How Data is Empowering the Digital Lending Space in Nigeria
In the digital lending space in Nigeria, data plays a pivotal role in driving the core operations of businesses. With the economic downturn and a constant high demand for credit, digital lending companies have emerged to complement traditional financial institutions by offering efficient and timely loan disbursement to individuals and small-scale business owners. This article explores how data analysis, compilation, processing, and application have become integral to the success of digital lending companies in Nigeria.
Easier Access to Credit Facilities: Digital lending companies rely on digital information about potential customers to simplify and expedite the loan disbursement process. Unlike the rigorous appraisal methods and high requirements of traditional banks, these companies leverage technological innovations and automation processes, such as data analysis, cloud technologies, and imaging, to provide simpler and easier access to credit facilities. By accessing personal data, they can render efficient and inexpensive services, reducing inconveniences, biases, manual verification, and geographical constraints associated with traditional lending methods.
Selection of Customers: Digital lending companies employ virtual contact and personal data to select their customers. Gathering personal data, including name, age, location, proof of economic activity, mobile number, and address proof, helps ensure that funds are allocated to legitimate borrowers. By analyzing customers' financial status, income level, spending habits, tax returns, and other data attributes, these companies can determine high-risk customers, detect fraudsters, and confirm the authenticity of lenders. Personal data from various sources, such as mobile data, previous loans, and transaction records, enable them to make informed credit appraisal decisions.
Digital Financial Inclusion: The digital lending space in Nigeria has significantly contributed to digital financial inclusion by providing access to financial services for previously excluded groups. Digital lending companies offer services such as payments, transfers, credit, withdrawals, and insurance, making these financial services accessible based on individual needs. This is particularly beneficial for individuals in local communities where formal financial institutions may be unavailable, and complex processes may hinder financial literacy. Leveraging data, digital lending companies make digital transactions easier and more accessible through the use of mobile phones, expanding their reach and offerings to cater to underserved populations.
Recovery Methods for Agents: While disbursement of funds is relatively easier for digital lending companies, the recovery of these funds presents a challenge. Personal data is crucial in tracking delinquent customers and ensuring debt recovery. By accessing customer emails, phone apps, contacts, and making personal calls, digital lenders can mitigate the risk of bad debts and operational losses. Personal data enables them to employ effective recovery methods, ensuring the sustainability of their lending operations.
Conclusion
As the fintech lending industry continues to innovate, the reliance on data for loan decision-making will only increase. Data analysis and automated loan decisions have become the hallmark of digital lenders, offering streamlined processes and improved access to credit facilities. In the digital lending space in Nigeria, data has acquired a value equivalent to collateral for traditional banks. By leveraging data effectively, digital lending companies are transforming the lending landscape and driving financial inclusion in Nigeria.