Credit bureaus are holding back digital lending in Nigeria

I was at a recent event organized for alternative lenders, mostly digital lenders serving individuals and SMEs. The engagements were eye-opening even though I was already conversant with most of the issues raised.
Nevertheless, one of the nagging problems kept nagging me after I left that day.

Everyone was complaining about how difficult it was to get access to credit bureau data. Yes, they exist in Nigeria, and about 3 of them (FirstCentral, CRC, and CreditRegistry) have been licensed for operations by the Central Bank of Nigeria. They even have an association, Credit Bureau Association of Nigeria (proper parapo).

I wouldn’t jump the gun to blame the credit bureaus, but the complaints that kept coming from different actors (banks, MFBs, individuals, etc.) were so many they cannot be without some attributions. There ain’t no smoke without fire.

Here are some of the critical issues that lenders raised.

Cost

The cost charged per record by the credit bureau is so high as to make it useless except for the high ticket transactions. Meanwhile, digital lenders lend from the low thousands, and when you aren’t giving credit to everyone you check, the cost becomes a runaway train.

On the flip side, credit bureaus get this data from banks and lenders for free then turn around and sell at an exorbitant price per check. This doesn’t make sense to me or anyone else for that matter.

If digital retail lending will ever explode in Nigeria, the cost of checking credit bureaus has to be so low that it is marginal. Probably in the region of N20 to N50 per call. Do that for 10 million calls a month, and you have a N6B business a year.

APIs

Without APIs, there is no credit bureau intermediation in digital lending. APIs must be simple to integrate with, extremely stable, and always available. In a modern digital finance world, APIs should take a few seconds and not days to apply for. There should be a sandbox to test without having to contact anyone.

The APIs currently provided by credit bureaus are so poorly implemented – they are buggy, slow, and takes forever to integrate. You can imagine these credit bureau struggling with modern technology. It is interesting to note that none of the credit bureaus has any reference to APIs on its website; so if you want to see developer documentation, you are on your own!

Information

Information should be simple. In the US and other countries, a combination of names and other demographic info are used. In Nigeria, there should be a standard use for BVN. It is unambiguous; it’s simple, it’s fast

Reduced cost for contributors

Credit bureaus should give credit of say, five free checks for every record of the contribution made by lenders. It offers incentives for lenders to contribute information. The more they update, the cheaper their operations are. It’s a win-win for everyone.

Partnership with fintechs

It’s possible that these credit bureaus have dinosaur backends and find it difficult to serve the fast-paced digital lending world. They could partner with fintechs (hungry for revenue) to build smart API front ends and developer portals which alternative and digital lenders can connect with. Revenue share is a way to make everyone happy. Any takers?

What happens when these are done

Lenders get to trust the system, and it becomes self-reinforcing. The better the system is, the higher the chances of blocking bad actors. When bad actors are getting barred, anyone (like my cousins) with a propensity to go rogue becomes serious because they can see consequences. Then default rates go down which makes interest rates go down as well. More credit flows. Maybe Nigeria can be great again.

Fun facts

Of the three credit bureaus in Nigeria, two are led by ladies. Amazing Amazons

Finding data in Africa shouldn't be a problem. Let's solve it

Data is the fuel of decision making, anywhere and everywhere; and Africa is not excluded. Regrettably, getting simple information to make intelligent decisions in Africa is so hard you are better off just reading the stars. No wonder most African businesses are based on “divine inspirations.”
The African economy is vast with different sectoral opportunities. Yet, the lord helps you finding accessible information to help you bring your nice ideas to the market. In the end, unfortunately, most of us depend on foreign data or information to make our business decisions. Some of these data are so old the web pages have gray hairs.
Many of my friends (I have so many, want some?) complain about the paucity of data and love to compare how easy it is to get data about other countries. But hey, angels didn’t create the data for them, they did. What we lack is a deliberate attempt to do research, surface insights and share data with the world, for free.
The exciting thing is, if you push data out, you end up becoming a reference or an authority even if some or all of what you published is rubbish. Remember, never believe everything you see on the internet.
The irony is that some data exist but in forms that are not discoverable. For example, I was recently looking for a list of approved mobile money operators in Nigeria. While I know it must be somewhere, hiding and eating popcorn on the CBN website, it wasn’t coming up on Google search.
And when you see some of these data, they are also not easy to understand forms. Data from National Bureau of Statistics (a rich source of good quality data) come in formats so ugly it wouldn’t find a girlfriend if it were a man.
My specialties have always been technology, banking, and payments, so, over the next few weeks, time permitting, I will be prettifying some of the easy information about Nigerian payments space which can then be found by anyone sleuthing around and hopefully Google and Bing can easily surface them as well.

Mobile Money in Nigeria: Operators, Opportunities and Trends

Recently I started seeing a spike in the number of inquiries made by friends, fintechs, and random other people about Mobile Money in Nigeria. And it’s not because they are suddenly having altruistic ideas for financial inclusion. Something must be cooking!

Let’s get the basics right
Mobile money is a form of banking where your account number is your mobile number. It’s as simple as that. Any other definition is an oversabi.
After the successful debut of mPesa in Kenya, many countries tried to launch their copycat mobile money system.

Unfortunately, it has been a mostly miserable failure. Some stats said less than 3% of all mobile money implementation has been successful. In Nigeria, the number is worse: 0%.

At the start of the mobile money madness, CBN gave out 23 licenses, 10 of which were by banks.

After a flurry of activities, things chilled. Banks subsequently developed acute amnesia about their licenses went back to their bread and butter: Commercial Banking.

Why and how mobile money failed will always be contentious. I have written about it, others have different opinions. The one thing we ain’t arguing about though is the fact that mobile money failed to hit the sweet spot.

New interests in Mobile Money
The emergence of fintechs has thrown open new possibilities of what can be done with moribund mobile money licenses. Most fintechs within the payment space are having a lorry load of challenges connecting to banks.
For example, a common request would be funding of payment transactions from bank accounts for which banks haven’t provided any simple APIs to work with. Those doing savings and personal financial management want to keep money in a legal way and also allow topping off investments from bank accounts. That is another problem.

Just like the way banks repurposed USSD codes meant for mobile money in 2014, fintechs are circling around banks to see how mobile money can be repurposed for better things.
 
Now, the list
Getting the actual list of licensed mobile money operators in Nigeria should be simple, right? Nope! You can’t even find it on CBN website if you search for it but here’s the direct link.
So, I put together the list of those I know to aid anyone.

OperatorOwnerWebsite
*909# Mobile MoneyStanbic IBTC Plchttp://www.stanbicibtc.com/
Access mobile moneyAccess Bank Plchttps://www.accessbankplc.com/
TinggCellulant Limitedhttps://tingg.com.ng/
Diamond mobileDiamond Bank Plchttp://www.diamondbank.com/
EazyMoneyZenith Bankhttp://www.eazymoney.com.ng
Ecobank Mobile MoneyEcobankhttps://ecobank.com/
FETSFunds and Electronics Transfer Solution Limitedhttp://www.mywallet.fets.com.ng
Fidelity Mobile MoneyFidelity Bank Plchttps://www.fidelitybank.ng
FirstMonieFirst Bank Nigeria Plchttp://www.firstbankplc.com/
Fortis Mobile MoneyFortis MFBhttp://www.fortismobilemoney.com/
GTMobileMoneyGTBank Plchttps://www.gtbank.com/
Mimo
*Part of Vanso. Bought over by Interswitch in 2016
Interswitch Limited (formerly mKudi, a subsidiary of Vanso)https://www.mimo.com.ng/
Monitize
*Not operational. Site redirects to Fiserv
Monitizehttp://monitise.com/nigeria
NowNowContec Global Infotech Limitedhttp://nownow.ng/
PagaPagaTech Limitedhttp://www.pagatech.com/
PayAttitudeUnified Payments Services Limitedhttps://payattitude.com/
PIDO
*Bought by Opera from Telnet in 2017
Opera Softwarehttp://www.paycom-ng.com/
PocketMonieTranzact Plchttp://www.pocketmoni.com/
QikQik
*Inactive
Eartholeum Networks Limitedhttp://www.eartholeum.com
ReadyCashParkway Projects Limitedhttp://www.readycash.com.ng/
Sterling mobile moneySterling Bank Plchttps://www.sterlingbankng.com/
Teasy MobileTeasy Mobile Limitedhttp://teasymobile.com
U-Mo
*Shut down. License allegedly returned to CBN
Afripay Limited/United Bank for Africa Plchttp://www.umo.net/
Virtual Terminal NetworkVTNetwork Limitedhttps://www.virtualterminalnetwork.com/
Wari
*Senegalese company. Acquired license in 2016
Warihttps://www.wari.com/
Zoto
*Zoto app shut down
Hedonmarks Management Serviceshttps://zoto.com.ng

 
Other documents
The following are also critical documents for mobile money in Nigeria, especially from the regulatory perspective: