In my opinion, the method OPay uses to assess a borrower’s creditworthiness is one of the best. When someone defaults on a loan, it can lead to a lower loan amount the next time, which encourages borrowers to make timely repayments and build a better repayment history. I think this is a smart approach to encouraging responsible borrowing in a country like Nigeria where financial information is never really clear.
This is the approach pretty much all Nigerian digital lenders use. It's a very expensive approach. If you don't have a war chest, it can lead to a lot of losses
If you're doing a "let's try and lend a lot of people little amounts and see who pays back," you'll have a lot of defaults. Those small sums will also have defaults because people are people. You have to consider that many of the people fintechs serve are sub-prime borrowers
Insightful read that has made me curious about the economics of loan financing. Thanks for this!
I like that you enjoyed this. Thank you so much and please share with your network!
Lovely piece. Jumia 🤣🤣🤣
Side note: I noticed that you reported Fairmoney's numbers in NGN and OPAY's in USD.
You know I must drag Jumia into it somehow. I'll update the web version with the NGN equivalent for OPay
Thanks for spotting it!
In my opinion, the method OPay uses to assess a borrower’s creditworthiness is one of the best. When someone defaults on a loan, it can lead to a lower loan amount the next time, which encourages borrowers to make timely repayments and build a better repayment history. I think this is a smart approach to encouraging responsible borrowing in a country like Nigeria where financial information is never really clear.
Great read!
This is the approach pretty much all Nigerian digital lenders use. It's a very expensive approach. If you don't have a war chest, it can lead to a lot of losses
Oh really? I genuinely didn’t know that. I’m curious but what makes the approach so expensive? Is it mainly the cost of capital and defaults?
If you're doing a "let's try and lend a lot of people little amounts and see who pays back," you'll have a lot of defaults. Those small sums will also have defaults because people are people. You have to consider that many of the people fintechs serve are sub-prime borrowers