Co-Founder/COO, Kiakia, a peer-to-peer money lending organization, Chiemeziem Anyadike, explained how technology has assisted the company’s lending operation. Excerpts.
How has the internet assisted your service rollout?
Technology has enabled our operations to reach wider customers. Our services are purely online. Millions of customers just need to submit their applications online. We process the applications cross-reference their identities through authentication. Others administrative processes, fund disbursement and collection are done online.
What is your level of technology adoption?
The people who constitute the management of Kiakia have expertise and experience in particular areas of the technology we have adopted. For example, I am a Data Analyst. I understand the building blocks of technology that are required to make each of the processes in the loan application, processing and collection possible. We have Material Design Engineer that deals with these processes. We also have backend Engineer. With this mix of technology, we are able to deploy solutions. We also have basic facilitation technology like payment processing and BVN that are available in the country to enable us authenticate processes in real time.
How does an applicant qualify for credit?
We don’t discriminate by sex, age, location as long as you are running a legitimate business under the law of Nigeria, you are qualified. The median age on our lending platform is 33 to 34. We have achieved and maintained a non-performing low rate of 1.09 since we launched to the public. As for our peer-to-peer, we have over 50 active customers across four states. For consumer loan, we have over 5,700 customers across 17 states. We have disburses loans to customers, all these entirely online.
How do you verify identity of applicants?
There are two categories of people. Those who are financially excluded, and these are people that are not captured in the banking system. They don’t have bank accounts. They can be considered as socially undocumented. The size of data regarding their identities is limited. That is why we are focusing on the underserved within the financial sector so our data has exploded significantly. This ranges from relational, geographical, social, identity and communication data.
They serve as primary ingredient that we rely on to authenticate the identities of those who need our services. The second group has Bank Verification Numbers [BVN]. It can be confusing to many people. We have tried to tell many people that this is an identity token and not a transactional token. Releasing it protects you and the financial institution you are transacting with.
It prevents people from stealing your identity within the financial ecosystem and it also mitigate fraud in both ways. So what we do is to establish the applicants identity with what the applicant does, where he lives, who he says he is. We then validate this in real time with a proprietary algorithm that does credit scoring and risk assessment.
We do this because our traditional way of lending relies largely on capacity to repay rather than the credibility to repay. So we have a dual approach to lending. We focus on the capacity and credibility in both ways. That you are earning excess amount of money is not enough to apply for a loan. There are other factors that form the basis of our credit scoring and risk assessment that enables and makes it easy for us to identify those who are credit worthy to access consumer and SMEs loans.
Does an applicant need asset-based collateral to access loan?
Because of the lending culture and psyche of consumers, business owners and financial institutions, I do not see collateral as what is possible because we will have to think of a warehouse, and where to keep the properties. There are cost-implication on the part of the financial institution. We strongly believe that a very effective risk assessment model does not need asset-based collateral to grant access to financial credit.
How did you get the idea of Kiakia?
The idea came as a combination of experiences with regard to access to credit especially as an employee. I sought a loan of N70,000 then when I was in the Army. I approached a bank where my salary account was domiciled. I could not secure the money for up to a month. The bureaucracy was cumbersome. I realized that this was the same experience with millions of people with credible credit rating attribute who could not access critical financial intervention when they need it.
How has regulations influenced your operations?
You must understand the legislative background of financial activities in the country. When it comes to banking, deposit, micro lending, payment processing and financial inclusion, it’s within the regulatory purview of the Central Bank of Nigeria [CBN]. This is on the exclusive list with other 68 items in the exclusive. But lending is within the executive and legislative purview of the state. Each state has Moneylending Act and different states have different level of modernization.
Lagos, Kwara and Oyo has the most modern regulation. Most of the states have subjected these legislations to re-enactment over the years but majority of the states have them in the colonial era format and it has not undergone reform. Moneylenders do not take deposits. They have guidelines, which they still adhere to.
So, if you registered a lending platform in Lagos, you can still render services to people in any part of the country and that is the beauty of the internet. You don’t need multiple licenses to reach borrowers in other states of the country. As long you don’t open a physical shop like sales and admin. It is just like e-commerce firm based in Lagos and selling to people in any part of the country. The same thing applies to the bank as well where you need different type of licences such as unit licensing, state and national licenses.
What should be government’s role in credit access?
Government should be proactive to review legislation and regulation and be flexible to support and encourage operators. Government should serve as the driver and catalyst for innovation. In the mobile money operation, regulations and innovation have contributed a great deal to stifle innovation. That is why financial inclusion has continued to be a sort of mirage to those who are yet to be captured in the banking system. Government should be more creative in regards to making fund available to the entrepreneurs and innovators.