As of September, 320 companies are now giving out loans to Nigerians through apps on their phones. This is up from 284 companies in May.
People are asking for more loans because it’s getting harder to live with the current economy.
Lenders say that the number of people asking for loans has gone up four times this year alone.
These 320 companies have gotten the thumbs up from either the Federal Competition and Consumer Protection Commission (FCCPC) or the Central Bank of Nigeria (CBN).
When you look at the FCCPC’s list, 264 of these lenders are fully approved. Another 42 have conditional approval. Plus, 14 more are also licensed by the CBN.
Why More Companies Are Going Digital
The FCCPC has a policy to register digital lenders to clean up the market. But the easy registration is making more companies join in.
“If you’re in finance now, the first thing to do is to go into digital lending,”
“Microfinance has stricter rules and costs more to start. That’s why many are going for digital loans,” says Mr. Gbemi Adelekan, Chairman of the Money Lenders Association.
“More people are coming because it’s easier to start than it is with CBN-regulated companies,” he adds.
Growing Loan Demands
Besides being easy to start, there’s a big need for quick loans in Nigeria. But there are risks of people not paying back.
- Many Nigerians need loans to get by, and loan apps offer fast money.
- The need for loans is now four times higher than during the COVID-19 pandemic.
“At our company, KwikPay Credit, during COVID, we got about 1,000 applications a week. Now, we get between 5,000 and 6,000 weekly. Many people want loans,” he says.
- But most people who apply can’t get the loans because they don’t have a good credit history.
- About 90% of the applicants fail after passing the first check, which is their BVN (Bank Verification Number).
“We first check if they have some financial history. Out of 5,000 applications, we reject 4,500 immediately,” Adelekan explains.
Some lenders take more risks and only do BVN checks to get more customers.
These lenders usually give very small loans, from 3,000 to 5,000 Naira, but with high-interest rates to cover the risks.
Dealing with Unregistered Loan Apps
Even though many lenders are now registered with the FCCPC, lots of others are not and still offer loans illegally.
- These unregistered lenders often harass their customers, and 88 such apps are now on the FCCPC’s watchlist. Meanwhile, 47 have been removed from the Google Play Store.
- Dr. Adamu Abdulahi, Executive Commissioner of Operations at FCCPC, says the registration helps to identify the companies behind the apps.
- Before registration, they couldn’t trace the companies running these loan apps.
- He also says they are trying to balance keeping the loan apps running while dealing with customers who don’t pay back on time.
What You Need to Know
The FCCPC under its former boss, Babatunde Irukera, created guidelines for digital lending in 2022.
The guidelines aim to make loan apps fair, clear, and helpful for Nigerians.
The rise in registered loan apps from 284 in May to 320 now shows that digital lending is growing fast in Nigeria.