In February 2021, 25-year old Victor (not his real name) received an offer letter from one of Nigeria’s newly licensed commercial banks. He was very ecstatic about this and was eagerly looking forward to joining the company when, to his greatest surprise, the job offer was suddenly rescinded. A regret email that was later sent to him explained that the employer rescinded the job offer after discovering that he, Victor, was indebted to a Lagos-based loan company.
Of a truth, Victor was owing the company the sum of N43, 000. He admitted this in a desperate email he sent to the potential employer, explaining that he was committed to paying back the money as soon as possible. Apparently, the young man had borrowed the money sometime last year to pay for his father’s medical bills. Unfortunately, he struggled to repay the debt due to his small monthly income stream. The fact that he was the breadwinner of his family also contributed to delaying his repayment of the loan.
Meanwhile, despite his explanations and pleas, Victor’s job offer was rescinded. The bank told him it was against their policy to employ people with “bad credit history”.
Folake’s Disturbing Experience Raises Concerns
While Victor can partly be blamed for the turn of events, his circumstance and experience are quite dissimilar from that of our next respondent. Folake, a young Lawyer based in Lagos told this author that she was minding her business when she started receiving “unsolicited and very invasive marketing messages” from a fintech loan platform. The lender promised her quick cash. But for a long time, she ignored these messages mainly because she wasn’t in need of quick cash. But as the newsletters kept coming into her inbox, she one day decided to check out the company’s product offerings. And just like that, she ended up registering and getting a loan. She confessed that it was really a quick process, and she had used the money to buy some dollars into her domiciliary account. Five months later, she paid back with interests. She thought the matter was settled, but she was wrong.
Months after Folake claimed to have cleared her debt, something very surprising happened —the loan platform sent messages to everyone on her contact list telling them that she (Folake) borrowed money and refused to pay back. The lender also warned Folake’s contacts to desist from doing business with her because “she is a fraud” they said. As you can imagine, the young lady was very distraught to hear this. Assuming that it must have been an error on the part of the lender, she quickly contacted them to rectify it. But the rectification never happened, even as the messages to Folake’s contacts persisted. By the time it dawned on the young woman that the issue was beyond her control, she slammed a lawsuit against the company. Business Elites Africa understands that the matter is still in court.
Proliferation of Quick Loan Platforms in Nigeria
Nigeria now has a proliferation of quick loan platforms such as Zedvance, Renmoney, Sokoloan and more, each of whom has their different packages and interest rates. These platforms also compete fiercely with each other in a bid to win customers. Their main targets are usually young professionals, preferably those with steady monthly income streams. These lenders target their customers with promises of quick loans with flexible refund policies. But everything is never as easy and straight forward as it seems.
Quick Loans in Nigeria: The Pros and Cons
Let’s be clear, quick loans can be lifesavers; literally. One of the major advantages is the ability to receive instant cash to take care of your urgent needs. It’s important to note that prior to the proliferation of fintech startups and the normalisation of quick loans in Nigeria, the gap between the banked and unbanked population was quite wide. This 2019 article by Microsoft took a closer look at the role fintechs have since played in closing that gap.
Notwithstanding the progress made, there have been concerns raised with regards to the modus operandi of these loan platforms. The issues range from privacy concerns to their controversial loan recovery tactics. According to Samson, another young Nigerian who has a lot of experiences with quick lenders, “there are possibilities that these startups invade people’s privacy. I won’t be surprised if they cross some lines they shouldn’t cross in the process of looking up your credit history. I mean, how am I sure that these people do not already have access to my account statements even when I do not have any transactions with them? Before they start sending those their patronising messages asking you to come borrow money, it’s very possible they already looked you up to see how much you earn per month. Why should they do that? That’s very invasive and I think something needs to be done to curtail how far they can go to retrieve people’s personal details.”
The Issue of High Interest Rate
Cynthia complained bitterly to this author about the high interest rates she was subjected to pay by virtually all the quick loan platforms she has patronised in the past. She said: “I borrowed N50, 000 from Fairmoney and had to pay back a total of N65, 000 which is outrageous. And then I tried Carbon, borrowing N9, 000 and had to pay back N12, 000. Aella gave me N11, 000 and collected N13, 200 in return. I then took N10, 000 from OKash and had to pay back N14, 000. But the one that really worried me was borrowing N70, 000 to pay back N100, 000. That’s almost 43% interest rate. Mind you, these are all monthly rates. If you fail to meet deadline, you’d get penalised…”
They will Call your Family and Friends to tell them you are a Debtor
Another major concern Nigerian professionals have with quick loan companies in Nigeria is their drastic loan recovery methods. These recovery methods often see these loan companies “harassing” the friends and families of their clients. A perfect example is the case of Folake mentioned earlier. It is, however, important to note that not all the quick loan platforms are extremely intrusive.
Quick Loan Platforms Need to Adjust and Improve
Chuks, a radiographer based in Ikeja Lagos, told this reporter that he has patronised more than five lending platforms overtime. His experiences with each of them vary. For instance, while it is harder to get a loan from Carbon, Fairmoney makes it easier for you to borrow. But then again, Fairmoney would disturb you with plentiful automated messages and calls if you default on your loan, even as Sokoloan would go as well as calling your relatives in the event of a default, even as you would end up paying more for defaulting. Chuks also claimed that based on his experience, “GTBank’s Quick Credit is the best I have ever used because not only is their interest rate very low, they will not quite pester your life in the event of a default… Honestly, some of these quick loan platforms need to do adjust and improve on their services. Some of them behave very badly. Some won’t remind you that your deadline is approaching but would wait until you fail to meet the deadline. That’s when they will start calling you and everyone in your contact list. They would also require you to pay for default.”
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