How Lending Platforms in Nigeria Can Overcome Poor Loan Repayment
Emmanuel Nnaemeka
Medium
Nigeria is an emerging market with so many people in dire need of loans to pay off their bills or invest in their businesses. Hence, the country has seen the sporadic establishment of lending platforms, scattered across the country. For example, there are over hundreds of lending platforms in the country, including Specta, Rapid Cash, C24, Lidya, Carbon, PalmCredit, KiaKia, QuickCheck, Okash, and so on.Read more about FinTechHowever, the nature of loans and default in loan repayment remains a challenge for these platforms in Nigeria. In fact, most of these platforms have degenerated into predatory lenders in a bid to recover default payments. Therefore, this article suggests that lending platforms can adopt several strategies to tackle poor loan repayment, including the following:
Engage In Detailed Risk Assessment
One of the most effective ways to reduce the risk of poor loan repayment is to thoroughly assess the creditworthiness of potential borrowers. This can be done through a variety of methods, such as reviewing credit reports, verifying income and employment, and checking references.
Employ The Collateral Strategy
Lending platforms can also reduce the risk of poor loan repayment by requiring collateral from borrowers. This can be in the form of property, assets, or other valuables that can be seized in the event of default.Sign up for the Connect Nigeria daily newsletter
Provide Customers With Flexible Repayment Options
Lending platforms can make it easier for borrowers to repay their loans by offering flexible repayment options. This could include allowing borrowers to choose the frequency and amount of their payments, as well as providing the option to make partial or early payments.
Provide Financial Education And Resources To Users
Lending platforms can also help borrowers avoid default by providing financial education and resources. This could include information on budgeting, debt management, and financial planning. For example, lending platforms can help their customers plan their annual budget and help them stick with it through models such as information on investment plans.
Partner With Credit Counseling Agencies
Lending platforms can also partner with credit counselling agencies to provide additional support to borrowers who are struggling to repay their loans. These agencies can provide one-on-one counselling and develop personalized repayment plans for borrowers.Register to attend the CN Business Mixer
Employ Penalty-Reward Model
Also known as the stick-and-carrot strategy where lending platforms can implement penalty fees for late or missed payments. Lending platforms should implement penalty fees for late or missed payments to incentivize borrowers to stay current on their loans.
Concluding Remarks
Overall, the key to tackling poor loan repayment is to have a comprehensive approach that includes a combination of risk assessment, collateral, flexible repayment options, financial education, and penalty fees for late or missed payments. By implementing these strategies, lending platforms can effectively reduce the risk of default and improve loan repayment rates.Featured Image Source: MediumGot something you want to read about on our platform? Contact us: editor@connectnigeria.com
