These are not the best of times to be an online lender nor a borrower. With countries and economies around the world mostly on forced lockdown, households and individuals’ primary income and emergency funds are under severe pressure.
A prolonged stay-at-home could see personal funds run out and demand loans skyrocket. Traditional bankers are already seeing the potential of huge loan default rates. As of Tuesday, the National Center for Diseases Commission (NCDC) said it has confirmed 139 coronavirus cases and it is still contacting thousands of potential cases.
In view of this, the Central Bank of Nigeria (CBN) granted a further moratorium of one year on all principal repayments of its intervention funds, effective March 31, 2020, being part of measures to contain the impact of COVID-19.
The CBN also granted Deposit Money Banks leave to consider temporary and time-limited restructuring of the tenor and loan terms for businesses and households most affected by the outbreak, particularly oil and gas, agriculture and manufacturing.
Unlike traditional banks, online lenders which are much smaller may consider the CBN measure as a big step that could have a major impact on the future of their businesses post-coronavirus.
But failure to act may not only increase the chance of higher default rates which puts the lenders at greater risk, it is critical to future customer and employee relationships, and could also damage public image if not well handled.
There are ways online lenders can help customers:
Short term flexibility in loan repayment.
Carbon, former Paylater told BusinessDay that it is adjusting its maximum loan amount from N1 million to N500,000 in hope that this reduces borrowers’ exposure to large loans and also ensures that the lender is able to help as many people as possible during the period.
Apart from announcing its staff will work remotely to continue to provide seamless service, Carbon appears to be the first and only online lender so far to proactively take steps to cushion the impact of the virus on its customers.
Most other lenders have only publicly promised their borrowers that services will be uninterrupted despite working remotely.
But beyond capping maximum loans, flexibility in repayment could go a long way in showing customers that a lender truly cares. Best Egg, a US credit firm, set up a page with links offering a number of payment options to help affected borrowers, including waiving late fees and two-month loan extensions.
Offer to help
While a loan moratorium could be a long stretch, the coronavirus crisis does present an opportunity for online lenders to put on their CSR cap. Lenders can post helplines on company homepages, and communicate options via company servicing portals.
NetCredit, another US lender, put out a list of questions about the coronavirus to its FAQ page, noting that affected customers can adjust their due dates or apply to refinance their loans to reduce their payments.
These actions to help consumers have consequences for the bottom lines of lenders, but so it’s waiting for borrowers to do the “right” thing when the current situation is pushing them to the wall.