It is widely acknowledged that there are limited funding sources for entrepreneurs in emerging economies, such as Nigeria.
Traditional financing usually comes with high-interest rates and collateral security. Consequently, alternative financing options, such as peer-to-peer lending and crowdfunding, have grown more popular amongst SMEs.
SMEs contribute 48% of Nigeria’s GDP, constitute 96% of businesses, and provide 84% of local employment. However, they have been extremely affected by the impact of the coronavirus.
The frantic search for capital to quickly inject into their businesses and constraints to traditional funding has brought digital lending, amongst other financing options, to the fore.
The flexibility, lower interest rates, ease, and speed of digital lending, compared with traditional financing, has increased its attractiveness amongst SMEs searching for capital.
However, there is currently no specific legislation on digital lending in Nigeria. Thus, digital money lenders are forced to operate within the extant moneylending laws of the States, which are modelled after the UK’s Money Lenders Act, 1927.
While these laws contain general provisions on money lending, they are not in tune with developments in the lending market.
For instance, section 14(2) of the Lagos State Money Lenders Law, 1972 renders a contract between a money lender and a borrower unenforceable if the money borrowed was not lent through a cheque drawn on the current account of the lender to the order of the borrower.
With digital money lenders promising five-minute loans through an automatic transfer to the borrower’s digital wallet or bank account, such archaic provisions pose an otiose limitation to digital lending.
Additionally, the cracks in the extant moneylending laws have provided an opportunity for some digital lenders to offer lending services without registering as a Money Lender.
The moneylending laws of the States exclude co-operative societies registered under the Co-operative Societies Law from the purview of the law. Consequently, some digital lenders have set up as co-operative societies to receive contributions from their members and give loans to same.
These concerns call for greater clarity in the regulation of digital lending in Nigeria.
An individual or company that wishes to carry on the business of digital lending must obtain a Money Lending License in any of the 36 states of Nigeria and the Federal Capital Territory. A license obtained under the Money Lending Law of a state permits money lending activities only within that state.
The process involved in obtaining a license within each state is similar. It generally involves making an application in the prescribed form with the applicant’s letter headed paper to the designated authority within the state.
The application will be supported with requisite documents, such as the incorporation documents of the company, empowering it to carry on business as a moneylender, tax clearance certificate, and evidence of payment of requisite application fees.
Upon the fulfillment of all regulatory requirements, an annually renewable license will be granted to the company.
The absence of a federal law on lending and the requirement for money lenders to be licensed under the laws of each state they intend to operate creates extra layers of regulatory requirements and increases the cost of lending. Therefore, it is not rare to see digital lenders opt for a Microfinance Bank license, which permits them to operate in all states of the country and offer a greater diversity of services.
Alternatively, a company wishing to carry on money lending activities in Nigeria may be licensed by the Central Bank of Nigeria as a Finance Company under the Revised Guidelines for Finance Companies in Nigeria (“the Guidelines”). This license is, however, more suitable for companies wishing to offer ancillary services in addition to money lending.
The Guidelines permits finance companies to provide consumer loans; funds management; asset finance; project finance; local and international trade finance; debt factoring; debt securitization; financial consultancy; loan syndication, and issuing of vouchers, coupons, cards, and token stamps.
It is worthy of note that both money lenders and finance companies are prohibited from receiving deposits from the public unless they acquire a Microfinance Bank License.
The nature of the digital lending business model is such that the regulatory framework for data protection cannot be ignored by a digital money lender offering its services to Nigerian residents.
This is more so as the digital lending platforms utilise borrowers’ data to verify their identity, assess their credit worthiness or ability to repay the loan, and ensure loan repayment by asking their friends, family, or workplace to repay the loan or compel the borrower to repay.
Data collected include contact information, call logs, SMS logs, Facebook friends, contact list from other social media accounts, mobile money transaction history, geolocation, bank verification numbers, emails, passport photos, videos, and data from use of any third-party application.
The Nigeria Data Protection Regulation, 2019 places an obligation on digital lenders as Data Controllers to disclose what data is being processed, the specific purpose of processing the data, and obtain consent of the Data Subjects to process the data. The Data Subject must also be informed of his right and the ability to withdraw his consent at any time.
Consent is deemed to have not been freely given where the performance of a contract, including the provision of a service, is conditional on consent to the processing of personal data that is not necessary (or excessive) for the performance of that contract.
This plays out where a borrower is required to either give consent to use of excessive data to access funds via the application or withdraw consent to excessive data requested by logging out and uninstalling the application.
Additionally, where the data is to be used for a purpose other than that for which it was collected, the Data Subject must be informed of this purpose and give additional consent.
Any harmonisation or amendment of the current laws should be carefully drafted to ensure a balance between regulating the market and killing the market.
Digital lending has become a source of hope for many SMEs and should be encouraged. An attempt to create excessively stringent laws will not only stifle the market, but also limit funding to SMEs in an already difficult business environment.
Paypal’s Venmo now permits cryptocurrency trading
Venmo will support four different cryptocurrencies: Bitcoin, Ethereum, Bitcoin Cash, and Litecoin.
Venmo, a mobile payment service owned by PayPal has announced that it has started allowing users to buy, hold and sell cryptocurrencies on its app. Just like PayPal, Venmo will support four different cryptocurrencies: Bitcoin, Ethereum, Bitcoin Cash, and Litecoin, and users can carry out transactions with as little as $1 on the app
Founded in 2009, Venmo has over 70 million users and it is one of the most popular payment channels in the US. The payment platform processed around $159 billion in payments last year.
Since the app functions like a social network, adding cryptocurrency will offer a more user-friendly feel for people who love buying and selling crypto.
As bigger companies show more interest in cryptocurrency, there will be wider adoption of virtual currencies in future. Venmo is the latest payment app that is offering support for cryptocurrency on its platform.
Paypal, the parent company of Venmo is one of the most active companies in the crypto space as it allows users to buy, sell and hold cryptocurrencies in their digital wallets. Paypal users can also spend their coins at millions of merchants globally.
Crypto on Venmo is enabled through PayPal’s partnership with Paxos Trust Company, a regulated provider of cryptocurrency products and services.
What they are saying
Darrell Esch, Venmo’s Senior Vice President and general manager said “Our goal is to provide our customers with an easy-to-use platform that simplifies the process of buying and selling cryptocurrencies and demystifies some of the common questions and misconceptions that consumers may have.”
Airbnb and two other companies that could follow Twitter’s Ghanaian playbook
After Twitter, these companies might be moving to Africa next.
On the back of Twitter’s monumental announcement to situate its regional headquarters in Ghana, Germany announced that it was choosing the Gold-Coast as the location for its German-West African Centre for Global Health and Pandemic Prevention – another critical blow for Africa’s most populous country and self-acclaimed ‘giant of Africa.’
Despite Nigeria’s burgeoning reputation in technology, its propensity for government and regulatory interference, rising insecurity, inflation, poor capital repatriation policies, and infringement on free speech have been identified as reasons why foreign organizations are increasingly overlooking the country. So, we examine 3 organizations ripe for African expansion that could follow in Twitter’s footsteps.
The $75bn online vacation rental marketplace has quietly made inroads into Africa over the last couple of years allowing listings from Kenya, Nigeria, Ghana, South Africa, and other African countries as part of the 220+ countries and regions it operates.
Over the past few years, destinations across Africa have emerged to become some of the fastest-growing Airbnb markets in the world.
However, the rental giant continues to operate a remote presence in Africa as none of its 23 offices is situated on the continent. But that may soon change as Africans increasingly adopt the service.
Despite iPhone sales largely growing year on year, Apple doesn’t have a physical office in Africa. In 2015, it was rumoured that Apple was looking to establish a South African office in an effort to grow its presence in the continent’s local market but not much has been heard about this.
In countries where the tech giant doesn’t have a physical office, Apple works with the local resellers to service its numerous customers.
The African market is driven more by the demand for Apple products like mobile phones, tablets, and laptops. With this high demand, it is highly probable that the company will consider a physical location in Africa in the near future.
Another company that is likely to have a physical presence in Africa in the near future is Shopify. The multinational e-commerce platform that allows you to host your store online already has an online presence in Africa and has partnered with leading payment providers on the continent to allow users pay for services in their local currency. Shopify powers over 1.7 million businesses in more than 175 countries.
What this means
Africa currently has the youngest and second-largest population in the world. Massive population growth and a rising middle class have created millions of new consumers hungry for products and services. This is a large market for tech companies that are already operational in other countries to tap into. Currently, Twitter, Google, Microsoft, and several others are already exploring this opportunity.
Nairametrics | Company Earnings
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- 2020 FY Results: Guinea Insurance Plc reports a loss of N227.7 million.
- 2020 FY Results: Unity Bank Plc posts profit after tax of N2.09 billion.
- Guinea Insurance Plc reports a loss of N142.13 million in 9M 2020.
- Unilever Nigeria Plc set to hold Annual General Meeting on 6th of May.
- UBA Plc posts profit after tax of N38.16 billion in Q1 2021.