The global lending market is increasing almost on a daily basis. Over the year’s traditional credit facilities mostly offered by Banks were constrained to only those who had bank accounts as well as collateral to secure credit facilities, credit facilities processing also took long making them unattractive to most prospective borrowers.
Globally, and particularly in emerging markets such as Africa, Banks and micro-financial institutions are partnering with financial technology companies so as to leverage on technology to penetrate into wider markets and previously under-served markets. In Kenya and Tanzania, individuals can now access credit facilities within minutes from Mobile lending institutions who use Mobile data and customer credit history to profile the applicants credit worthiness.
This has evolved to the extent where Utility companies such as Kenya Power in Kenya allow customers to purchase power tokens on credit, other models are in the Agri-tech sector where organizations offer credit to farmers in the form of farm inputs all initiated within a mobile lending platform. The benefits of this model are diverse from accelerated economic growth to financial inclusion as well as return on investments for lending organizations.
Furthermore, customers in these markets are increasingly becoming tech-savvy with the penetration of mobile phones to even remote areas. This is further enhanced by the invention and Growth of Mobile payment platforms with MPESA in Kenya and TIGO in Tanzania making it easy for lenders to channel the loans to borrower’s mobile wallets as well as facilitate repayments of the loans via the same channels. The lending services are available both via USSD and on mobile applications allowing those without smartphones to also access the services. With the entire process being handled on the comfort of customer mobile phone, it increases the motivation and justification of getting loans via mobile lending platforms.
NLS (Banking Solutions), a financial technology Company based in Kenya and India is at the forefront of innovations in mobile lending, with its experience in software development and implementation particularly in the financial sector, they have partnered with small scale enterprises to develop a mobile lending solution platform that covers virtually all services previously provided under the traditional loan processing systems.
While financial technology companies will keep on driving digital lending innovations, it is equally important to note that they are not the only players. Financial institutions have built strong brands, a range of financial products and have the capital base that easily allows them to thrive in the sector. In addition, they have been successful over the years in penetrating markets as a result of their physical touch points that help in engaging, supporting and educating their customers.
The greatest opportunity for digital lending is largely dependent on the partnerships of traditional financial services providers and fintechs. Through mutually beneficial partnerships, they can exploit their different strengths and experiences in creating customer-centric models that promote the financial inclusion course. Such partnerships hold the keys to driving large scale digital lending in under-served markets and promoting financial access and inclusion.