Marketplaces all over the world have moved online, and the same goes for the credit market. Things have moved from the times when one had to spend days visiting several banks and licensed lenders in search of suitable credit facilities, to the digital times where a mobile device provides all of that information and more within a short time. Among those pushing the envelope in the credit space in Africa is Evolve Credit, a tech startup that is well on its way to becoming a key player.
Speaking during the weekly Nairametrics Business Half Hour on Classic FM, Akan Nelson, co-founder and CEO of Evolve Credit, explains that the business idea was birthed out of the realization that Africans needed an online marketplace where they could explore their best loan options, just like they did when shopping online.
Evolve Credit provides potential borrowers data to compare loan options, interest rates, repayment options, and other terms before deciding on the loan which best suits their needs, and then applying for it right away.
“I realized quite early that there was a gap and an opportunity in Nigeria’s credit space and I wanted to play there,” Akan recounted.
Even though about 36% of adults in Nigeria have access to some kind of savings or payment products, only about 5.5% of Nigerian adults have access to loan facilities – a gap that needs attention.
Together with his co-founder, Daniel Osineye, Nelson built a lending app that allows people access loans at the Point of Sales (POS), and the process of running this business opened their eyes to an even bigger problem in the space. As the customer care agent, Nelson realized that when people had their loan applications, they immediately started asking for other loan options or other lenders.
Obviously, they cared less about what institution availed them the loan, and more about the credit option and accompanying terms. While trying to provide answers to their questions, Daniel realized that there was an information gap to be filled at the point of decision. Potential borrowers needed to understand the terms, the rates and other conditions attached, in order to make the right credit decisions and avoid getting locked in debt longer than planned.
Evolve Credit thus evolved as a central point where people could get all the information needed on loans, right from their phones. It features loan products from hundreds of licensed lenders in the country, thereby providing a level playing field upon which they can all compete.
“There are literally thousands of licensed lenders like the commercial banks, the microfinance banks, the finance houses, and the individual money lenders, and many of them have products that are better suited for many Nigerians than the ones we all hear on the radio, but they are not digitized so they cannot compete with a loan provider that is all over our mobile devices.
“Evolve Credit provides the kind of technology on the backend that enables an offline lender, microfinance bank, finance house or individual money lender to essentially become a fintech overnight and automate every single step in the lending process – from receiving the loan applications, to ascertaining credit-worthiness, managing the loan portfolio, automating the payments disbursement and collection process – and this helps to actually facilitate a completely online loan application, from the market place to the lender,” Nelson explained in the show.
After filling out a 3-minute form, the intending borrower can compare and review available options, send in an application within 10 minutes and receive feedback within 24 hours.
How the money flows
Evolve Credit works with a double-pronged revenue model. On the one hand, it provides feature software and tech facilities to lenders for a monthly subscription fee. On the other hand, it gets to charge a commission fee every time a loan application sent to the lender is approved, either based on a fixed fee or some revenue–sharing formula.
“To be specific, we leave that to them to decide which best suits their business needs. We are very flexible and we like to put our borrowers and our lenders first,” he said.
The idea that the process of applying for, receiving and paying back credit facilities can be done completely online, totally eliminates paper from the process.
“It is a brand new category in Nigeria and our expectation is that in a few years, people should be able to access credit facilities from their phones, right from their homes, using the app, website or the USSD options and without interacting with a single human being,” Nelson said.
Although some similar businesses have gone defunct in the past, Nelson is positive that Evolve Credit has learned from the mistakes of those companies and will be around for much longer, bringing value to the decision making process of getting a credit facility in Nigeria, and by extension Africa.
Within 5 months of operation, the company is still running a lean structure with less than 10 staff, all working remotely. After commencing operations in May 2020, both founders bootstrapped the venture for a short while, trying to engage investors. “It happened very slowly at the start and then very quickly at the end. We were able to raise a couple hundred thousand dollars to allow us get things off the ground,” he said.
Giving all the competing lenders a level playing field to operate in means that customers can now get better rates and loan terms, as each institution tries to outdo the other while competing on different terms.
“By making the market more transparent for borrowers, we should begin to see the emergence of new and more progressive kinds of financial products, since lenders will now have to compete on more subtle things,” Akan stated.