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Page 1 of 17
Improving Digitised Microcredit in Nigeria – A Use Case for Credit Bureau and Collateral Registry
August 2018
Page 2 of 17
Table of Contents
1.0 Executive Summary ........................................................................................................................... 3
2.0 Opportunities in the market ............................................................................................................. 4
3.0 Digital Credits .................................................................................................................................... 6
4.0 Risks in Digitised Microlending ......................................................................................................... 9
5.0 Considerations for Digital Lenders in building Strong Business Models and Customer
Relationships ............................................................................................................................................... 11
6.0 Considerations for use of Credit Bureaus and Collateral registry in disbursing digitised
Microloans .................................................................................................................................................. 12
7.0 Recommendations to financial services providers on how to engage in disbursing digitised
unsecured loans .......................................................................................................................................... 14
8.0 References ...................................................................................................................................... 16
Page 3 of 17
1.0 Executive Summary
Lending to the un(der) served low income households is challenging due to little or no financial knowledge as
most of these persons have limited understanding of formal financial services, which inhibits their ability to
make good decisions about credit. Furthermore, lenders often have little to no credit history to use to make
sound lending decisions. Digitised Microcredit which is using online digital platforms to originate loans
directly to customers, usually the low income persons and micro to small sized businesses has helped
expand access to formal credit in globally.
Prior to the emergence of access to microcredit through traditional banks, microfinance banks and other
financial institutions, low income persons as well as micro and small business owners accessed credit
using informal means such as moneylenders, family & friends, co-operatives, savings and credit groups
etc. Following the release of the Microfinance policy, Regulatory and Supervisory Framework for Nigeria
by the CBN in 20051 which was later revised in 20112, there has been an increasing shift from the
informal financial channels to formal financial channels of accessing credit. In addition, the advent of
innovative digital technologies and services are enabling financial institutions devise new methods of
offering financial services especially microcredit to people at the bottom of the pyramid, thereby
changing the narrative.
With digitised micro lending, loan origination platforms may automate some or all components of loan
applications, such as electronic data and document capture, automated underwriting and e-signatures.
Automation enables lenders to deliver loans more efficiently while maintaining their traditional
underwriting, pricing and compliance practices.
Global perspective: Total Number of Loans (2009 - 2013)
Source: Microcredit Summit Campaign, “State of the campaign” 2015 Report
1 Central Bank of Nigeria: Microfinance Policy, Regulatory and Supervisory Framework for Nigeria
2 Central Bank of Nigeria: Microfinance Policy Framework for Nigeria
Page 4 of 17
Global perspective: Total Number of Borrowers vis a vis Micro borrowers (1987 - 2013)
Source: State of the campaign
2.0 Opportunities in the market Nigeria presents a huge market for digitised unsecured loans; the EFInA Access to Financial Services in
Nigeria 2016 survey3 revealed that of the 96.4 million adults (people aged 18 and older) in Nigeria, 40.1
million (41.6%) are financially excluded, meaning that they do not have access to any financial product
or service, from formal financial services providers such as banks or even informal providers such as
cooperatives or savings clubs. Furthermore, 48.8 million adults are underserved such that it takes them
more than 30 minutes to reach any formal financial services provider. With regards to Nigerians who
borrow (33% of the adult population), only 5.5% of adults in Nigeria use formal credit products, 18.1%
use informal credit channels such as money lenders while 76.3% rely on family & friends. Of those who
are outside the formal financial system, 66.6% they are prepared to learn how to use new technology.
Demand & Supply for Unsecured Loans in Nigeria as at Q2 2018
3 EFInA Access to Financial Services in Nigeria 2016 Survey
Page 5 of 17
Source: CBN
Page 6 of 17
3.0 Digital Credits Digital credit is a fast-growing phenomenon in many emerging markets. “Digital credit” refers to credit
products—including digital payments products such as mobile money—that are delivered fully via digital
channels, such as mobile phones and the internet. These are usually referred to as unsecured cash loans
in emerging markets that are obtained via digital channels without the involvement of a salesperson,
that use digital channels for loan disbursement and collection, and that leverage digital data to make
lending decisions via automated processes. These tiny loans are having a large impact, allowing millions
of low-income consumers to borrow money with just a few taps on a phone menu or clicks on an app
screen. Digital credit is also promising from a financial inclusion perspective, given the low access to
formal credit by low-income consumers in most developing countries and the limitations of informal and
semi-formal options.
To date, most of these loans are low in value (generally $10–50 to start) and very short in tenor
(typically 2–4 weeks). Interest rates in digital credit commonly range between 6 percent to 10 percent
monthly for a one-month loan, which is relatively expensive compared to traditional formal loans in
similar sectors such as microfinance; although this is possibly less expensive than informal
moneylenders who may charge an interest fee equal to the amount borrowed4.
These digitised credits business models are driven by strong customer demand, lower operating costs,
and the greater reach of the instant, automated, and remote lending methodology. Because of these
factors, they can scale more quickly than traditional small-loan models5. The convenience and speed of
digital credit are well matched to urgent and unanticipated needs.
The following CGAP experiments with a diverse range of digital credit providers show clear and direct
evidence that digitising Microcredit processes is not only the right thing to do, but often a wise business
decision6:
Improving transparency of costs can improve borrower decision-making. A lab experiment with
digital lender Jumo found simple changes to how costs are presented reduced default rates from
29 percent to 20 percent. These changes were then integrated into its messages to borrowers on
its lending platform. This same experiment also found that making consumers actively opt out of
viewing a summary of product terms and conditions increased viewership from 9 percent to 23
percent, and resulted in fewer loan defaults.
Providing additional educational content can improve portfolio performance. A simple set of SMS-
based educational programs for M-Pawa borrowers in Tanzania had wide-reaching impact on
borrowing and savings activity, including borrowers paying their loans back 5.5 days earlier than
they had before accessing the learning content.
4 Ochieng 2016
5 Chen and Mazer 2016
6 Consumer Protection in Digital Credit
Page 7 of 17
Consumers need greater control of their digital credit history. M-Kopa provided its customers with
access to—and ability to correct to—the credit history being generated from their digital loans.
Those who accessed their credit history made more payments to M-Kopa and had lower rates of
default.
Framing of repayment messages with the right context can reduce late payments. Experiments
with Jumo and Pesa Zetu in Kenya found that simple changes in repayment messages can have
powerful impact on repayment rates. Jumo found that messages sent in the evening had 8 percent
higher repayment rates than morning reminders. Simlarly, Pesa Zetu leveraged its peer-to-peer
lending model in its repayment messages, finding that messages emphasizing the peer lenders
funding the loans were more effective in encouraging repayments.
3.1 Digitised Microcredits Ecosystem
3.2 Models of Digitised Microcredit
Globally, digitised Microcredit has proven to be an effective tool in reaching the people with little or no
access to financial services. Technology has helped overcome the challenges of accessing hard to reach
areas, high transaction costs, as well as increase transparency. Considering the Nigerian market, the
following are some of the digital lending models available;
1. Technology partnerships- Financial services providers can partner with FinTech companies or
Technology firms to provide digitised lending services. Many FinTech firms see an opportunity to
work directly with banks as a technology enabler versus a competitor. They understand banks are
compliance savvy and recognize the synergies between their technology expertise and the banks’
Microcredit
Regulators
Financial Institutions
Facilitators Technology Providers
FinTechs
CBN, NIBSS
Collateral Registry,
Credit Bureau
DMBs, MFBs,
MMOs, OFIs
Dev.
Partners
Page 8 of 17
ability to bring the low-cost funding and the trusted relationships. As a result, these FinTech firms
offer software as service solutions for banks. These are typically white label solutions, which enable
banks to offer a branded end-to-end digital lending solution to their customers without investing in
infrastructure or technology creation around the solution. The banks maintain full control over the
origination process.
2. Online Lenders: These are financial services providers that offer end-to-end digital lending products
online or via mobile phone applications. In this model, customer acquisition, loan distribution, and
customer engagement are entirely digital as these financial institutions upgrade their technology
platforms to allow the delivery of digitised loans. This process is specially designed with little/no
need for face-to-face contact.
3. P2P Platforms: Digital platforms that facilitate the provision of digital credit between many
borrowers and lenders, typically playing an ongoing central role in the relationship between these
parties.
4. Supply chain lender: These are firms that provide digital short-term working capital loans for micro
businesses to purchase stock/goods from their distributors or for pay-as-you-go financing of an
asset purchase.
5. Mobile money lenders. Mobile money operators offer loans to their customer base, leveraging on
mobile phone data for credit scoring. Customers can also make use of the agent network to
complete cash-in/ cash-out transactions.
3.3 Features of Digitised Microcredit
There are three common features/components that characterise digital microcredit, namely:
Use of digital channels: Digital Micro lenders leverage digital channels such as smartphone apps and
USSD (Unstructured Supplementary Service Data) menus to reach new and existing customers
where they are so they can apply for credit, receive loan disbursements, obtain information on their
accounts, and make payments remotely. Digital payments and communication channels form critical
railways for digital credit delivery. While previous financial account ownership and credit history are
not required, a precondition for many digital credit deployments is an existing subscription to
mobile phone and mobile money services
Decisions are automated and leverage nontraditional digital data: In the absence of credit bureau
data and a formal financial history of many potential borrowers, alternative digital data sources,
such as voice, airtime, mobile money usage, and at times even social media and utility payment
data, are used to inform initial credit decisions. These variables are assembled into computerised
decision trees and substitute manual decision-making processes.
Processes are managed remotely: In-person interactions between borrowers and lenders are
limited in digital credit delivery, as most transactions occur via digital channels. The digital nature of
lending addresses geographic access barriers of traditional credit products, and increases the
potential reach to underserved and unserved customers. Digital lenders use digital channels and
data to offer clients convenient access, quicker approval, personalized communication, and
responsible products and pricing.
Page 9 of 17
4.0 Risks in Digitised Microlending
Digitised unsecured credit is expanding rapidly in many leading digital finance markets as more people
(especially the low-income) now have the ability to access credit instantly from their phones and web
applications. Financial service providers need to be aware of the risks inherent in disbursing digitised
loans as well as the mitigants available to curb the effects.
The very attributes of digital credit—instant, automated, and remote— create risks that are distinct
from those of more traditional consumer and microenterprise credit models. Some of these risks
include:
External risk- These risks come up as a result of events outside of the corporate structure and cannot be
totally controlled or forecasted with a high level of reliability by an organisation. Companies always try
to manage the effects of these risks when they occur. Examples of these risks include:
1. Regulatory risk - Government constantly develop policies, laws and regulations that may or may not
be beneficial to the business.
2. Economic risk – Macroeconomic conditions such as exchange rate, political instability will affect the
business
3. Technological risk – Technology failures may occur that will disrupt the business such as information
security incidents (theft of customer data), server outages.
4. Market risk – Several changes like consumer interest, supply and demand as well as influx of new
entrants into the market can affect the business.
5. Client repayment capacity risk - Certain factors may affect the borrower’s capability to repay.
6. Consumer Protection Risk: This could be as a result of the customer’s low understanding of loan
costs and consequent defaults, customers making little or no prior consideration of need, costs, and
benefits of loans, with no clearly identified purpose of loan. These risks can result in consumers
taking on expensive loans, borrowing when they do not have a real need, facing challenges in on-
time repayment, and suffering the consequences of a negative listing in the credit bureau.
Internal risk- Internal risks are faced by a company from within its organisation and arise during the
normal operations of the company. These risks can be forecasted with some reliability, and therefore, a
company has a good chance of reducing internal business risk.
1. Credit risk – The risk resulting from a borrower's failure to repay a loan or meet contractual
obligations. Traditionally, it refers to the risk that a lender may not receive the owed principal and
interest, which results in an interruption of cash flows and increased costs for collection
2. Governance – Strategies, directions and instructions from management may not be accurate,
complete and timely thereby jeopardizing the business
3. Liquidity risk - Liquidity risk occurs when a business or financial institution cannot meet short-term
debt obligations due to lack of marketability.
4. Operational/Strategic risk- Prospect of loss resulting from inadequate or failed procedures, systems
or policies.
Page 10 of 17
4.1 Risk Management & Digitised Unsecured Loans
Microlending organisations face many risks that threaten their long-term viability and sustainability,
therefore, risk management is essential as it involves making decisions about how much risk should be
tolerated and how to mitigate and manage the risk that remains. Well-executed risk management can
help to build credibility in the marketplace and create new growth opportunities. However, if risk is
poorly managed, investors, lenders, borrowers, and savers may lose confidence in the organisation,
funds may dwindle, and the institution may not be able to meet its objectives and may eventually go out
of business.
The following are risk mitigation strategies, financial institutions may adopt:
Use credible data sources. Due to certain peculiarities of the target market, Micro lenders need to
look for data that can be used as reliable alternatives for identity, ability to repay and willingness to
repay. Such data can be assessed from telecommunications providers, utilities, government, etc. For
example, customers who do not object to sharing their information in order to improve their access
to credit, airtime purchase patterns and amounts can indicate a steady or uneven cash flow, and the
timing and frequency of calls and text messages can indicate whether someone is working a steady
job (for example, fewer calls between 9 a.m. and 5 p.m. may indicate that someone is working
during those hours). Another example: the proliferation of data from mobile payments can provide
credit underwriters with rich transactional information for generating credit insights. Point-of-
service (POS) devices are used with increasing frequency by retailers of all kinds to gather
transaction data. Retailer loyalty cards can provide important insights into consumers’ income and
even family structure (for example, buying diapers or school supplies is a good indication of children
at home).
Develop credit scoring tools. Financial institutions need to be able to predict the likelihood that a
customer will repay a loan in the future in comparison to others. This scoring models help assess the
credit risk of a borrower and aid in the credit evaluation processes. There are many data sources
which can be used as a scoring input a score can use as input:
o Socio-demographic data such as customer gender, age, civil status, business experience, time
residing at current residence, type of residence, etc.
o Behavioral data which reflects the history of a customer with a financial institution and may
include variables such as: number of days past due at last month end, maximum number of
days a client was delinquent, average number of days a client was delinquent, number of
times client was more than 30 days delinquent; number of times client was more than one day
delinquent, etc.
o Credit Bureau data which is collected by a third party and includes personal credit history with
financial institutions.
o Collateral registry which is a web-based system that allows lenders to determine any prior
security interests, as well as to register their security interests over movable assets provided
Page 11 of 17
as collateral. The Collateral Registry facilitates the use of movable / personal assets as
collateral that remain in possession or control of the borrowers.
o Psychometric data comes from specifically designed questionnaires to determine a person’s
knowledge, abilities, attitudes, and personality traits. In microfinance, these principles can be
used for credit scoring as well as to assess entrepreneurial aptitudes.
o Big data includes data from various sources outside of the norm, such as phone companies,
utilities, retailers or social networks (Facebook, Twitter, LinkedIn, Yahoo)
Advanced analytics and decision automation. Micro lenders may upgrade their systems to
sophisticated risk models that are built on machine-learning algorithms so as to make more accurate
predictions of default and other risk events. The proliferation of new technologies provides cheaper,
faster computing power and data storage, which enable better risk decision support and process
integration. Automating and digitising a number of repetitive, low-value, and low-risk processes,
particularly in the case of transactions that require small amounts, short maturities, and
comfortable risk profile will boost productivity, facilitate regulatory compliance, and enhance the
understanding of the overall risks.
Maintaining a robust risk culture. This is critical in ensuring the success of the organisation in the
future. This culture should have a clearly defined goal as well as the standards and models that the
organisation can use to manage risk. These standards will promote informed, conscious risk taking
based decisions, coupled with the necessary checks and control systems to continuously detect,
assess, and mitigate risks, as well as transparent procedures to follow up on breaches and
deviations.
Aligning with regulatory demands. Micro lenders are advised to focus on understanding regulatory
requirements and implications applicable to the industry as well as agents and customers. In
addition, financial service providers must ensure full compliance with acceptable regulations,
identify potential areas for risk of non-compliance and adhere to processes of compliance. It is also
advisable to establish a positive and productive relationship with regulators.
In summary, there is an urgent need to strike a balance between ensuring due diligence and data
protection in disbursing microloans. Identity verification is the starting point for most financial
transactions, but making sure a person is who they claim to be — and that they aren’t engaging in
criminal activity — has become a complex and costly process in the digital age7. There is a need to strike
a balance between the need to share data for Know Your Customer/credit analysis purposes and
important concerns around individuals’ rights.
5.0 Considerations for Digital Lenders in building Strong Business Models and Customer Relationships
Disclosure of loan terms and conditions:
- Provide consumers the all-in price before they sign a loan agreement. Consumer understanding
of costs can improve intentionality and repayment performance.
7 Customer Due Diligence and Data Protection
Page 12 of 17
- Test and adopt measures so borrowers read and understand the terms and conditions (T&Cs)
and their obligations. This includes using cost-effective tweaks to the menu design, “opt-out”
framing, and screens that summarize “Key Facts” in a clear and simple manner.
Marketing
- Consider whether push marketing and unsolicited offers are effective strategies in the long term
because they exacerbate the risk of encouraging borrowing without a purpose.
- Design effectively framed loan offers to reduce the likelihood that consumers will take the
largest amount available without thinking through their needs and repayment capacity.
Suitability and product design
- Introduce measures to improve intentionality and increase the “friction” in the borrowing
process to make sure consumers are making active and well-considered credit decisions.
- Structure the loan process to collect—with clear data privacy protections in place—more
customer data upfront to better assess needs and avoid the observed tendency toward “mono-
product,” one-size-fits-all digital loans.
Repayment and collections
- Optimize effectiveness of payment reminder messages through framing content, timing, and
tailoring to different borrower segments and preferences.
- Reward strong repayment performance by using incentives such as risk-based pricing, lower
lending costs, or longer terms to create incentives for your “prime” customers.
- Consider whether your system allows for flexibility in repayment options, such as semi-
automated loan restructuring.
Credit reporting and information sharing
- Increase borrower awareness of their data trails and credit histories—including their credit
reports— and their ability to ensure accuracy, which in turn incentivizes strong performance and
strengthens loyalty
There should be full disclosure of all costs. Providers that use USSD, SMS, or SIM Toolkit should not be
exempted from disclosing costs and key terms properly and transparently to consumers
6.0 Use of Credit Bureaus and Collateral registry in disbursing digitised Microloans
6.1 Credit Bureaus
The overall aim of a credit bureau is to reduce the credit risk associated with a financial transaction
usually loans. This is done by collecting, processing, and sharing information through an integrated
computer system that allows current and potential lenders make better informed credit decisions.
Credit Bureaus are independent, neutral and privately owned financial data agencies that collects,
stores, analyses, summarises and provides reliable and accurate financial information that is considered
relevant, about a person’s credit history and worthiness.
Models for credit bureau
Generally, there are 2 main business models for Credit bureaus;
For profit Credit Bureau:
Page 13 of 17
o Creditor owned and operated model. Financial service providers (most often banks) establish
the credit bureau and are the primary shareholders
o Independent operator model. A third party owns and operates the bureau, typically on a purely
commercial basis
Non-profit lenders association model: Usually, the motivation of the founders is to promote the
common interest of information sharing. As a non-profit model, no one organization has an
ownership stake
In Nigeria, Credit Bureaus gained recognition in 2008 when the Central Bank of Nigeria (CBN) issued
guidelines for the licensing, operations and regulations8. This guideline was later revised in 20139.
Currently there are 3 Credit Bureaus in Nigeria:
1. CRC Credit Bureau Limited;
2. CR Services Credit Bureau Plc
3. First Central Credit Bureau formerly XDS Credit Bureau Limited
The purposes of the Credit Reporting System are as follows:
To encourage and improve access to loans which starts with a good credit history
To enhance the creation of new loans which would lead to better access to finance
To aid financial institutions to assess and better manage risks associated with lending
To promote responsible lending and borrowing: borrowers can avoid over indebtedness and lenders
can avoid bad debts and defaults using the credit reporting system
To equip financial institutions with the required infrastructure and tools for processing and
managing loans to MSMEs and individuals
Credit Bureaus facilitate ease of doing business by significantly improving access to credit especially
for the disadvantaged sectors of the economy – consumers and SMEs
6.2 Collateral Registry
According to EFInA Access to Financial Services in Nigeria 2016 Survey10, unavailability of collateral is a
major reason for the low uptake of credit as financial service providers usually require collateral from
potential borrowers. Low income persons typically possess some form of movable assets that can be
pledged to obtain microcredit. However, due to the inadequate legal and regulatory environment,
Lenders are usually reluctant to accept movable assets as collateral.
Countries that enacted laws that allow movable assets to be accepted as collateral witnessed a positive
impact in the uptake of credit. For example in Colombia, following the enactment of the new Secured
lending Law in 2013 and the new centralized collateral registry in 2014, more than 58,000 loans
registered for a value of more than US$ 10 billion (in 6 months there were more loans registered than in
8 Central Bank of Nigeria: Guidelines for Licensing, Operations and Regulation of Credit Bureaus in Nigeria
9 Central Bank of Nigeria: Guidelines for Licensing, Operations and Regulation of Credit Bureau and Credit Bureau
Related Transactions in Nigeria 10
EFInA Access to Financial Services in Nigeria 2016 Survey
Page 14 of 17
the last 30 years). In Vietnam after the legal reform and new centralised online registry commenced in
2012, 400,000 loans have been granted to more than 215,000 SMEs and 15,000 micro businesses. The
total volume of financing through the registry is US$ 13.7 billion. In Ghana, the collateral registry has
facilitated US$1.3 billion in financing for the small-scale business sector since it was established in 2010,
and US$12 billion in total financing for the business sector using movable assets as collateral
In Nigeria, the Secured Transactions in Movable Assets Act 2017 was signed into law on May 2017, to
allow financial institutions (bank and non-bank), to register their priority interest in movable assets as
collateral for loans. The Collateral Registry, which is an initiative of the Central Bank of Nigeria, is a web-
based system that facilitates the use of movable/personal assets as collateral that remain in possession
or control of the borrowers and thereby improves access to secured finance.
As at August 2017, 136 financial institutions comprising 22 commercial banks, 106 Microfinance banks, 1
non-bank financial institution, 3 merchant banks, 3 development finance institutions and 1 non-interest
bank have registered. The registry has attracted 16,236 financing statements for 20,684 movable assets
on the NCR platform, valued at N392 billion, particularly the micro enterprises.
6.3 Credit Bureaus and Collateral Registry in digitised Microloans - Recommendations
1. The use of efficient technology in assessing credit information: Having real time-access to
information on the status of movable assets as well as credit history will encourage Micro lenders to
use the Collateral registry and Credit Bureau platforms. This will also guarantee timely registration
of security agreements executed in favour of secured creditors to ensure the benefit of priority.
2. Perfection of Security cost: MSMEs registered as limited liability companies are still expected to
undertake the payment of duties on every registered asset. This is because the Collateral Registry
Act does not preclude Companies with the limited liability status from registering such securities,
thereby increasing the cost of obtaining Microloans. In order to increase the uptake of Microloans,
the Collateral Registry should exempt MSMEs that are Limited Liability Companies from paying for
stamp duties on registered assets.
3. Increased awareness among the low income: The Collateral Registry and Credit Bureaus can
partner with Micro lenders to increase the level of awareness among the people at the bottom of
the pyramid such that they become aware of the opportunities available.
7.0 Recommendations to financial services providers on how to engage in disbursing digitised
unsecured loans
Adopting digitised micro lending methodology offers several important advantages such as lower
operating expenses and faster turnaround time, lower delinquency due to better decision-making,
improved understanding of client behavior, and enhanced customer engagement through personalized
products. In addition, it provides un(der)served persons with the high quality, convenient and affordable
financial access to credit.
Page 15 of 17
Digital Readiness: Implementing digital lending can be complex and challenging for lenders, and it
requires a strong structural and cultural foundation to be successful. An important initial step is for
lenders to assess their digital readiness. This includes the core processes, activities, and systems that will
support the adoption of digital initiatives across all parts of the lending process. Most financial service
providers often jump to implementing a digital product or channel without proper planning, resourcing,
systems, or capacity. Micro lenders should identify potential challenges and plan proactively to mitigate
risks and build digital readiness. Financial service providers should take the time to thoroughly assess
the current operations, and use this assessment to inform their objectives.
Channel Strategy: While physical interactions are generally reduced as lenders advance along the digital
journey, there are situations where human touch can enhance the customer experience, build loyalty,
and improve repayment behavior. It can also assist the lender to make more informed credit decisions,
and can be particularly useful at the early stages of piloting and scaling up a digital product.
Having Clear Goals & Objectives: Micro lenders should take the time to define their overall objective for
digital lending before embarking on (or revisiting) their digitised unsecured loans journey. Digital lending
can sometimes be seen as mission drift for financial service providers – particularly in industries where
digital credit is equated with low-touch, high interest consumption lending. Micro lenders should reflect
on how digital lending aligns with their mission and target segment, ensure their approach is in line with
their strategic goals, and communicate accordingly to all stakeholders.
Understand Consumer Preferences: Financial service providers need to assess their customer segments’
willingness and ability to engage with digital products, and design their processes accordingly. This
begins with understanding target customer needs, designing the customer journey to include a strategic
mix of physical and digital touch points, and developing products and services that build in effective
human touch.
Identify Potential Partners that Can Supplement Your Digital Offering: Digital lending implementation
involves new and different skill sets and competencies that additional Micro lenders may lack.
Partnerships are an important way to supplement an FSP’s lending model with specialized skill sets and
in depth experience in a particular aspect of the lending process Partnerships involve commercial,
cultural, infrastructural, and legal considerations. In partnerships however, both parties must work
together to avoid mismatched expectations, insufficient internal resources, loss of control, or lack of
commercial clarity.
Use of Data: Data drives digital unsecured loans. Financial service providers must carefully consider
what additional data is available in their markets that can support customer targeting, evaluation, and
communication, and plan accordingly. This data should supplement existing institutional data to support
more informed decision-making.
Page 16 of 17
8.0 References
https://www.cbn.gov.ng/Out/2018/SD/2018%20Q2%20CCS%20Report_Final.pdf
https://borgenproject.org/credit-access-in-nigeria/
https://stateofthecampaign.org/read-the-full-2015-report/
http://www.zmwft.co.zw/digital-lending-models-from-accion/
http://www.cgap.org/blog/four-common-features-emerging-digital-credit-offerings
https://www.microfinancegateway.org/topics/risk-management
http://www.accion.org/sites/default/files/credit-scoring.pdf
https://www.linkedin.com/pulse/how-digital-ecosystem-impact-financial-risk-vander-straeten-mba-ma
https://www.mckinsey.com/business-functions/risk/our-insights/new-credit-risk-models-for-the-
unbanked
https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/Risk/Our%20Insights/The%20fut
ure%20of%20risk%20management%20in%20the%20digital%20era/Future-of-risk-management-in-the-
digital-era-IIF-and-McKinsey.ashx
https://www.mckinsey.com/~/media/mckinsey/dotcom/client_service/risk/pdfs/the_future_of_bank_ri
sk_management.ashx
https://www.microfinancegateway.org/sites/default/files/mfg-en-paper-promoting-credit-bureaus-the-
role-of-microfinance-associations-2010.pdf
https://www.iaca.org/wp-content/uploads/World-Bank-Group-Survey-Results.pdf
https://www.ifc.org/wps/wcm/connect/8891c280415edb709ba3bb9e78015671/Collateral+Registries+f
or+Movable+Assets++Does+Their+Introduction+Spu+Firms+Access+to+Bank+Finance.pdf?MOD=AJPERE
S
https://www.microfinancegateway.org/sites/default/files/publication_files/1123_digital_lending_r10_p
rint_ready.pdf
National Collateral Registry of Nigeria
http://bankingfrontiers.com/digital-transforming-lending-decisions/
http://www.bain.com/publications/articles/retail-banks-wake-up-to-digital-lending.aspx
https://blog.iese.edu/iese-and-africa/2015/12/09/microfinance-3-0-opportunities-and-challenges/
http://www.cgap.org/blog/msmes-big-opportunity-small-lending
Page 17 of 17
http://www.cgap.org/blog/6-ways-microfinance-institutions-can-adapt-digital-age
http://blogs.worldbank.org/eastasiapacific/transforming-microfinance-through-digital-technology-in-
malaysia
https://www.kreyonsystems.com/Blog/how-digitisation-is-transforming-lending-and-loan-
management/
http://www.financialnigeria.com/review-of-collateral-registry-act-and-prospects-for-credit-access-
expansion-in-nigeria-feature-168.html