Never Has There Been Stronger Evidence for Mobile Loans in West African Economic and Monetary Union region

With many countries in the West African Economic and Monetary Union (WAEMU) region in lockdown, bank branches empty and movement constrained; the case for a true, robust mobile lending ecosystem is stronger than ever. In global markets where mobile lending is nascent or inexistent, and the credit market is relegated to physical interaction between underwriter and customer, physical confinement and countrywide lockdowns are the equivalent of death sentences. Credit markets are frozen because critical communication is impossible. On the other hand, where digital wallets and e-money are common, no such barriers exist.

In the WAEMU region, many initiatives are already in place. MoMo Kash, a mobile money solution by MTN in Côte d’Ivoire has over 5.000.000 subscribers and specifically targets ‘financially vulnerable’ segments of the population. It has a similar structure in Benin. Orange Bank will launch in Côte d’Ivoire this year. Other solutions such as Moov show that the seeds have been planted and are ready to grow. Growth has been incentivized by ‘healthy’ competition and a well-designed regulatory environment. In addition to mobile lending, successes such as Creditinfo Kenya underscore the importance of having a strong and functioning Credit Bureau platform to prevent over lending from responsible lenders, as well as its complementarity with a vibrant e-money ecosystem.  While Côte d’Ivoire leads the way, it is high time for the rest of West Africa to embrace such transformative solutions.

Nevertheless, while there are many positives, there are still key steps to be taken. One fundamental obstacle that needs to be removed is the difficulty of obtaining customer consent digitally or online. Comprehensive digital onboarding is important in normal times but critical in a crisis. It enables rural communities far from bank branches to take advantage of access to finance. It also prevents overcrowding at bank branches for small, short term loans that would otherwise be financially unviable for banks. It reduces the costs, errors, and subjectivity that were once structural components of human underwriting. In a crisis like this, with people stuck at home, digital onboarding and disbursement can be completed in a few clicks, pumping ‘real’ money into the economy, keeping families afloat, and allowing bills to be paid. None of this is possible if a sole trader must physically sign a form at a bank branch far from his home. Therefore, digital consent is the crucial next step in transforming the lending industry. This must be coupled with a mandatory bureau inquiry for mobile loans, to avoid the phenomenon of high default rates observed so far. To this end, Creditinfo have planned to launch a mobile score which will be ideally suited for risk analysis. The technology and infrastructure are not only a commercial, but an economic imperative as well, and there is a need for a revolution in the region.

Nelson Madeddu

Global Consultant at Creditinfo Group