If I had a dollar for every person I’ve watched sign a loan contract without reading a word of it, I would be a retired billionaire with one of those super yachts in Monaco or just lounging in one of my many old Ikoyi homes. Unfortunately for me and me alone, this discovery has never translated to money.
And while you may think, this old man is only trying to exaggerate, I promise you that’s not the case at all. This is the ordinary condition of consumer lending almost everywhere, and it gets worse the further down the income ladder you go. People rushing to solve a problem, whether it is school fees due next week or a business that needs inventory before the market opens, will skip past the fine print because the fine print feels like an obstacle between them and the money they need right now.
And the fine print, as anyone who has ever been burned by a contract knows, is where all the consequences live. A misplaced comma, a clause about compounding interest, a line about what happens after day 30, these are the things that decide whether someone comes out of a loan intact or comes out of it owing three times what they borrowed. Sometimes including their kidneys.
There is a version of this problem where you could call it negligence. I mean, someone with two eyeballs, a university degree, a stable salary, and the time to read a contract who chooses not to read it has made a choice for sure, and there is an argument that the consequences of that choice belong to them. But that argument begins to fall apart the moment you look honestly at who truly needs consumer credit in an emerging market like ours.
Across Africa and most emerging markets, credit invisibility tracks poverty almost perfectly, and poverty tracks limited access to education almost as closely. The people who need a loan the most are frequently the people least equipped to interrogate the terms of that loan. They are not being negligent when they sign without understanding. Oftentimes, no one sat them down and explained what they were about to sign before they signed it.
Nobody signs up to be exploited
Now here’s the hard-to-sit-with part of this conversation we shy away from. If you refuse to lend to people who might not fully grasp the terms, and you’ve decided that access to credit is a privilege reserved for the literate and the comfortable, which defeats the entire point of financial inclusion. But if you take the opposite position and treat every borrower as a fully informed adult who understands what they signed, and you’re pretending that even educated people don’t get tripped up by loan terms, then you’re being dishonest.
Most borrowers have no idea some lenders capitalize unpaid interest, folding it back into the principal so the balance grows even as they’re making payments. And in certain cases, some lenders build in punitive penalties that only reveal themselves after a missed payment. A few “good” lenders build in restructuring options that could genuinely help a borrower in trouble, but since nobody reads the contract in the first place, those options sit unused while the borrower panics and disappears instead.
Sadly, the people this hits hardest do not know what happens after a missed payment, nor do they expect to be reported to a credit bureau, and they are often blindsided when a collections call arrives, because in their mind, being broke or sick or unable to pay is a good enough reason. Some of them borrowed for reasons that had nothing to do with cash flow planning in the first place, a wedding or as the Yorubas would say owanbe, a burial, an obligation that culture and family pressure made non negotiable, and only realized afterward that they had no plan for repayment.
A non-negotiable ethic the industry must uphold
Before getting into what responsible lending should look like in practice, I want to be straightforward about the part of this that is not gray at all. While most ethical questions come with shades of complexity, deliberately hiding terms from people who cannot protect themselves, or structuring a loan so that a borrower has no real path to walk away once they understand what they signed, is deeply wrong.
There is no framing of business necessity or market competitiveness that makes it acceptable to trap someone who did not have the means to see the trap coming. Lending to people you know cannot meaningfully consent to your terms, and doing it because their vulnerability makes them profitable, deserves to be called exactly what it is.
I say this with the weight of something I watched happen firsthand. Years ago, while I sat on the board of one of the larger fintechs operating across Nigeria and the wider African market, one of our own employees, a young man in his early twenties working inside one of the better fintechs on the continent, took his own life after taking out a loan he could not repay and finding himself under pressure he could not withstand.
I have not forgotten it, and I do not expect to. If someone working inside the industry, with more visibility into how lending works than the average borrower will ever have, can be pushed to that point, it tells you something about how much damage an unmanageable loan can do to a person who has far less protection than he did.
Tala went through something similar in Kenya, where several of their customers died by suicide tied to loan pressure, and I want to be careful here, because Tala is not a company I would call predatory or reckless. Plenty of what they built was genuinely good for financial inclusion. But even well-intentioned lenders can create conditions that break people, and that should sit with every founder and executive in this industry as a reason to build differently, not as a scandal to distance yourself from.
What does responsible lending look like for the average lender?
Regulators like Nigeria’s FCCPC, and similar bodies across Africa, are already pushing towards a more responsible lending terrain with tough enforcement, and I think they are right to. Loan terms should be plain enough that nobody needs a law degree to understand them.
There is room for sophisticated, layered products aimed at middle class or highly educated borrowers who want that complexity, but for everyone else, the terms should be stated in the most direct language possible. Borrow $100, repay $120 over six months at $20 a month, full stop, with every fee disclosed upfront. If there is a penalty for missed payments, it should be disclosed clearly and it should be capped, so a borrower who falls behind is not staring at a debt that has doubled in size.
Communication matters just as much as the terms themselves. A borrower should hear from their lender before a payment is due, not on the day it is due and certainly not after. For a loan repaid monthly, a reminder a week ahead gives someone time to plan. For a loan repaid weekly, three days ahead does the same job on a shorter cycle.
When a payment is missed, the lender owes the borrower ongoing, human communication before escalating to a credit bureau report or anything more severe, and that communication should always include an open door to restructuring, offered without an additional fee attached, because charging someone to fix a problem you could have helped them avoid defeats the purpose of offering the option at all.
Interest capitalization deserves particular scrutiny when the borrower is vulnerable. Letting unpaid interest fold back into the principal can make a loan balloon out of proportion to what someone can reasonably work their way out of, and once a borrower reaches that point, frustration turns into resignation, and resignation is where the worst outcomes come from.
How you and I can uphold responsible lending
A lot of what I have described so far comes down to something far less complicated than it sounds. When a lender suspects a borrower is under pressure, or worries that person may not fully grasp what they are agreeing to, the answer is as basic as a phone call.
Ask the borrower directly whether they understand the loan and whether they have a plan for what the money will actually be used for, and let their answer guide what happens next. Where it is possible to hand over goods instead of cash, inventory for someone running a small business, tuition paid straight to a school rather than routed through a parent’s account, lenders should take that path every time, because it closes off an entire category of misuse and diversion that cash lending leaves wide open for vulnerable borrowers.
None of this asks lenders to reinvent how they operate, they’re merely choosing transparency over obscurity and patience over aggression, and both of those are choices sitting well within their control. A lender who will not build in these protections has decided, whether they say it out loud or not, to profit from a borrower’s confusion, and there is no gentle way to describe what a business built on that foundation deserves.
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