Financial LiteracyFinancial marketsThe Rise of Digital Lending in West Africa

Ida MwangiFebruary 1, 20238669 min

In this article series titled, “An Alternative Lending Revolution: What’s in it for Africa?”  I’ll breakdown it down into 3 parts:

  1. Financial Inclusion: Mobile Money in Africa.
  2. The Digital Credit Wave in East Africa: What Went Wrong?
  3. The Rise of Digital Lending in West Africa.

This is the third part of a series titled, “An Alternative Lending Revolution: What’s in it for Africa?”

3.The Rise of Digital Lending in West Africa
Source: Techpoint Africa

Across West Africa, the mobile money sector is about thirteen times that of local banks according to the West Africa Mobile Money Economy Report by the Global System for Mobile Communications (GSMA). It means that for every one person with access to adequate banking services locally, about thirteen others exploring and using mobile money services, this includes digital lending. As of January 2019, research conducted by the Consultative Group to Assist the Poor (CGAP) revealed that digital lending had already started gaining popularity in Ghana, Cote d’Ivoire, Nigeria and Senegal. The most impacted cities, as mentioned, are Abuja and Accra, though there have been more cities transformed by this phenomenon.

In Ghana, MTN’s Qwikloans had already disbursed five million loans, worth USD 120 million, before celebrating its first anniversary. MTN Group Banking specialist was keen to note that West Africa is the next key region. It might be too early to boast of success, yet the statistics so far, demonstrate that there is a bright future for digital lending in this region.

Source: weetracker

Nigeria already has a significant number of digital credit providers present in its space including Carbon, Aeella, Branch, Fairmoney, Alat, and Palm Credit. Farmers can source digital credit through their mobile phones. 4February 2020 marked the unveiling of the first digital credit app on Apple’s iOS application store in Africa. Carbon (formerly Paylater), one of the leading digital financial services company in Nigeria, became the first digital lender in Africa to initiate and complete an entire loan cycle via an iOS application. This is the same company that pioneered instant lending in Nigeria, with a launch of the first mobile application that provided access to credit digitally.

Why West Africa, one might ask and, why now? The region is experiencing a growth in mobile money, not to mention the enabling regulatory environment present. Both Ghana and Nigeria require that lenders have a license from the central bank to operate. The existence of regulatory oversight dictates that each product must be approved by the central bank before launch and is subject to ongoing supervision.  Additionally, with low pre-existing access to affordable financing, digital lending comes across as saving the day. Even further is the possibility that West Africa has been observing East Africa, the pioneers of digital lending in the continent, at close range, and feel up to the task in trying out what has already seemingly worked.

What started as a small flame in East Africa is now becoming a continental wildfire spreading to West Africa. Digital lending, otherwise known as digital credit, is extending its roots throughout Africa. Indeed, a revolution is happening. Let’s hope that we can stomach all that it brings forth-the good and the bad. East Africa is already in a silent outcry, which is a whole discussion for another day. But it begs the question: is West Africa ready for what’s to come?

This series has demonstrated the impact of mobile phone platforms. From paying utility bills, merchandise payments to digital lending. Mobile money platforms have performed roles traditionally and almost exclusively handled by financial institutions.  From East Africa with Mpesa to West Africa with Qwikloans. There are plenty of opportunities and prospects to be explored in this digital revolution.

Ida Mwangi

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