320 businesses were authorised in September, up from 284 in May, to offer loans to Nigerians using digital platforms commonly referred to as loan apps.
This occurred as the nation’s economic difficulties deepened and lenders saw an increase in loan requests. According to the lenders, applications for loans by Nigerians have doubled this year.
The 320 businesses that now service the digital loan market are those that have obtained permission to do so from the Central Bank of Nigeria or the Federal Competition and Consumer Protection Commission (FCCPC). Examining the FCCPC database reveals that 42 digital lenders are operating under conditional approval, whereas 264 digital lenders have received full licenses from the Commission. In addition, 14 CBN-licensed businesses are included in the database.
The ease of registration has turned into a draw for many to enter the digital lending industry, despite the FCCPC’s announcement that it is bringing digital lenders under its Limited Interim Regulatory/Registration Framework and Guidelines for Digital Lending to clean up the industry.
The Chairman of the Money Lenders Association, the umbrella body of the registered lending app companies in Nigeria, Mr. Gbemi Adelekan, said: “Right now, the first thing that you would want to do if you’re in the financial sector is to go into digital lending.
“If you think of microfinance, the regulation is tighter and the licence is costly. This is why many companies are coming into the space,” he added.
Continuing, he had this to say: “More people are coming because the entry barrier is not as high as CBN-regulated financial institutions ”
Beyond the simplicity of entry, the growing demand for quick loans from Nigerians presents enormous opportunities for anyone entering the digital lending industry, albeit with considerable non-payment risks.
Adelekan claims that a large number of Nigerians now depend on credit to get by, and that’s where loan apps come in because they provide quick loans. He pointed out that there has been a fourfold increase in loan requests since the COVID-19 pandemic’s peak. He said: “Let me use our own company, KwikPay Credit as an example. During the COVID period, when everybody was sitting at home, give and take, weekly, we would get applications of like 1,000.
Also read: https://brandspurng.com/2024/09/24/wetech-2024-to-sponsor-aurora-tech-award-support-women-in-tech/
“But now, we are receiving between 5,000 and 6,000 applications weekly. A lot of people want loans,” he added
However, he pointed out that the majority of loan applicants are not eligible for the loans since their credit histories aren’t good enough. He claims that 90% of applicants often fail the credit history section of the BVN verification process after passing it.
According to him: “One of the first things we do is to check whether an applicant has a financial footprint. Unfortunately, out of 5,000 applications, the system will reject 4,500 of them instantly.
“Once you have an outstanding loan that you haven’t paid, the system filters you out. People don’t realize that their credit history matters,” he added.
He went on to say that some lenders reduce the amount of risk they analyse to attract clients via BVN verification alone. He claimed that this group of lenders offers high interest rates to offset the dangers associated with their nano loans, which range from N3,000 to N5,000.
Hundreds of other unregistered lenders are still operating in the market and receiving business from desperate borrowers, despite the increase in the number of digital leaders who have registered with the FCCPC and obtained permission to operate.
The FCCPC said it has now placed 88 loan apps under its watchlist as it continues to work out modalities to sanitise the digital lending space, while 47 have been delisted from the Google Play Store, in response to their ongoing atrocities, which include harassing and defaming their customers through their contacts.
The primary goal of the nation’s digital lender registration and licensing process, according to Dr. Adamu Abdulahi, Executive Commissioner of Operations at the FCCPC, is to identify the organisations operating the applications through its Interim Regulation so that they may be held accountable for any violations.
He added that before the rule, it was impossible to identify any of the businesses running the loan applications.
According to Abdullahi, the Commission is also attempting to find a balance between the loan apps’ ongoing operations and the clients’ loan defaults. He also noted that despite these difficulties, loan apps continue to play significant roles in the economy.
It is pivotal to support equitable, open, and advantageous alternative lending opportunities for Nigerians. The FCCPC, led by its former boss, Babatunde Irukera, collaborated with the Joint Task Force (JTF) to develop the Limited Interim Regulatory/Registration Framework and Guidelines for Digital Lending, 2022.
The troubling activities of loan applications in the nation, particularly the illicit ones, due to claims of unfair practices and rights abuses, among other things, also made registration necessary.
Citing Nairametrics, as of May of this year, there were 284 registered loan applications in the nation. There are currently 320 approved companies, up from 36 at the beginning of the application period, BrandSpur business and economy news reports.
