Now, more than ever, there is an overwhelming need for loans and financial products in the Nigerian market.
This is evident in the increase in loan applications from individuals and small businesses since lockdown restrictions began.
But with most loan providers operating offline, it proved difficult for some customers to apply for this financial service.
Still relying significantly on offline lead generation, in-person meetings, and paper applications, offline methods played a big part in deciding the fates of these businesses during the lockdown.
Besides that, another problem exists.
Not all SMEs and individuals who succeeded in getting loans via the available online lenders had a smooth process. How so? Because despite the increase in loan applications this period, reports on predatory lending increased too.
But this isn’t particularly new as predatory lending always reared its ugly head even before the pandemic.
During his time as a process analyst at UBA Nigeria, Akan Nelson began to notice why this happened. In his opinion, the average Nigerian isn’t particularly privy to the knowledge that people with a good finance background have regarding financial products.
He attributes this to an information gap and this is why some customers get good interest rates on their loans and others get frustrating deals.
“I think if more people had access to this kind of information and understood the kind of loans that are in the market, then maybe we wouldn’t hear most of the horror stories we hear about people getting locked in debt with predatory lenders,” he tells Techpoint Africa.
To him, loans and financing needed to become more inclusive, accessible, and transparent.
He also argues that to foster true financial inclusion and access in these times, more customers must be sourced online, engaged and educated on their options remotely, and onboarded through online application and acquisition channels.
Making information about loans accessible
To further strengthen his point about the information gap, Nelson says that while there are more than 1,000 licensed money lenders, microfinance banks, and commercial banks, it’s hard for most people to name ten to twenty off the top of their heads. This means customers don’t have enough information to get the best products for themselves.
However, for the lenders, there’s a distribution issue. Though they have over 10,000 loan offers on the market, being offline restricts the type of customers they can reach.
For instance, a microfinance bank in Ikeja with interest rates as good as a commercial bank might find it difficult to service the needs of a customer who lives in the Lekki area.
To address these problems, Nelson teamed up with Daniel Osineye to launch Evolve Credit in April 2019.
Evolve Credit is an online marketplace where people can go to get information about different financial products, personalised recommendations for their unique needs, and apply for loans.
As a software engineer, Osineye acts as the startup’s CTO while Nelson, with a deep background in finance, doubles as CEO and CFO.
Looking to add value on both sides of its marketplace, Nelson admits it can be tough to bring offline lenders onboard. For now, that seems to be the startup’s biggest challenge.
While these lenders operate offline, consumers now expect to be able to apply for loans online without visiting a branch.
“We run a risk of facing a drop-off from consumers because most clients are offline and consumers want to complete their processes online,” he says.
Therefore, the one-year-old startup has had to innovate around what customers need to what these partners already have on the ground.
Evolve Credit does this by providing an end-to-end backend software that gives lenders everything they need to manage their loan application process. This means that a financial institution with its products offline can go online.
Through the platform, they’ll be able to receive loan applications, manage their portfolio, automate credit scoring, and disburse and collect payments.
What lenders and borrowers stand to gain
The core value proposition to the providers who already have an online presence like Carbon is a high-quality lead generation.
According to the CEO, Evolve Credit helps these entities increase their market reach as people who couldn’t look into a lending provider can do so on the platform.
Here’s where its recommendation play comes in.
When customers submit the loan applications of products they applied, to Evolve Credit does a quick check to see if the application is tailored to both parties.
If it is, it gets passed on to the lender. If not, Evolve Credit recommends a loan provider that offers the type of loan they’re looking for.
“We see ourselves as driving a lot of traffic to them in volume. We want everyone to win on all sides. We want people to get their loan applications approved and we want the lenders to get their money back,” he says.
On the flip side, the value proposition to the borrowers is that the company is helping them make more informed decisions. With Evolve, they’ll be applying to where they have a higher chance of getting approved instead of applying to any provider they see.
By creating this synergy, Evolve Credit gets a commission for every converted lead generated or a revenue share upon successful collection of the loan product. Similarly, lenders using the platform’s cloud-based software are charged a monthly licensing fee.
Nelson says that so far the company has officially onboarded lenders like Carbon, Lendigo, and PennyLender. However, there are dozens of other lenders on the platform like FairMoney, CIT Microfinance Bank, and Branch among others.
Open for business
Evolve Credit went live in May 2020. Since then, more than 15,000 users have registered on its platform with over 5,000 loan applications made.
The platform has also seen over 20,000 monthly visitors, a number Nelson hopes will reach a million by the end of next year.
Nelson tells us that the company is publicly launching this month and what he wants to achieve is simple. To be a part of a movement where the default mode for the financial industry has shifted from offline/paper in-person processes to fully remote online and automated experiences.
“In our heads, we would be successful if our existence helps to move the financial industry to where consumers can see all their options and access core financial services entities provide like accounts, loans, debit and credit cards, in one place wherever they are.”
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