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Digital Credit in Nigeria: A Focus on Nano-Loans, Bridging the Existing Gaps
Subject area: Management and Commerce · Area of research: Financial Inclusion/FinTech
Abstract
Signifying an important stage in digital innovation, digital credit represents a sharp turn from traditional credit systems as it instantiates and increases the use of smart technology and feature digital origination media to register, score, approve, and disburse loans and credit to borrowers. However, in the context of a developing country such as Nigeria, digital credit as a novelty inevitably leaves a double-edged and gradually narrowing gap in which both the lenders and borrowers are faced with a new type of challenge being the cost of data (where it is available) and its protection. These come in the forms of digital address, data privacy, underwriting, repayment channels etc., as all of these factors impact the cost of loans, among other risk-based challenges. Although digital credit effectively and significantly reduces the inclusivity gaps (especially in hybrid case scenarios where field agents implore digital means to onboard customers without digital footprints), the complexity of these attending challenges cannot be understated. This paper, therefore, aims to identify the very nature and complexity of problems which loan providers and borrowers face in the age of digital innovation in the context of financial services in Nigeria. The study identifies the opportunities, the technological bridge or innovative solutions as well as potential complications. The database of critical players such as the unbanked and the underbanked in both the formal and informal sectors constitutes the data for analysis in the study. Using the financial inclusion theory, the paper examines the peculiarity of nano-loans operations in the Nigerian digital financial market and draws important conclusions from findings. Critical among such potential findings is the reasoning that, if the challenge of data is tackled, loan products are likely to be better and more attractive to existing and potential borrowers who have digital footprints.
Keywords
Digital Credit; Nano-Loan; Nigeria; Data; Innovation
How to cite this paper
@article{1706274,
author = {Igbene Oritsetinmeyin},
title = {Digital Credit in Nigeria: A Focus on Nano-Loans, Bridging the Existing Gaps},
journal = {Iconic Research And Engineering Journals},
year = {2024},
volume = {8},
number = {3},
pages = {164-174},
issn = {2456-8880},
url = {https://www.irejournals.com/formatedpaper/1706274.pdf},
abstract = {Signifying an important stage in digital innovation, digital credit represents a sharp turn from traditional credit systems as it instantiates and increases the use of smart technology and feature digital origination media to register, score, approve, and disburse loans and credit to borrowers. However, in the context of a developing country such as Nigeria, digital credit as a novelty inevitably leaves a double-edged and gradually narrowing gap in which both the lenders and borrowers are faced with a new type of challenge being the cost of data (where it is available) and its protection. These come in the forms of digital address, data privacy, underwriting, repayment channels etc., as all of these factors impact the cost of loans, among other risk-based challenges. Although digital credit effectively and significantly reduces the inclusivity gaps (especially in hybrid case scenarios where field agents implore digital means to onboard customers without digital footprints), the complexity of these attending challenges cannot be understated. This paper, therefore, aims to identify the very nature and complexity of problems which loan providers and borrowers face in the age of digital innovation in the context of financial services in Nigeria. The study identifies the opportunities, the technological bridge or innovative solutions as well as potential complications. The database of critical players such as the unbanked and the underbanked in both the formal and informal sectors constitutes the data for analysis in the study. Using the financial inclusion theory, the paper examines the peculiarity of nano-loans operations in the Nigerian digital financial market and draws important conclusions from findings. Critical among such potential findings is the reasoning that, if the challenge of data is tackled, loan products are likely to be better and more attractive to existing and potential borrowers who have digital footprints.},
keywords = {Digital Credit; Nano-Loan; Nigeria; Data; Innovation},
month = {September},
}