The small and medium enterprise loans services, also known as SME credit, could be a potential revenue generator for the Nigerian economy if the right attention is giving to it according to Ngozi Dozie, Managing Director One Credit.
Presently, the industry loan credit is under-performing peers, “In Nigeria there is 6-8% debt to GDP, Kenya has 30% and South Africa is 70%. It’s inevitable that we are going to grow from 8%. That’s where we are going as more of our institutions become business friendly. If Nigeria grows from 8% to Kenya’s level, it will effectively recreate a new financial services industry.
“Add all the banks, the insurance firms, the pension funds, will help power the level of growth when we move from 8% to 30%. So this consumer credit is powerful. Unfortunately, most of the banks are not keying into it,” said Dozie.
SME credit industry caters for individuals and small businesses that require loans for emergency spending or facilitate a business idea.
The industry operates different from the banks in the sense that where a small business will be required to present collateral to access a loan by the latter, the former will not.
Similarly, to access a loan in a bank on many occasions a customer will need to have an account whereas that is not needed in an SME credit organisation which operates a purely lending service to its customers.
Services provided by an SME credit vary. Dozie noted that “We started lending to salaried workers, so you needed to have a formal job to get a loan. The loan was anything from N40, 000 to N1m ahead of 3 months and 12 months tenure. It is a loan that is unsecured; no collateral – nothing. We just ask for your bank statement, proof of identity and then we make a decision. If it is a ‘Yes’, then we transfer money to your bank account.
“We don’t take savings; we are purely a lending organisation. It was a way to change the mindset of people from loans. Most banks will say “give us deposit”, we are saying “we will give you loan, we are not taking any of your money. It is purely service oriented culture which we think is very different from what the banks are doing.”
Apart from no collateral loans, SME credits also come with innovative models which offer flexibility to customers. According to Ngozi, “We partnered with Unified Payment on a product which is tied to the SMEs. That’s one way we lend you money based on your POS transaction. If a shop makes N200, 000 in a month and average and I lend you 50 percent, N100, 000, I will charge you a 30 percent commission and then you pay that down for as long as it takes. This is where Unified Payment; to ensure the money is paid out.
“It means that if you don’t sale for a week we don’t take anything. If you sell a lot we take fifty percent of a lot. So it allows the SMEs particularly in this time where there is uncertainty to have money. Again this is not collateral no guarantor. It is a matter of 3-5 business days, that’s our promise; we will give you that money. Because we look at average turnover, when you pay that down you will then be accessible to higher amount of loan.”
A product like Pay Later only requires that the customer is banked and anyone can access the loan. “It’s a one month loan and you apply through your phone; no paperwork. You log in via Face book, helps us with your identity. You will give us a debit card from which we will deduct the money at the end. It is an automated loan process.
“We can ask you questions like “how much do you spend on food, airtime etc.” This will tell us whether you are likely to be a good credit; we disburse the money to your account. You can be a student, a mechanic, and vulcanizer or formally employed but you just need some quick cash like N10, 000 which is the maximum. We do a credit bureau checks on all borrowers whether you are borrowing N3, 000 or N1m,” said Ngozi.
Challenges the industry face include lack of financial literacy, “Like those people that say you give Nigerians money and they run away, we have a different mindset, view. We believe that people are ready to pay because the people we are lending to are those people who have been looking for loans but have not been able to get money. Nobody wants to lose credit because you don’t know when you are going to lose it. You may need it for school fees, healthcare emergency; our issue have never been about will people pay back. I think the credit bureaus are improving but the quality of service needs to improve for people to have more information about credit like you have it in other countries.”
FRANK ELEANYA
