long for this type of service in Nigeria. I didn’t know it is already happening here in Nigeria through paylater until I jammed this app on Google play store. I just want to say thank you. Your service is efficient, reliable, dependable, friendly, fast delivery and reasonable. You have delivered me from financial embarrassment. Kudos to Paylater team!”
Another user also commended the platform but called for a review of the rates charged. He said, “This app saved my daughter’s face in school, and I was able to add up and pay up the urgent payment needed in her school. For the first time, the response was so fast, and I appreciate. It’s worth the 5 star, so I’m not going to give less, but don’t you think the interest rate is a bit high? Please try and review.”
The platform makes it possible for business people to receive loans easily, and as the name KiaKia implies (it means ‘quick’ in Yoruba), it enables people to receive loans as quickly possible. It is a licensed, entirely-online direct and P2P lender that uses technology to provide direct personal loans at flexible rates, and also matches borrowers with individual or corporate lenders at mutually-agreed rates. With improved credibility, borrowers are able to make their own interest rates offer to selected lenders while KiaKia takes a little fee for that.
According to the Co-founder, Olajide Abiola (who also doubles as Chief Data Scientist), millions of naira in loans have been successfully granted to and repaid by hundreds of borrowers across 22 States in Nigeria. This comes with a loss/default/Non-Performing Loan ratio of below 2.3%, which is consistently maintained over a 12-month period, all thanks to KiaKia’s algorithm.
Areas for improvement
There are general concerns about the necessity and safety of demanding for Bank Verification Number (BVN) as a requirement for the loan. According to an industry expert who reveals the need for customers’ BVN, “The request for BVN is used to verify that the individual applying for a loan is the same as the owner of the provided bank account. This is to ensure that details cannot be used to apply for a loan without the authorization of the account owner in the event that a 3rd party has access to your account details.”
The online lending platforms must ensure that customers’ data stored in their systems are safe. Lessons must be learned from the Equifax data breach in which over 143 million Americans’ personal information were stolen by hackers and the recent Uber breach.
Also, most of the platforms are still app-based services and require internet access to make use of them. What now happens to the Ifa-Atai farmer in Akwa-Ibom state and the Rice farmer in Kebbi state who don’t have the luxury of android-enabled phones, needless to say internet services? Startups should come up with solutions that will enable this class of people, who mostly live in villages, to have access to loans by using USSD codes with simple mobile phones once the creditworthiness of such farmers or customers is ascertained. Also, the process of granting loans must be as fast as possible using the USSD.