RenMoney MFB Limited, a consumer finance firm is plotting to crack Nigeria’s notoriously difficult consumer lending market by deploying high tech predictive algorithms and analytics to aid loan creation.
The company is able to approve loans in 24 hours to 95 percent of all applicants with the use of its customised proprietary models that provide predictive analytics on how to price risk for clients who often operate in the informal sector of the economy and are usually ignored by traditional banks.
RenMoney has also partnered with Nigeria’s fledgling credit bureau firms to help strengthen their expertise, Graham Lee, managing director/CEO, said.
“We believe that a proper access to finance is one of the biggest drivers of economic growth,” Lee said in an interview with BusinessDay at the firm’s headquarters in Lagos.
“Our innovative and unique selling points lie in the interface of technology, professionalism, skills and a lower cost base that allows us to pass on savings to clients in the form of cheaper interest rates. We will be significantly creating financing access to a large number of clients in the coming year.”
RenMoney plans a significant ramp up in operations by adding 180,000 new clients by year end 2016, a 900 percent increase from today’s levels.
The firm which aims to break even by December, currently has a loan book of N2.8 billion, with average loan size of N140, 000 ($700).
By comparison, Nigeria’s largest bank by market capitalisation, Guaranty Trust Banks (GTB) had N16.66 billion in loans extended to its 150,000 SME customers, for an average of N110,066 ($555), per loan size, according to data from the lenders 2014 annual report.
Lack of access to credit is a major issue for small businesses and consumers in Nigeria.
Nigeria ranked 52 in getting credit on the World Bank 2015 doing business report, compared to Ghana’s 36 ranking.
Major Nigerian banks are retrenching from extending loans to all but the most blue chip corporates, as an uncertain macro – environment threatens to balloon bad debts.
Nigeria’s economy decelerated in the second quarter of 2015 as GDP expanded by 2.35 percent, down from 3.96 percent in the first quarter.
“Our expectations for loan growth are muted – a nominal 5 percent increase in 2015, which is low by Nigerian standards – due to the much deteriorated operating environment,” Fitch Ratings Services said in a September 25 report on Nigerian banks.
RenMoney’s customers mostly use their credit/ loans to consolidate debt, pay for education, home improvement, buy appliances and invest in their businesses, according to Lee who was a former head of Management Information Systems at South Africa’s Capitec Bank Holdings Ltd., which specializes in short-term lending.
The firm’s data is all stored in the cloud, with minimal fixed asset investments (it operates six branches in Lagos) that help to keep costs down.
Growth is surging as 1,015 new clients were signed up in September, according to Lee.
“The risk profile of our operations remains the same, despite the strong growth, as our predictive models allow us to price better,” Lee said.
“We also continue to work with our clients even if things go badly for them. Interest rates are risk-based, with the top end of the range at 6.5 percent. We target a specific Return on Equity (ROE) for each loan we make, and every naira we save will be used to reduce rates further,” he said.
PATRICK ATUANYA
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