Most digital banking solutions focus more on payment services while the availability of credit receives little attention when it comes to digitised banking. Ergo, players in the Fintech space are making a call toward the digitisation of credit to boost the economy.
The gains of digitising the credit processes both for organisations and businesses in need of loans were discussed at a stakeholder meeting organised by the Committee of E-Business Industry Heads (CeBIH) in Lagos.
In line with the central topic, stakeholders were urged to transform credit through digital optimisation as it would foster equal access to credit facility to everyone, especially those at the bottom of the pyramid.
Digital lending is seen as the process of offering loans that are applied for, disbursed, and managed through digital channels. The process is instant, automated, and remote.
The chairman of CeBIH Adeyemi Atanda said he believes that availing credit is one of the major avenues to drive economic empowerment.
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Speaking to our correspondent, he said Nigeria is at the level of two to three percent credit availability to the bottom of the pyramid, whereas in other developed countries, that ratio is about 40 percent.
Further checks show that Nigeria’s overall financial inclusion target was 80 percent by 2020. EFInA data shows that only 64 percent of Nigerian adults were financially included by the end of 2020, meaning that 36 percent of Nigerian adults, or 38 million adults, remain completely financially excluded.
On the issue of financial inclusion, women remain more financially excluded than men, with only 45 percent of women using formal financial services, compared with 56 percent of men.
“This means that Nigeria is very far from the target,” Atanda said. “And if we don’t make credit available to people, SMEs will not grow, businesses will not be able to expand and we’ll not be able to create employment which actually is supposed to drive our economy.”
In addition, he said there is a need for home-grown solutions to be able to drive digital credit optimization as every solution imported is paid in FX and there’s a lot of pressure on the Naira right now.
“So, to reduce that, we need to grow our own solutions locally,” he adds.
Although cultural behaviour, regulation and enabling environment, IT infrastructure, and organisational structure were some identified challenges at the event, Anino Akperi, CEO, Money Mall, said digital innovations should be designed in such a way that Nigerians can have access to loans.
He argued that a lot has changed in the credit space as the sector has moved beyond manual processing of things: manual customer acquisition, manual credit processing, disbursement, and other processes.
Commending CeBIH for being able to bring to show that every aspect of banking can be digitalised, and not just payment systems and money transfers, he noted that the credit area is a critical aspect of banking and if digitised, it will help the banks to reduce their cost of customer acquisition, cost of credit administration, and also help those that are seeking facilities to be able to get money easily.
Most importantly, the issue of credit concentration is eliminated with digitized credit, according to Akperi, who said more than 40 percent of loans granted in Nigeria are within three sectors: oil and gas, construction, and maybe government.
“What happens to the rest,” he asks rhetorically. “And that also points out something: whenever we have issues around oil price, non-performing loans in the industry go up. So, critically, every lender will need to diversify, spread out these loans.
“Let the loans no longer be concentrated in Lagos. Let the man in Damaturu, and Eket have equal access such that the opportunities that exist there, the people can take advantage of it and do well and it helped the entire economy.”
Steve Bireley, chief technology officer, Lokyata, advised Fintechs to find ways to measure the effectiveness of digital optimisation because with measurement, they will not know how effective their optimisation is.
CeBIH is constituted of the upper echelon of electronic business industry practitioners in all Banks in Nigeria with its major and most important objective being the promotion of electronic banking services in line with global best practices.
This event is one of its activities at driving awareness across the industry.
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