Bank

2024

Strong

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Nigeria’s digital lending space has come a long way. Not only is that way long, but it is also very hard as players in the space continue to deal with a myriad of problems from every side. Borrowers, for instance, are lamenting about the high interest rate demanded by the lenders as well as the unconventional, sometimes physical means of getting back their money. 
For Digital lending companies like Lift Above Poverty Organisation (<a href="https://www.lapo-nigeria.org/" target="_blank" rel="noopener">LAPO</a>), VFD, etc, their problems revolve around determining creditworthiness, continuous admission of new players (read competitors) into the space by the Federal Competition and Consumer Protection Commission (FCCPC), risk of doing business in the country, and the issue of non-performing loans which has driven many companies to adopt measures which many have described as high-handed. 
While many digital lending platforms have crumbled in the wake of these challenges, LAPO, one of the pioneers in the space, has continued to thrive. Speaking about how this is so, the company’s Executive Director of Business Support, Israel Aibuedefe, attributed it to “strong human technology.” 
“I will like to say we have a very strong human technology at Lapo if I may say so. That is the ability to be able to identify those that we give money to. We are able to identify their houses, their relatives, the churches they go to and all that so we really don’t get scared of how to recover our money. But using technology to drive this is a very big challenge,” Israel said during an event in Lagos. 
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<h4 id="could-tech-help-nigerian-digital-lenders-like-lapo" class="wp-block-heading">Could tech help Nigerian digital lenders like LAPO?</h4> 
The Executive Director’s comments appear as proof that at this stage of the development of the digital lending space in Nigeria, there is not much technology can do when it comes to matters surrounding creditworthiness and more importantly, getting your money back. This is even more so if you consider that a few financial technology companies have tried to disrupt the space only to end up getting destroyed. 
A fresh and appropriate case in point is BlackCopper, a venture capitalist-backed fintech. Armed with billions of naira in investor (debt) funds, the company set out to disrupt the digital lending space by offering collateral-free loans to small businesses and individuals, basically those without access to credit from formal financial institutions. Four years later, the startup <a href="https://techcabal.com/2024/05/22/blackcopper-racked-up-over-%E2%82%A61-billion-in-debt/" target="_blank" rel="noopener">found itself in a N1.2 billion debt</a> and struggling to recover over 60,000 loans. 
BlackCopper CEO, Olumuyiwa Faulkner attributed the bad loans to falsified information provided by the borrowers during the know-you-customer (KYC) process which allowed them to disappear once the money got into their accounts. For the rest, they simply could not pay up their debts. 
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Speaking about implementing technology into these very human problems, LAPO’s ED of Business Support, Israel noted that having technologies alone just will not work as the kind of failure suffered by BlackCopper has shown. He therefore called for some kind of regulation that would give force to the technology. 
“Using technology to drive this is a very big challenge,” he said. “Because we tried to have a strategy around it but it was a bit difficult for us to implement. And then when we saw the fintech guys coming in to lead the way, we were like okay, let us see what they are going to do. And when we saw the first set of guys get burnt, we were like, okay, we said it. However, we are now looking to regulators because just the solutions by itself will not be able to drive home the expectations.” 
Israel said the space needs the regulators to implement global standing instructions (GSI) solutions and some other kinds of partnerships that regulators can enforce that will help to drive digital credit in Nigeria. The GSI was created by the Central Bank of Nigeria (CBN) to ensure that borrowers who are simply unwilling to repay their debts are forced to pay with the money in their other bank accounts. 
While the GSI is expected to effectively deal with borrowers who are unwilling to pay, there is not much it could do about those who simply are unable to pay. 
See also: <a href="https://technext24.com/2023/12/27/loan-apps-harassment-drops-by-80-fccpc/#google_vignette">Harassment by loan apps reportedly drops by 80% as FCCPC to unveil debt recovery regulations in 2024</a>

Strong human technology: how LAPO survives Nigeria’s crunching digital lending space

Technext.ng

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