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Improving Digitised Microcredit in Nigeria – A Use Case for Credit Bureau and Collateral Registry

August 2018

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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

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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

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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

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Source: CBN

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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

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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

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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.

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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.

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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

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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

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- 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:

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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

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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.

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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.

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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

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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