Why Nigerian banks will never win the consumer credit game

Consumer credit is a tough bull to ride

Today, trying to buy a phone or any accessory in Nigeria will require you to put down the full payment in cash. It is difficult to find deals that help you spread the payments in installments. And if you could find one, they will scalp you with an ungodly interest rate.

Institutional barriers to lending

Like everywhere else in the world, there are a lot of institutional rails that guide retail lending. One of those rails is using credit history to determine credit worthiness. In Nigeria where credit bureaus were first set up in 2003, there is still a paucity of data that means that banks cannot make lending decisions, effectively shutting millions of people out.

Legacy structure of banks make innovation difficult

Nigerian banks report huge profits every year and most of this is down to the fact that they’ve become pretty good at doing a narrow set of things very well: They lend to mostly large corporates and commercial companies. If you are rich, they could throw you some loans as well. But if you are the average man on the street, then .

Alternative lenders show that banks don’t care about retail lending

Despite the excuses banks give, the approach of digital lenders show that the banks are simply taking the easy way out. Their lending to corporates as well as their large loan sizes to companies they think are too big to fail reflects their thinking.

Banks will lose the retail lending space to fintech lenders

Despite all of this, one thing is clear, that lending will continue to grow massively, because more alternative lenders will join the fray and innovation will force players deeper into the market. Some of these lenders will be powered by cloud platforms such as Lendsqr which removes the technology barrier to lending at scale.

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