As a young trainee engineer in the mid 2000s, like most people just starting out, I shared a flat with others for a couple of years before I saved enough to rent my own flat. After paying my two year rent, I didn’t have enough to buy a fridge. Imagine life without a fridge.
Though I had an account in one of the national banks, I could not get a personal loan because I didn’t have a credit history. This basically means the bank imagine that it did not have enough information on me to make an informed lending decision. Sadly, to them, I was without their relying on any subjective data or statistics or predictive analysis such a high risk customer that I was to be avoided rather than lending to me as a new to bank or new to borrowing customer.
Then a social connection came to the rescue. His name is Emeka. We were both trainee engineers. I expressed my frustrations to him at work one morning and that’s how redemption came.
At break time we drove for about eight minutes to an electronics shop in Bishop Aboyade Cole street run by a retailer called Aimar. When we left the shop about fifty or more minutes later, I’d acquired my first fridge. Most importantly, it was on an informal installment plan.
Here’s the back story. Emeka had been introduced to Aimar when he needed to buy a television. Like me he had been refused credit by the institution which ironically held all the information on his earning power and spending behaviour.
Based on the trust that Aimar had in Emeka’s “sponsor”, Aimar allowed Emeka to take the television and pay in installments over a few months.
Emeka did what his sponsor did for me. He introduced me to Aimar, and Aimar let me take the fridge I wanted after I signed 4 post-dated cheques for him. My cheque was good for Aimar but only because Emeka had been a good customer and he trusted that Emeka woulD not bring a customer that would jeopardize their credit relationship.
Emeka in turn trusted that I’d fulfill my credit obligations. This is the power of social underwriting.
My relationship with Aimar lasted for a couple of years and only ended because Aimar left Nigeria. For those few years, Aimar was my plug for all electronics purchases. I bought and paid in installments.
Needless to say I introduced other peers I trusted to Aimar and not once did Aimar complain of anyone defaulting.
Adamu’s daughter took ill a week before pay day. Like many salary earners, he was almost on empty and could not wait for his salary to be paid when this happened. There just was no budget to accommodate the cost of the medication she needed and his friends and colleagues like him were waiting for salaries to be paid too.
Though he works in the administration department of a medium enterprise, has a steady income and banks with one of the national banks, Adamu couldn’t get a loan as fast as he needed it from his bank because he didn’t have a credit history.
That was how XYZFinance (not real name) – an alternative lender stepped in and provided the N45,000 required. The interest rate was much higher than his “bank” would have charged, but Adamu was only too happy to take the loan and promptly paid it off when his salary was paid. Ironically, this was via a credit to his account at the bank which had refused to give him this short term accommodation.
Borrowers like Adamu who can not get quick access to credit from traditional banks now have an easy solution to their credit needs at the tip of their fingers without unending document submissions and multiple visits to their banks -the alternative lenders.
“The experience was surreal,” Adamu said. “From the comfort of my desk, I downloaded the app, uploaded a couple of documents, and did not need to meet any rep. That is impossible with my bank”.
The problem with using this channel is that XYZFinance will not report Adamu’s prompt repayment of his loan obligation to any of Nigeria’s three credit bureaus so Adamu will be back to square one when next he needs credit. His credit history will remain invisible to the credit bureaus so neither a credit score nor report can be generated for him so he is unable to build the much needed credit score that will ultimately give him credit and even lower his cost of credit.
While Adamu’s experience worked like a charm, not everyone has a great experience borrowing from digital lenders. Many are not licensed to provide lending services and often employ unethical lending practices. But that’s another day’s story and it will be told another day.
At eSuSuSocial, we’ve undertaken the mission to help boost access to credit and by extension ensure financial inclusion for those who are financially underserved.
Financial Institutions simply do not have sufficient consumer data to grant credit to those who need it. Credit is a large part of consumers’ financial power. It helps ensure one is able to get what one needs when one needs it e.g. a car, medication, a refrigerator, an air conditioner or even a house, based on a promise to pay at a later date.
eSuSuSocial tackles this problem by using consumers’ digital footprint, utility payments, telco data, basic KYC and other user-permissioned data to provide a predictive credit assessment.
This alternative data type has proven to be a powerful predictor of individuals’ character & willingness to fulfill loan obligations.
Alternative credit scoring is becoming widely accepted because there’s a growing demand for financial inclusion. Many lenders are beginning to see “credit invisibles” as an opportunity instead of the risk this segment has been viewed as in the past.
eSuSuSocial was created to make it easier for borrowers to responsibly build a credit history by voluntarily submitting data that traditional financial institutions do not reckon with and for lenders to integrate alternative data scoring, allowing them to reach more potential borrowers.
Committed to ethical lending
eSuSuSocial’s focus is on responsible and ethical lending to the credit invisible – those with little or no credit history- who are under-served by formal financial institutions and banking channels.
We also help our customers build and strengthen their credit scores by providing them a financial identity which greatly enhances their chances of approval when they need personal loans.
We are on a mission to bring Nigerians who are financially underserved into the financial mainstream through financial services.
