When FairMoney launched in 2017, its mission was straightforward but ambitious.
The company’s founder, Laurin Hainy, saw a Nigeria where millions of people struggled to access basic financial services, from opening bank accounts to getting credit, and believed the quality of financial products available in developed markets could be replicated locally through technology.
What began as a digital consumer lending platform was always designed to be more than quick loans.
Nearly a decade later, that vision has evolved into a full-stack microfinance bank regulated by the Central Bank of Nigeria.
In this interview with Nairametrics, FairMoney’s Managing Director, Henry Obiekea, reflects on the company’s journey, the rapid transformation of Nigeria’s digital lending market, the role of data and regulation, and how open banking could impact interest rates charged by digital lenders.
Nairametrics: As a company that started in the digital lending space, you’ve watched the market evolve over time. What is your assessment of the digital lending space?
Henry Obiekea: It’s a very interesting one. It’s one that has grown significantly. In fact, if you ask me, I would say that digital lending players are one of the key drivers of the increase in lending to the private sector.
So, if you look at the recent CBN data over the last few 18 months, you’ll see a small but consistent increase in the credit to the private sector. In fact, if you look at the penetration of credits, right, you’ll see a huge jump over the last two years. And I perceive that a lot of it is due to players like FairMoney, as well as other people who are playing within the digital lending space.
So, it’s one that is more interesting. There’s also increased regulation. Obviously, because of the attraction and the demand, there’s a need for the place to be quite sanitized and be clear, and just to ensure that people are operating with a certain level of decorum and ethics.
So, that’s the second thing that we’ve seen in terms of increased regulation. A lot more regulators are looking at the sector. And then, obviously, we’ve got significantly more players within the sector.
Some large ones and some very small ones are all coming up. So, it’s one that is interesting. At the end of the day, I think the economy wins by having the right set of lenders, whether it’s digital or manual.
Nairametrics: One thing that many borrowers have against digital lenders is the issue of high interest rate. Why is this so?
Henry Obiekea: That’s a good question, and the truth of the matter is, at the end of the day, what we try to do is price the risk of the loans.
What are the things that can help people pay their loans? And that’s one. The second thing that can help is for us to get more information about the customer. In getting more information about the customer, you are able to access the customer better and say this is a lower-risk customer.
And so now with open banking, and I think that is one of the impactful regulations that I see that can move the industry forward, where people are able to access people’s financial data easier, then you can make a better call and be able to differentiate who is a risky customer versus who has lower risk.
You can very easily determine the financial capability of one customer versus the other.
Doing it the traditional way, the traditional, you can’t do that at scale. So, at scale, there needs to be a way to optimize for that. And so, with the open banking model, I think that’s something that really can help.
And so, if you’re able to do that, then very clearly, I know that this guy has a stable job. I can check the credit bureau and see that he has only one loan or two loans, and his debt-to-income ratio is very small, and he can still take more. So, when you have all that data, rather than price the person, give the person a loan at a high price; you can give the person a loan at a lower price. So, it’s more about getting more data, more information and that helps.
And then there are other factors that come into play in terms of interest, the cost of funds. For instance, MFB’s cost of funds compared to the banks is much higher. And so, you look at some of those things, and it factors into the interest that you eventually pass on to the customer.
When we look at the yield on our book, on an annual basis, we see that the rates versus the size of the book are reducing on a global level. But there is still work to do, and what can help is more data, more information, and then obviously, the good people continue to repay.
Nairametrics: Are you saying that when open banking is fully operational in Nigeria, interest rates will come down?
Henry Obiekea: I would say it’s not a direct link, but I think it is a consequence of open banking because what it can mean is that if I have more data and I’m able to differentiate between risk levels, then that helps me in making a case.
Rather than just slap a high rate for 100 people, I can have different rates for those 100 people, depending on their risk level, different rates and what you see at the end of the day, the consequence is that the total may actually be reduced.
Nairametrics: Going to specific figures, like how much have you disbursed so far as loans?
Henry Obiekea: If you look at last year alone, on average, we have disbursed more than 10 billion on a monthly basis.
Last year, we disbursed over 150 billion. That’s for the full year 2025. Our expectation is that we should scale this year significantly, maybe another 30-40%.
Also, just to add, in terms of deposit base, last year, we paid out over 7 billion Naira as returns on savings. So, we think it’s quite significant, and if you look at the MFB space, not a lot of people are doing that quantum type of numbers.
So, that’s something that we are proud about, but we want to continue to improve on that and scale that significantly, because we think that we’re still scratching the surface.
Nairametrics: Looking at the amount you’ve disbursed, how are you addressing the issue of people taking loans and not wanting to pay back?
Henry Obiekea: So, I think the first thing to point out is that at FairMoney, we believe in ethical practices, not just because we are regulated by CBN, but the way the company was founded, the ethos of the company, the investors of the company, so we cannot do anything but be ethical, so that’s the first point.
In terms of how we manage this, I think it’s a combination of the strengths that we have, some of the strengths that I had enumerated earlier. So, the quality of data that we have, because at the end of the day, what you want to do before you give out a loan is to determine the risk level of this particular customer.
So, if you can adequately assess the risk of a customer, then you know what you’re getting into, and you can price for that risk, and you know that, okay, if I give this customer 100 Naira, or set of 10 customers 100 Naira, at least eight of them will give me back 110, and I am good.
So, at the end of the day, that’s what you’re trying to do. So, the quality of data that you use in coming to that decision, the quality of the models that you have, so there’s the proprietary data you have, but there’s also the additional data that you can get from other people, like your credit bureaus, for example.
So, going to the credit bureau, and looking at the thin files and the large files, and just ensuring that you’re able to adequately assess the risk level of that customer. And then, if you’re able to do that, then you can now determine what your risk appetite is, and based on the customer’s risk appetite, you go ahead and give out this loan.
So, we believe one of the things that have worked for us is the fact that we have the knowledge, we have the experience, and we also have the partners that we rely for information.
So, for instance, like the credit bureau that I mentioned, and all these coming together, we use this to make decisions on who and how much we lend to people.
And then, another thing, and I think finally, it’s just that you also learn. So, the models you have are learning, you yourself are learning, and so, depending on what happens, you’re making very, very quick, flexible and tactical decisions on how to ensure that the quality of your book remains very good.
Nairametrics: How helpful are the credit bureaus given the level of non-performing loans in the industry and the fact that an individual can still take a loan from up to 30 different digital platforms without repaying?
Henry Obiekea: We’ve been working with the credit bureaus for the last eight to nine years. We’ve seen significant improvement in the quality of information and the quality of data that they have.
But the credit bureau data is only as good as the number of people reporting, right? And so, that’s where there is a bit of a mismatch. So, for example, you just gave an example where one customer has 30 different loans from 30 different providers. If you check, maybe only three or four of the providers are reporting those loans to the credit bureau, which is against the law.
If the credit bureaus don’t have that data, then there isn’t a lot to do. So, how do we enforce for people to send that data to the credit bureau? I think that’s what it is; that’s something that can be very helpful. And I know that the credit bureaus are also working on ways to ensure that it is easy for you to report those data.
So, just imagine I have one small MFB in one village in Delta or one village in Kano, how do I go ahead and report those loans? Whether the loans are performing or not performing, it doesn’t matter; you need to send the data to credit bureaus.
So, it’s just ensuring that we are getting everybody to report that one. But there’s also a set of people who haven’t taken loans before, so they are not under the credit bureau. So, the models that people like us at FairMoney have, where we are not just looking at the credit bureau, we are looking at the alternative data to make an informed decision and assess you and then determine the risk level of that particular customer.
Companies like us now do that to also help the ecosystem, because at the end of the day, if we assess a customer that doesn’t have any historical credit records, assess the customer, give that customer credit and we are the first formal source of credit that this customer is getting, at the end of the day, what happens? We send that information to the credit bureau.
Now, they have data about the person, so now that person has access to credit and some other company can look at the person and later on in the day or whatever, grants that person credit. So, that is also some contribution we, as a company, believe we are making to the ecosystem because of the way our model works.
Nairametrics: As an MFB in the digital lending space, you are regulated by the CBN and also under the regulatory purview of the FCCPC, how does this impact your operations?
Henry Obiekea: So, the primary regulator is CBN, and in fact what the FCCPC has for companies that are regulated by CBN is limited. There is more deference to the CBN in that aspect. We comply with the FCCPC. If they have questions, we sit with them, but for all intents and purposes, the CBN regulation really is what guides all the MFBs.
So, if you are complying with the CBN regulations, chances are you’re also compliant with the FCCPC
Nairametrics: What would you consider as your biggest operating challenges?
Henry Obiekea: The challenges are the normal challenges of operating a business in Nigeria. But we always look for the things that can improve our fortunes, improve the way we serve our customers and our ability to serve them better and profitably.
So, I would say, for example, there are certain things that are available to commercial banks but not necessarily available to microfinance. There is something called GSI, Global Standard Instruction, where if customers default for a certain period of time, the banks have the right to go after any of the accounts that the customers have. So that’s a huge tool that these commercial banks have.
We think that stuff like that should be exposed to MFBs because it will really help. I know that there have been conversations about this for a while, but in my view, that’s something that can really help us and improve the defaults that we have.
So I think if customers know that this is what can happen, it will incentivize customers to behave the right way and to pay their loan if they know that there is this risk in terms of GSI.
The deployment of the GSI was going to be done in phases. Unfortunately, the phasing has taken quite a long time. So the earlier you get MFBs on it, the better for us.
Nairametrics: From 2021 to now, what has changed after you obtained your MFB license?
Henry Obiekea: So, now we are regulated by the CBN and also our deposits are insured by the Nigeria Deposit Insurance Commission, NDIC. And so, the fact that we are now regulated, there’s a lot more from investors, a lot more trust in the company, and there’s a lot more oversight.
And so, we have a duty to comply with the relevant laws, regulations and guidelines. And so, we cannot hide, right? Whatever the CBN has stipulated within the financial systems of how to operate, we need to comply with that. And by doing that, a few things happened: processes needed to improve, which has happened. The types of services, and I think that’s important, the types of services that we provide.
One of the things that the license achieved for us was our ability to provide a broad range of services for our customers. So, it was no longer just lending play, but now lending, deposit taking, offering savings accounts, offering interest to customers, providing them with family debit cards, amongst other things.
We are also powering transfers and payments, bill payments, and the like. So, if there’s any change the license did for us, it was our ability to provide customers with a broader range of services and products.
