Nigeria, populous as it is, has a consumer loans industry that is significantly lower than that of South Africa at $2,4 billion as of 2015 (compared to South Africa's which was estimated at over $200 billion during the same period). A small consumer loans industry in such a populous country not only speaks to a lack of financial inclusion to some extent, but also how much more the country's economy could be stimulated if consumer credit was not as near impossible to get.
Even though Nigeria is said to have approximately 60 million bank account holders, only about 15 million have any form of credit history or information of any sort that can be used to assess whether they qualify for credit or not. This leaves the remaining 45 million, approximately, with no chance of having access to any formal consumer or small business loans.
Bank data is not the only issue making it difficult to obtain a consumer or small business loan in Nigeria, another issue is that of identification of people given Nigeria's poor national ID system. Although Nigerian banks introduced the Bank Verification Number (BVN), Tunde Popoola (Managing Director and CEO of Nigeria's CRC Credit Bureau Limited) previously indicated in June 2016 that "less than half of bank customers have been successfully enrolled (for BVN), almost two years into the project".
Despite these seemingly insurmountable challenges, a Nigerian FinTech startup, KiaKia, believes it has found the solution to not only making it easy and quick for Nigerians to apply for personal and small business loans, but also to collect succesfully on the loans.
Olajide Abiola, Co-founder and CEO of KiaKia
"We had a clear and thorough understanding of the situation, based on extensive and in-depth research that it was possible to identify creditworthy and credible borrowers and grant them loans without them having a credit history or possessing collateral. Our play with data and technology validated our belief and conviction and we went ahead to do just that using predictive analytics, big data, machine learning and digital forensics." said Olajide Abiola, Co-founder and CEO of KiaKia, as he explained to iAfrikan how they came about starting KiaKia.
Abiola has 12 years experience in financial legislation and the ICT industry including a stint as the Legislative Aide to the Chairman of the Senate Committee on Banking, Insurance, Financial Institutions and the Capital Markets in Nigeria's National Assembly. His co-founders include Ime Udoh, who is the CTO and has 8 years experience in developing enterprise software applications for the public and private sectors in Nigeria, as well as Chiemeziem Anyadike, KiaKia's COO with 7 years experience in front-end development and one of the pioneer developers in one of Nigeria’s online betting companies.
Abiola's experience seems to position him well to lead the FinTech startup, but how exactly did they overcome the issue around identifying borrowers given KiaKia comducts all its applications and issuing of loans online?
"Authenticating the true identity of individuals in our digitally active age and explosion of data is not something complex at all. It is one of the simplest processes for us. Also, there is the Bank Verification Number (BVN) which enables us to validate the identity of borrowers." explained Abiola.
He further elaborated that KiaKia utilizes a creative and innovative combination of machine learning and Artificial Intelligence in their credit scoring and credit risk assessment process which he says has an accuracy of about 97%.
"This is based on performance. We can accurately determine if an individual is indebted or earns the income they claim they earn without physical bank statements or credit reports. Data doesn’t lie. Our performance attests to it." added Abiola.
This whole process and their unique systems has apparently resulted in KiaKia being profitable within six months of launching thanks to also a high percentage of loans being repaid on time by their borrowers.
The whole process from loan application to paying out the loan to the borrower takes place via KiaKia's website.
A small business or individual in Nigeria can register with KiaKia by supplying their e-mail, mobile phone number and BVN. The BVN is used for identity authentication to protect against fraud, both for the borrower and KiaKia.
Once a business or individual is registered, which takes less than 3 minutes, including e-mail validation and mobile phone number authentication via OTP (One Time Pin), a borrower then provides their employers details, next of kin or friend, income details and other verification information. If the amount requested correlates to the borrower’s income and other details, it is submitted successfully, if it doesn’t, a counter loan amount offer is made immediately.
Disbursement of the loan is with a push of a button and typically happens under an hour from application as Abiola explained.
"Early repayment earns a borrower trust points and also a K-Kard, which is our customized prepaid card that enables those class of customers access loans without application." said Abiola.
Abiola attributes much of their success so far, as compared to their competitors, to their proprietary credit risk assessment system. Another advantage is that KiaKia's operations are entirely on the Internet as opposed to their competitors who are somewhat limited by their brick-and-mortar operations.
So far, KiaKia say they have succesfully disbursed loans, and collected on them, in 17 Nigerian states.
KiaKia is definetly doing their bit for financial inclusion while being profitable but as time goes on, depending on how much of the market they are able to grab, they could prove to be a powerhouse as far as the collection and analysis of key personal and small business financial data in Nigeria is concerned.