Adeola Adedewe, the founder and chief executive officer at Kredete, an African digital end-to-end lending marketplace, in this interview with BUNMI BAILEY shares insights on how the company will deepen Nigeria’s financial inclusion drive through transparency while replicating the US social security number model to enable easy access to credit for both individuals and businesses. Excerpts:
After immigrating to the US and establishing yourself in the financial services sector there, why did you develop an interest in Africa and form Kredete?
My interest in the African market, especially Nigeria, is due to my roots and personal connections. Though I had the opportunity to migrate to the US earlier on and establish a successful career in its financial sector, I always kept sight of the challenges I faced here and what other Africans have faced in their various communities.
And the idea behind Kredete was born out of my personal experience trying to access a loan to start a business and the desire to make a difference and contribute to the development of the African continent. About 82 percent of Africans lack access to formal credit, with 60 percent being Small and Medium Enterprises (SMEs) with no funds to grow their businesses. This is crucial for economic growth and living standards across the region.
So, by leveraging my experience and knowledge in the tech and finance space, I saw an opportunity to create a platform that could bridge the gap between the underbanked populations and formal financial services. Kredete aims to empower people and multi medium small-size businesses in Africa by providing them with access to credit, including access to credit scores, reports, education and most importantly, the support they need to succeed and contribute to the growth of their local economies. This is why I am deeply committed to African space.
With Nigeria’s current barriers to financial inclusion growth, how do you plan to deepen access and provide credit facilities?
As I said at the recent lunch of Kredete, two things are missing, which is what we are going to leverage – transparency and the ability to give Nigerians a choice. For increased transparency, we offer access to free credit scores, reports, and educational materials to help Nigerians understand their credit standing. For example, many lending apps do not offer easy access to your credit score portfolio.
So, you get a loan first, and, in most cases, if you have little or no understanding of the credit space, you are potentially going to default on that loan, which is also the reason for the high default rate in Nigeria.
We are not providing a trade-by-barter situation; we are offering access to free credit scores and reports because it is supposed to be transparent. This is one of the privileges many people enjoy in global markets like the US, which is getting access to data for free. That is how people get to make informed decisions. We are giving Nigerians access to their credit scores, which would be relatable to market women, the elites, students, and graduates.
Access to credit scores and reports will also enable lenders to compare their options as most small to medium size businesses are put in a tight spot to get loans without the chance to compare or choose to analyse loan A over loan B. This is what Kredete is offering – putting in ranges of lending opportunities based on multiple parameters driven by our AI technology. So, for example, if company A gives you N100, 000 at five percent and B is giving you N100, 000 at 25 percent, you have the visibility to pick loan A. Many credit platforms today do not have that visibility, which is why people struggle to repay loans.
Our goal is to educate Nigerians about these features we have made readily available to them so they can use them to their benefit.
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Will your credit score and report be reliable for lenders using it as a creditworthiness document in accessing loans from traditional banks?
Absolutely. We are a marketplace for a reason, and we are the first company to introduce this into the Nigerian lending space. We are not just looking at personal loans for individuals or business loans for SMEs or credit cards; we are looking at expanding to auto loans, mortgage loans, and so much more.
These are very convoluted markets that will definitely require access to credit scores, which is why we will continue to build this feature to ensure widespread adoption and access.
With regard to our data, our sources come from the National Bureau of Statistics. Still, we are leveraging our expert experience and adopting the Fair Isaac Corporation standards to ensure it is comparable to global markets.
So, if an American’s credit score is 723 and a Nigerian has the same score, based on global economies, it will be regarded as the same going by the parameters used to arrive at those scores. Therefore, any Nigerian could go to any financial services provider for access to formal credit based on the credit scoring model or reports that we are offering.
How is Kredete going to be beneficial to its lending partners in curbing issues around high default rates?
We have drafted an all-in-one loan lending disbursement platform, and one of the first things it does is digest an average user and how they understand their credit profile. If an individual understands their financial standing and what they will be paying on a month-to-month basis, can review their income and expense, and are aware that they cannot bring on board another additional credit line, they will start making very impactful decisions. It would also help lenders not engage in high default rates.
So, the first set of actions we put into place is providing education to our user base and getting them to understand their profile, leveraging an AI decision engine for our learning infrastructure.
With this infrastructure, various lenders on our platform can input the different parameters of their loans, even for the first few days. For example, suppose you want to provide loans to only those with 700 to 850 credit scores who make five million a month, they can view and allow people in that category to access those loans.
With the AI decision engine, once lenders see a trend with a user being able to repay loans, they can begin to extend their credit lines to provide more credit to them. This is something that I experienced when I migrated to the US.
How did they trust me with a credit line when I had little to no data in the country? It was because I paid back my loans in good time and utilized the credit cards that I was given, and so this pattern of behaviour formed data used to increase my credit lines.
This is what we are trying to introduce to the lending space here, which will most certainly minimize default rates because once an AI tool sees a pattern in someone’s profile, it can decipher the user’s spending capabilities to provide them with the best type of loans that suit them.
Nigeria’s high lending rate has been described as one of the reasons for the country’s high loan default rate. Are you going to be aiding rates that are lower than the current market rates?
At Kredete, we do not provide loans. We are bridging access to these loans from various lending platforms through a digital lending end-to-end marketplace. The current interest rate is exceptionally high, but if you give users a choice, which is what we are trying to do, it allows them to decide what is most favourable to them.
Furthermore, as we deepen access to credit histories, it will help reduce this interest rate. This means that if you are beyond a certain level of credit history rates, you could get a reduced interest rate like international global market standards, which is one of the things we are introducing to our lending partners.
There should be parameters for good and excellent credit scores. So, if an individual gets 25 percent if his score is between 500 and 650 if the individual pays back all his loans in good time, he could work his score up to 700. With this score, he could eventually start borrowing at 10 or seven or even five percent. We want to work with our users to achieve 700 credit scores so that they can access reduced interest rates, which are incentives and benefits that lenders can begin to implement.
Many fintech companies preach the financial inclusion message but need to include the unbanked. Are you targeting the unbanked Nigerians for inclusion?
This affected me years ago when I tried to get access to formal credit while I was part of the underbanked population. I could not get access to credit. So, our mission is not to provide credit to the elites alone but to provide formal financial inclusion to the underbanked, which is a vast majority of the population. This is why we started with free access to credit scores and reports. We are saying a market woman who, for example, makes about N25, 000 to N50, 000 monthly can get free access to credit scores and reports without spending from her profits.
How does Kredete plan on deepening financial education, especially for those at the bottom of the pyramid, and does it have a target number?
Absolutely. This is why I started with a free platform; that is the first step to financial inclusion. According to the data from Central Bank and EfinA, in 2020, about 36 percent of the Nigerian population is unbanked, and in 2023, we are looking at about 40 million+ excluded people, which is one-quarter of the population. This is a vast opportunity which we’re trying to tap into.
Our primary focus is to provide these people access to free credit scores, reports, and credit assessments. More importantly, we made this score a number. If there are too many words, not many people may understand. But every market woman or artisan understands numbers because they work with numbers daily. By gaining free access to the Kredete app, a room full of different classes of people can understand their profiles and credit scores.
Also, we are marketing aggressively to ensure we can get about one-quarter of that excluded 40 million population. If you do the math correctly, that is about 10 million of the population in Nigeria over the next two years, and we will target them inversely.
You know how they say it, words spread in the marketplace. We believe if you target every one in 10 market women, they begin to spread the word to the average market woman because it becomes a thing of pride. They can understand credit and channels and be part of that financial inclusion.
Are you considering partnering with conventional banks, fintechs and other industry players?
Yes, because we have a lender platform. We have done a cost analysis of what our platform will save the average traditional bank, fintech company, startup, or credit facility-driven company. They spend so much money on the process and it is still not that efficient, but based on our platform, they are reducing costs and, most importantly, increasing efficiency. So we are onboarding them as we go, showing them what our platform can do and how it can increase efficiency.
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