Access Bank Plc CEO, Herbert Wigwe revealed that the bank had set a daily target of 400 million naira lending to at least 20,000 customers. Sir. Wigwe made the comment during the bank’s call to investors and analysts on Monday, September 9e, 2019.
Competetion: Nigerian banks are in fierce competition with FinTech startups in what is seen as the very lucrative segment of quick loans. FinTech startups with huge financial war vaults from patient investors have deployed their money to innovative marketing and tech products that have changed the way borrowers receive money through loans.
Currently, Nigerians eligible for these loans can get them between 5 minutes and less than a day without collateral or documentation. Some get the loans through native mobile apps owned by FinTechs relying solely on their phone numbers for documentation. These aggressive initiatives have put banks on the defense, resulting in the release of competitive quick loan products.
Target: Access Bank claims its quick loan program or payday loan (as the bank calls it) disburses about N 200 million per day to 4,600 customers and the bank looks forward to doubling that number to N400 million and 20,000 customers by the end of the year.
“We have also grown our digital lending business with respect to our financial inclusion and our normal traditional retail strategy by expanding our digital lending capabilities to include more products such as pay raises, small tickets, personal loans and device financing in addition to what we call our payday loans.
And all this is done on our QuickBucks application that essentially hosts all these products. Today, we spend an average of 200 million yen to 4,600 different customers every day at the click of a button. And we’ve set a target of around 400 million euros per day for at least 20,000 customers, and we’re on track to get there. This essentially generates very low NPLs and is correctly priced, as much of it goes to clients who have their salary accounts ” Wigwe
Charges: Access Bank charges an initial fee of 1% flat rate, 4% flat rate interest and insurance of 0.15% of the loan amount is taken upon disbursement of the loan (5.15% in total, all payable in advance). The loans are for a period of 31 days. The average cost of all-inclusive loans in the market is between 4-6% per month.
On the offensive: Access Bank also claims to have been aggressive in marketing its payday loans and has now set aside around N18 billion in the first half of 2019 alone, up from N11 billion a year earlier. The CEO also claimed that the bank issued around 1 million one-time loans as of June of this year.
Default rates: Quick loans are very sensitive to the risk of default, so we looked at what the bank’s response was to what. They reported that the default rates for his payday loans are below 3% affirming that in most cases it is 0%. Explaining further, they claim that the reason for the low default rates was that their borrowers were employees who already had accounts opened with banks and their salaries domiciled in those accounts.
“So for the digital loan portfolio, which is largely dominated by pay-per-minute loans, the NPL ratios there are typically well below 3%. Now the reason for this, as Herbert alluded to earlier is they are based on clients who already have their salary with us. Therefore, loans usually don’t go bad in the traditional sense. In certain case, you might find the salary payment sometimes delayed, for this period we might see a gradual increase in the NPL ratio. But the NPL when you get the wages, as you know, is going to be very low for a long time. So that’s the kind of ratios you’ve seen. There are times when it is 0%. Almost all employers have fully paid wages. When there are late payments, in some cases it can take three or four months for those salaries to arrive. Eventually, they arrive and the NPL is again trending towards 0%. ”
On the bank’s website, they point out that it is not necessary to have a payday account in Access Bank to access the payday loan. The bank claims that you will have to open an account at the bank for the loan to be disbursed, however.
What does that mean: Nigerian banks may not be nimble, but they have the financial strength to engage in a long-term battle in the quick loan space.
- While stifling regulations and forays into this space by deep pockets like MTN remain a huge threat, their acquisition journey is shorter as most borrowers are already clients within the bank.
- Access Bank claims to have 31 million customers and acquire at the rate of 500,000 new customers per day, relying mainly on digital resources and its bank agent initiative.
- Access Bank has signed around 1.6 million new customers since its merger with Diamond Bank.