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.
Why Nigeria’s banking stocks performed well in May
Many portfolio investors were unable to move their money from the country due to FX limitations. So, they reinvested.
Virtually all the banks listed on the Nigerian Stock Exchange (NSE) witnessed varying degrees of growth in their share price during the month of May. Besides Union Bank of Nigeria Plc which declined by 0.7% and Aso Savings and Loans Plc which recorded no price movement, all the other banking stocks recorded increases according to checks by Nairametrics Research.
Best banking stocks in May
The best-performing banking stock for the month was Jaiz Bank Plc. The share price increased by 27.3% to N0.70, up from N0.55 in April. This is followed by Stanbic IBTC Holdings Plc which rose by 25.6%. Zenith Bank Plc and Unity Bank Plc both gained by 18.2%, followed by FBN Holdings Plc which rose by 16.3% and then Ecobank Transnational Incorporated with 14.6%.
See the rest of the banks and their share price performances in the chart below.
The factors responsible for the positive performance, starting with CBN’s FX restrictions
Interestingly, the positive returns for Nigerians banks may not be linked to any tangible fundamentals. According to Investment Advisor and Fixed Income expert, Ighodaro Alonge, these banks are significantly undervalued and operate in a very challenging economy. He told Nairametrics that one of the factors responsible for the positive performance of the banking index was the fact that many portfolio investors were unable to move their money from the country due to FX limitations. So, they reinvested.
“Fundamentally, the Nigerian banking system is not what is really driving performance. What is driving performance is more from investments that cannot exit the Nigerian market due to the backlog of FX demands. There’s a backlog of FX demands at the Investors & Exporters window of about $1.5 billion. Those monies have not been able to leave Nigeria. So, some of them have had to roll their money back into the stock market,” Alonge said.
Equity Trader, Kenneth Kanebi, shared a similar point of view. In a separate phone interview with Nairametrics, he explained that given the very sparse FX liquidity due to the fall in oil prices and also the Coronavirus pandemic, Nigeria was not getting as much FX revenue as it used to get in the past. As a result, the country’s obligation to foreign portfolio investors who invested in Nigeria, sold their assets, and were looking to repatriate funds, could not be met.
“A couple of these foreign portfolio investors have had their money trapped since March when the CBN restricted the sale of dollars on the I&E window. A couple of these investors have also earned dividends within that period. And what we believe is that they began to reinvest in the market. Hence, the demand we saw in the likes of GTB,” he said.
Some maturing financial instruments found their way to the equities market
In an emailed response to Nairametrics’ inquiries, the Head of Retail Business at CSL Stockbrokers Limited, Ifeoma Ukwunna, noted that “maturing debt instruments found their way into the equity market rather than being rolled over at very low-interest rates, and banks were their favorites.”
On his part, Kenneth Kanebi also explained the role played by OMO maturities. He said:
“OMO maturities also played a huge role. This is because the investments that are maturing cannot be reinvested in OMO given the new CBN policy. So, we believe that some of that naira inflow found their way into the equities market now that there are limited opportunities to invest in. Secondly, the few domestic investors that tried to use NTBs as substitutes for the OMO bills have realised that because of huge demands, the yield on NTBs crashed significantly. So, for a few of these guys, the only option available was equities.”
Global influence on the Nigerian bourse
It should be noted, at this point, that the performance of the Nigerian stock market in May, was in tandem with global trends. Across major markets in North America, Europe, Asia, and Sub-Saharan Africa, the prices of equities increased. As Ighodaro Alonge explained, this can be attributed to what he described as ‘central banks’ liquidity’. In other words, central banks around the world, especially the U.S Federal Reserve, pumped liquidity into the system. He explained:
“In May, equity prices rose across the globe. We saw that reflect in Nigeria across the board. What was fueling the rise in asset prices is Central Banks’ liquidity. The amount of liquidity pumped into the system by the U.S Federal Reserve between March and April has gotten to about $3 trillion. They pumped in about $3 trillion into buying a range of assets such as US Government bonds, U.S-backed mortgage securities, and even investment-grade corporate bonds. So, the liquidity helped assets to climb upwards.
“Now, whatever obtains within the U.S market usually tends to happen across the globe. The U.S makes up about 40% of the global stock market capitalisation. So, the U.S direction tends to sway the global market either upwards or downwards. Therefore, because the U.S market has been bullish, the Nigerian market was also bullish.”
Impacts of COVID-19, crude oil prices and more
In her emailed response, Ifeoma Ukwunna also attributed the rally on the NSE to the COVID-19 pandemic and fall in crude oil prices. According to her, the pandemic, oil price decline, and asset sell-offs by foreign investors all led to stock prices declining initially. As bad as this was, it also presented an opportunity for other investors buy up value stocks; including a lot of the banking stocks. She, however, forewarned that the rally may not be sustainable.
“With the outbreak of COVID-19, fall in crude oil prices, and sale programme activated by foreign investors in Q4 2019, most stock prices dropped sharply in February and March. The banking index in particular fell by 15.59% and 21.56% respectively, presenting a good opportunity for bargain hunters to pick up value names.
“We doubt the trend will be sustained going into this quarter, with the IMF’s call for banks to call off dividend payments. The CBN hasn’t said anything to the effect as there are already existing conditions to be met for dividend payments. Investors will react negatively if the CBN advocates the same.”
Will the United States hamper the rise in oil prices?
The United States is facing a national crisis with the most significant number of coronavirus cases globally, the worst unemployment levels seen in decades, and massive crowd protests from state to state by their citizens.
Last week Friday, Oil finished higher after oil traders weighed on the de-escalation in the strain between the U.S. and China, and a significant drop in U.S. oil rigs (which is an indicator for declines in U.S oil production). However, some events occurred during the week, which should be a cause for concern for the bullish momentum.
The United States is facing a national crisis with the most significant number of coronavirus cases globally, the worst unemployment levels seen in decades, and massive crowd protests from state to state by their citizens. The downside to this downside is the possibility of a second wave of infections as social distancing seems to be thrown out of the window for mass protests. Furthermore, if protests and riots continue, business activity will likely collapse and would most likely hurt demand as the United States is the largest oil consumer in the world.
On the supply front, prices also declined mid-week as the American Petroleum Institute (API) reported a large crude oil inventory draw of 8.731 million barrels for the week ending May 22. These figures deviated from the prediction of 2.50 million barrels by analysts. In the past weeks, buoyed by the rise in oil prices, some Energy producers in the U.S hinted on resuming production, which only adds more supply to the market. It would be counterproductive for Shale companies to boost output now as most companies “need prices at least in the low $40s per barrel to cover direct costs”, according to Ian Nieboer, who happens to be a managing director at consultant Enverus. Prices in this range we are at does not help the cause. The CEO of Parsley, CEO Matt Gallagher, confirmed in an interview weeks ago that “Currently the world does not need more of our product and defends the need for his company to put a hold on drilling”.
Last week Friday, Oil prices edged lower at the morning session after the EIA data showed weak fuel demand in the world’s largest oil-consuming country. Christopher Louney, an RBC Capital Markets analyst, said in a statement that “the previous weekend which happened to be Memorial Day weekend did not bring motorists out in large numbers like many market bulls were hoping.” Fuel demand remained limp, albeit various states lifting travel restrictions and lockdowns.
Another plausible way the United States can hurt prices is by hurting China. There were some sharp declines in prices noticed last week after palpable tensions between the two superpowers. Although the Oil bulls were boosted on Friday as Trump’s press conference did not indicate the U.S reneging on the trade deal with China. However, this does not signify a conclusion on the tensions between the two nations, and a possible escalation is still on the cards if China reacts to the impending sanctions meted by the United States. Early Monday morning, some reports suggest China has put a halt on some U.S. farm imports, which impacted U.S. stocks and European stocks. The report by Bloomberg News reported that China told state-run companies to pause purchases of U.S. products, including soybeans, as pork product orders were also canceled. This impasse reminds me of how oil became volatile last year before we got a “phase 1 deal” between both nations. Now is not the time for economic wars, the virus is already enough on our hands.
Conclusively, the United States wants higher prices, but their internal energy industry and policies might weigh on oil futures prices. Oil recovery has a long way to go. Just a reminder that the lack of storage facilities last month caused us to witness negative prices for the first time in history, and the U.S infatuation with shale oil and drilling new wells is why we might never see our beloved $100 oil again.
Covid-19 Update in Nigeria
On the 1st of June 2020, 416 new confirmed cases and 12 deaths were recorded in Nigeria bringing the total confirmed cases recorded in the country to 10,578.
The spread of novel Corona Virus Disease (COVID-19) in Nigeria continues to rise as the latest statistics provided by the Nigeria Centre for Disease Control reveal Nigeria now has 10,578 confirmed cases.
On the 1st of June 2020, 416 new confirmed cases and 12 deaths were recorded in Nigeria.
To date, 10578 cases have been confirmed, 3122 cases have been discharged and 299 deaths have been recorded in 35 states and the Federal Capital Territory having carried out 63,882 tests.
Covid-19 Case Updates- May 30th 2020
- Total Number of Cases – 10,578
- Total Number Discharged – 3,122
- Total Deaths – 299
- Total Tests Carried out – 63,882
The 416 new cases were reported from 20 states – Lagos (192), Edo (41), Rivers (33), Kaduna (30), Kwara (23), Nasarawa (18), Borno (17), FCT (14), Oyo (10), Katsina (7), Abia (5), Delta (5), Adamawa (4), Kano (4), Imo (3), Ondo (3), Benue(2), Bauchi (2), Ogun (2), Niger (1).
The latest numbers bring Lagos state total confirmed cases to 5135, followed by Kano (958), Abuja at 674, Katsina (371), Edo (325), Oyo (302), Kaduna and Borno (288), Ogun (280), Jigawa (270), Bauchi (240), Rivers (239), Gombe (161), Sokoto (116).
Kwara State has recorded 111 cases, Plateau (105), Delta (88), Nasarawa (80), Zamfara (76), Yobe (52), Akwa Ibom and Osun (45), Adamawa (42), Ebonyi (40), Imo (39), Kebbi and Niger (33), Ondo (28), Bayelsa (21), Ekiti (20), Taraba and Enugu (18), Abia (15), Anambra (11), Benue (9), while Kogi state has recorded only 2 cases.
Lock Down and Curfew
In a move to combat the spread of the pandemic disease, President Muhammadu Buhari directed the cessation of all movements in Lagos and the FCT for an initial period of 14 days, which took effect from 11 pm on Monday, 30th March 2020.
The movement restriction, which was extended by another two-weeks period, has been partially put on hold with some businesses commencing operations from May 4. On April 27th, 2020, President Muhammadu Buhari declared an overnight curfew from 8 pm to 6 am across the country, as part of new measures to contain the spread of the COVID-19. This comes along with the phased and gradual easing of lockdown measures in FCT, Lagos, and Ogun States, which took effect from Saturday, 2nd May 2020, at 9 am.
|Date||Confirmed case||New cases||Total deaths||New deaths||Total recovery||Active cases||Critical cases|
|June 1, 2020||10578||416||299||12||3122||7157||9|
|May 31, 2020||10162||307||287||14||3007||6868||7|
|May 30, 2020||9855||553||273||12||2856||6726||7|
|May 29, 2020||9302||387||261||2||2697||6344||7|
|May 28, 2020||8915||182||259||5||2592||6064||7|
|May 27, 2020||8733||389||254||5||2501||5978||7|
|May 26, 2020||8344||276||249||16||2385||5710||7|
|May 25, 2020||8068||229||233||7||2311||5524||7|
|May 24, 2020||7839||313||226||5||2263||5360||7|
|May 23, 2020||7526||265||221||0||2174||5131||7|
|May 22, 2020||7261||245||221||10||2007||5033||7|
|May 21, 2020||7016||339||211||11||1907||4898||7|
|May 20, 2020||6677||284||200||8||1840||4637||7|
|May 19, 2020||6401||226||192||1||1734||4475||7|
|May 18, 2020||6175||216||191||9||1644||4340||7|
|May 17, 2020||5959||388||182||6||1594||4183||7|
|May 16, 2020||5621||176||176||5||1472||3973||7|
|May 15, 2020||5445||288||171||3||1320||3954||4|
|May 14, 2020||5162||193||168||3||1180||3815||4|
|May 13, 2020||4971||184||164||6||1070||3737||4|
|May 12, 2020||4787||146||158||6||959||3670||4|
|May 11, 2020||4641||242||152||10||902||3589||4|
|May 10, 2020||4399||248||142||17||778||3479||4|
|May 9, 2020||4151||239||127||11||745||3278||4|
|May 8, 2020||3912||386||118||10||679||3115||4|
|May 7, 2020||3526||381||108||4||601||2818||4|
|May 6, 2020||3145||195||104||5||534||2507||1|
|May 5, 2020||2950||148||99||5||481||2370||4|
|May 4, 2020||2802||245||94||6||417||2291||2|
|May 3, 2020||2558||170||88||2||400||2070||2|
|May 2, 2020||2388||220||86||17||351||1952||2|
|May 1, 2020||2170||238||69||10||351||1751||2|
|April 30, 2020||1932||204||59||7||317||1556||2|
|April 29, 2020||1728||196||52||7||307||1369||2|
|April 28, 2020||1532||195||45||4||255||1232||2|
|April 27, 2020||1337||64||41||0||255||994||2|
|April 26, 2020||1273||91||41||5||239||994||2|
|April 25, 2020||1182||87||36||3||222||925||2|
|April 24, 2020||1095||114||33||1||208||855||2|
|April 23, 2020||981||108||32||3||197||753||2|
|April 22, 2020||873||91||29||3||197||648||2|
|April 21, 2020||782||117||26||3||197||560||2|
|April 20, 2020||665||38||23||1||188||466||2|
|April 19, 2020||627||86||22||2||170||436||2|
|April 18, 2020||541||48||20||2||166||356||2|
|April 17, 2020||493||51||18||4||159||317||2|
|April 16, 2020||442||35||13||1||152||277||2|
|April 15, 2020||407||34||12||1||128||267||2|
|April 14, 2020||373||30||11||1||99||263||2|
|April 13, 2020||343||20||10||0||91||242||2|
|April 12, 2020||323||5||10||0||85||228||2|
|April 11, 2020||318||13||10||3||70||238||2|
|April 10, 2020||305||17||7||0||58||240||2|
|April 9, 2020||288||14||7||1||51||230||2|
|April 8, 2020||274||22||6||0||44||226||2|
|April 7, 2020||254||16||6||1||44||204||2|
|April 6, 2020||238||6||5||0||35||198||2|
|April 5, 2020||232||18||5||1||33||194||2|
|April 4, 2020||214||5||4||0||25||185||0|
|April 3, 2020||209||25||4||2||25||180||0|
|April 2, 2020||184||10||2||0||20||162||0|
|April 1, 2020||174||35||2||0||9||163||0|
|March 31, 2020||139||8||2||0||9||128||0|
|March 30, 2020||131||20||2||1||8||121||0|
|March 29, 2020||111||22||1||0||3||107||0|
|March 28, 2020||89||19||1||0||3||85||0|
|March 27, 2020||70||5||1||0||3||66||0|
|March 26, 2020||65||14||1||0||2||62||0|
|March 25, 2020||51||7||1||0||2||48||0|
|March 24, 2020||44||4||1||0||2||41||0|
|March 23, 2020||40||10||1||1||2||37||0|
|March 22, 2020||30||8||0||0||2||28||0|
|March 21, 2020||22||10||0||0||1||21||0|
|March 20, 2020||12||4||0||0||1||11||0|
|March 19, 2020||8||0||0||0||1||7||0|
|March 18, 2020||8||5||0||0||1||7||0|
|March 17, 2020||3||1||0||0||0||3||0|
|March 16, 2020||2||0||0||0||0||2||0|
|March 15, 2020||2||0||0||0||0||2||0|
|March 14, 2020||2||0||0||0||0||2||0|
|March 13, 2020||2||0||0||0||0||2||0|
|March 12, 2020||2||0||0||0||0||2||0|
|March 11, 2020||2||0||0||0||0||2||0|
|March 10, 2020||2||0||0||0||0||2||0|
|March 9, 2020||2||1||0||0||0||2||0|
|March 8, 2020||1||0||0||0||0||1||0|
|March 7, 2020||1||0||0||0||0||1||0|
|March 6, 2020||1||0||0||0||0||1||0|
|March 5, 2020||1||0||0||0||0||1||0|
|March 4, 2020||1||0||0||0||0||1||0|
|March 3, 2020||1||0||0||0||0||1||0|
|March 2, 2020||1||0||0||0||0||1||0|
|March 1, 2020||1||0||0||0||0||1||0|
|February 29, 2020||1||0||0||0||0||1||0|
|February 28, 2020||1||1||0||0||0||1||0|