Poor infrastructure tops Fintech challenges in Nigeria- FairMoney CEO
… as adult population adds 4m annually
The lack of infrastructure needed for Fintech companies to provide seamless financial services to Nigerians, especially the unbanked, is one of the biggest challenges facing the industry players, according to FairMoney’s Founder & CEO, Laurin Hainy.
The CEO of the quick loan app Nigeria’s high unbanked population is largely due to the poor existing infrastructure like the low Bank Verification Number (BVN) registration.
According to him, the few BVN in the country is a barrier to entry for many Nigerian adults and also a challenge for many industry players who are unable to go the last mile to provide financial service to the excluded market.
“The vast part of the Nigerian adult population do not have a bank account and one of the biggest reasons is because the needed infrastructure is not available- most Nigerian adults do not have a BVN,” Hainy said at the recent FairMoney’s investor conference in Lagos.
According to the CEO, the Nigerian adult population adds 4 million every year “but if you don’t have the right infrastructure (credit assessment tools, KYC, etc) to ride on to deliver services to that large population then it can get challenging for operators.”
38.1 million Nigerian adult population were reported EFInA in 2020 to be financially excluded, a shortfall by 16 percent points from the Central Bank’s desired target of a 20 percent exclusion rate.
A high financial exclusion rate for a country like Nigeria could translate to an increase in poverty rate as the unbanked population find it difficult to access credit to among other things expand their business.
“The reason why Nigeria’s financial exclusion rate is still high is that the products by financial services players are not good enough and this is largely due to infrastructural issues,” Hainy said on the sideline of the investor conference.
The CEO also raised the question of an incentive that would encourage an unbanked adult to embrace any financial product. “What are banks today offering the unbanked population that would want encourage them to want to own a bank account?” he questioned.
The loan app company which recently obtained a microfinance banking licence from the CBN said FairMoney is relying on existing infrastructure like BVN system, credit assessment tools to build a customer-facing service that then helps to solve the customers’ financial needs.
“The idea is to build the first and largest online bank in Nigeria that will still exist in the next 100 years.” The digital lender said it expects to have opened 2million bank accounts by the end of the year.
From about N8 billion gross loan book in 2020, FairMoney head of finance, Yaw Mante said it has now grown its loan book to about N25billion.
On what FairMoney is doing differently in the market amid increased competition, Mante said “our unique selling point is we want to be able to provide all of the banking needs of our customers but we started with the offer that we think is the most pressing- digital lending product.”
Secondly, he said the bank has a strong team that is diverse in its abilities.
“The other thing that makes us stand out is that we have a good underwriting approach- to do lending- you need to get the money back and our ability to lend and help people pay back and continue to gr9w with them sets us apart,” FairMoney head of finance said.
This year alone, Mante said FairMoney has generated profitability of about N2billion. Risk assessment and profiling the creditworthiness of their customers to determine those with higher and low risk has helped the company to achieve its milestone.
On FairMoney’s plans, the head of finance said the digital bank plans to use its three years’ experience to continue to scale and “keep our risk cost down and generate more profitability because the more profitable we are the more customers we can serve.”
“At FairMoney, we want to use the power of technology to bank the over 60 million in Nigeria who today are not banked,” the CEO of the quick loan app said.
The CEO believes its vision of deepening Nigeria’s financial inclusion through technology is possible because it has been tested in its loan business. “We used the power of technology to underwrite loans facilities- we have used very sophisticated methods to underwrite loans facilities and these technologies are something that we have developed internally and many larger banks don’t have.”