The equity funding will come from a mixture of local and foreign investors, and may be concluded in the next week, Johnson says from Lagos. The money will be used to fund product development.
Johnson, a former head of corporate strategy at First Bank of Nigeria, co-founded Indicina with Yemi Ajao in 2018.
The company’s cloud-based software connects with national identification databases to carry out regulatory checks on potential borrowers and draws on demographic data to assess credit risk. Its platform can also carry out disbursements and collections.
Loans that are made digitally rather than through bank branches are a “whole new ball game,” Johnson says, as decisions that used to take weeks can now be made in hours. “There is a huge consumer credit gap. Banks should be leading the charge.”
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Credit bureaus that provide information to banks, cover only 13.9% of the population in Nigeria World Bank figures show. That means that there is no ready information on the creditworthiness of the bulk of potential borrowers.
- Nigeria now has 151 million people who have internet access, and their online behaviour can help predict whether they can repay a loan.
- Existing investors in Indicina include the Catalyst Fund, Green House Capital, Acuity, Kepple, Itanna and Future Africa.
- Customers include banks, microfinance lenders and tech start-ups that want to be able to offer financial services.
According to Financial Inclusion Insights, only 29% of Nigerians have a bank account. Yet, with the central bank requiring that a minimum proportion of loan portfolios be allocated to consumers and small businesses, banks have to extend their range of borrowers.
In 2019, the central bank fined 12 banks a total of $1.3bn for their low loan-to-deposits ratios.
Indicina’s use of artificial intelligence (AI) and machine learning can help predict the probability of default, Johnson says. And while banks are unlikely to outsource the whole loan decision-making process, banks in Europe and the US are using fintech suppliers to assess credit risk in Europe and the US, Johnson says. “If you peel back the onion, vendor technology is being used to make lending decisions.”
Africa, on the other hand, has “poor credit infrastructure and low-risk innovation”, Johnson says.
- Only 11% of the continent’s population has their credit information recorded by credit bureaus, versus 17% in emerging Asia and 79% in Latin America.
- “This massive consumer credit opportunity requires technology and credit-risk innovation that most lenders currently don’t have,” says Johnson.
- Indicina plans to start targeting banks outside Nigeria later this year, says Johnson. Ghana and Kenya are two places where Indicina plans to start. “The problem we are solving is not just a Nigerian one.”
Nigeria’s banks must lend to people about whom they have little data. Fintech solutions can help bridge the gap.
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