Nigerians are embracing digital lending alleging that they are seeing huge opportunities irrespective of high risks of non-payment.
This is as about 320 businesses were authorized in September, up from 284 in May, to offer loans to Nigerians using digital platforms commonly referred to as loan apps.
This occurred as the nation’s economic difficulties deepened and lenders saw an increase in loan requests.
Lenders claim that this year has seen a quadrupling of Nigerian loan applications.
The 320 businesses that now service the digital loan market are those who have obtained permission to do so from the Central Bank of Nigeria or the Federal Competition and Consumer Protection Commission (FCCPC).
A look at the database of the FCCPC shows that 264 of the digital lenders have been granted full approval by the Commission, while 42 others are operating with conditional approval. The database also includes 14 companies licensed by the CBN.Although the FCCPC said it is bringing digital lenders to get registered under its Limited Interim Regulatory/Registration Framework and Guidelines for Digital Lending, as a way of sanitizing the space, the ease of the registration has become the catch for many to go into the business.
Read Also: Nigeria Eyes Another $1.5 Billion World Bank’s Loan
“Right now, the first thing that you would want to do if you’re in the financial sector, is to go into digital lending.
“If you think of microfinance, the regulation is tighter and the licence is costly. This is why many companies are coming into the space,” the Chairman of the Money Lenders Association, the umbrella body of the registered loan app companies in Nigeria, Mr. Gbemi Adelekan told Nairametrics.
“More people are coming because the entry barrier is not as high as CBN-regulated financial institutions,” he added.
According to Adelekan, many Nigerians are now relying on credit to survive and the loan apps come in handy as they offer instant loans.
He noted that demands for loans have now quadrupled what was being recorded during the COVID-19 pandemic when there was a surge.
“Let me use our own company, KwikPay Credit as an example. During the COVID period, when everybody was sitting at home, give and take, weekly, we would get applications of like 1,000.
Read Also: MAPOLY Confirms Receipt Of Bank Alerts For Student Loan
“But now, we are receiving between 5,000 and 6,000 applications weekly. A lot of people want loans,” he said.
He, however, noted that most of the loan applicants are not qualified for the loans because they lack a good credit history.
According to him, 90% of the applicants, after passing BVN verification usually in the credit history aspect.
“One of the first things we do is to check whether an applicant has a financial footprint. Unfortunately, out of 5,000 applications, the system will reject 4,500 of them instantly.
“Once you have an outstanding loan that you haven’t paid, the system filters you out. People don’t realize that their credit history matters,” Adelekan said.
He added that some lenders lower their risk analysis because they want to acquire customers by doing only BVN verification.
This set of lenders, he said, give out nano loans of N3,000 to N5,000 and comes with high interest rates to cover for the risks.
