Faith Adesemowo, developer of Social Lender, a digital service platform that provides immediate access to formal financial services to those with little to no previous access, says she is working towards bringing over a million unbanked Nigerians into the financial system through her innovation.
Adesemowo’s innovation, which uses social reputation scoring to provide credit scores to those who would otherwise not qualify for formal financial services, is achieving international acclaim. It emerged runners-up in the 2021 edition of Africa Prize for Engineering Innovation (APEI) organised by UK Royal Academy of Engineering.
In this interview with Business Hallmark’s OBINNA EZUGWU, she says her aim is to be the MasterCard of alternative scoring; the platform which every bank or financial institution uses to do KYC.
Recently your Social Lender emerged runner-up in the Africa Prize for Engineering Innovation. Tell us how the story began?
We started sometime in 2016. We were exploring the idea that a lot of people, especially in the rural areas, have very limited access to formal financial services. And part of the thing we wanted to look at was how we could solve their problems using the things that they already have; the things that are already available in their environment. So, what we did was that we began to ask ourselves whether there are assets that they already have which can be leveraged upon. That was when we started to consider the fact that our relationships have some sort of imports on how people see and address us. In Africa, if you go back 100 years, you find out that a lot of things were done in social circles. Marriages were arranged like that; from the person who knows this person and so on. So, there was some sort of social collateral. That collateral is something we thought was going to be very valuable and we decided that we would prefer to digitise it to give people the opportunity that they didn’t have. So, really that is how it started; we just wanted to be able to solve problems.
So, the whole idea is that you provide a platform for people to access services? What is the level of your own exposure?
First thing first. We are not a lender; we don’t do any lending. We are just a platform and one of the things we are really trying to do is to make people understand that we are a financial services provider; we are a digital financial services platform that is bringing access to people. One of those is access to credit. There are many other access that you can have on the platform.
But to answer your question directly, the collateral we are providing is not our collateral, it is these people’s collateral; it is their relationships. It is their own network; it is their social standing, and the person who benefits the most is the person whose social standing has been taken into consideration. And obviously, the reverse is the case when someone who has offered his ecosystem to the platform begin to damage it when he or she defaults. The default does not just affect him or her, it also affects their own environment. So, as I said, the platform is not providing collateral, it is providing the collateral that people may not have taken notice of, that is their own social status – their network, their engagements and their interactions. Therefore, a damage is done when someone decides to default or to behave poorly.
For me as an individual who wants to take a facility, why would I come to you instead of going directly to a commercial bank?
Well, I’d emphasis again that we are not only providing access to credit, we are providing access to micro-insurance and to farm inputs. But to answer your question as to why you should come to us. We have just bought a connection between you and the commercial banks. If you go to the commercial banks they will ask you for a collateral, then you have to ask yourself if you have any. The problem we are trying to solve is for people who do not have collateral. Again, it would be expensive for the banks to address you as an individual who is most likely looking for a microcredit, because what we are also doing is providing access to microcredit for people who can’t afford much. Therefore, my target market will be people who need that access and don’t have collateral; people who may not even have any financial history. The point is that you cannot walk into a bank today without a bank account and ask the bank to give you money. I don’t think that is possible. However, on the Social Lender platform, what happens is that we are essentially able to create a bank account for you, and give you your bank verification number right there and then. With that, you can access the service on the platform. Again, the social reputation score is the key thing. Our social reputation score is what the banks look at to be able to decide that you meet their criteria, and therefore can have access to the credit. Essentially, the collateral you provide is your social reputation score. If you have a good social reputation score, the bank is definitely going to respond to you.
But as a basis, what should anyone coming into the platform have; the basic requirements?
How the system works is that when you come into it the platform, you give us access to information that you feel comfortable divulging. Then, the back end solution will do an audit of you. When that is done, you get something we call social reputation score. With your social reputation score, you can access any of the partners on our platform to get any service. If you want credit service you can access it, if you want microinsurance you can access it and if you want farm inputs, you can also access it. Basically, that’s how the solution works.
Which banks or other financial institutions do you have partnerships with?
We have with Sterling Bank, we have with FCMB Microfinance bank, we have with Unity Bank, we have with iTrust. Those are the partners we have in Nigeria today. But we are working towards having partnership with OCP Group to be able to provide fertilizer to local farmers. We will also partner GOXI Micro Insurance we also have FBN Micro-insurance.
What’s the range of facilities that can be accessed through your platform? If I’m looking for N50 million for example, can I come to you?
Certainly not; not at all. Like I said it’s microcredit; it’s microinsurance, that’s where we are really focusing on. Depending on the partner, some partners can do between N1,000 and N100,000. Some partners will do nothing more than N20,000 for a start. If you want the insurance product, you can do insurance for as low as N1,000 a month, and you’ll get some significant cover. So it is micro-credit. We are looking at people who might be unbanked, and who might be below the poverty line, and who might also be in the rural areas.
You talk about rural areas. Many rural areas don’t have access, and this is what you mostly do online. How are you able reach those in rural areas?
The Social Lender platform is an online and offline platform. The online offering is for people who can download the app or just go to the website. For the offline market, we have been able to crack that market, and we have done that in a very unique way. We have agents that we call Social Lender Ambassadors. We trained them so that they can train the locals. What we do is that we deliver financial literacy training. When we deliver the financial literacy training, you find out that it helps the locals to understand a lot more about finance; to understand why they should be financially included, and then we proceed to open bank accounts for them. All of this can just be done on the spot, with the guide of the ambassadors. We open the bank account and we also do the bank verification right there.
Now, to take it a step further, we have also been able to deliver our solutions via SMS and USSD. We did this with the help of the World Bank. We launched that part of the product, specifically targeted at people who have feature phones. You know, many of the locals don’t have smartphones. If you don’t have a smartphone, that doesn’t deter you from being able to use the Social Lender platform. Using SMS and USSD, you can connect to us and the solution works.
I could not find your physical office in Nigeria. For a person in my village who is just hearing about Social Lender and wants to come into the platform, how can the person reach you?
Like I said, our Social Lender Ambassadors will basically be in those areas, and what they will do is that they will serve as guides. We use SMS short codes, we also have USSD short code that we use. Once that code is dialled, our platform begins to interact with that individual and the responses are directly fed into the Social Lender system. That way, everything else works. The only thing the person sees is the responses via the SMS or USSD portals. The person does not need to download or go to the web, so anybody in the rural area can just connect with us using the short codes.
What has been your experience and how many people have you been able to bring on board?
We have done over 120,000 users till date, but we think there is is still a lot we need to do. We want to be able to reach a million users, that’s what we are working on. Our experience has been very interesting. First of all, I’m a woman and I have been very interested in female inclusion. Part of the process we are driving is to make sure that women make up over 30 percent of the people that we serve. My experience personally has been that the women, when they take facility, they repay very quickly and timely, too. So the women make better borrowers as our own experience has shown. The men are catching up, however, but the women are fantastic. And like I said, women inclusion for us is also very important and that’s what we are working very hard to be able to drive. We believe that when you empower a woman, you also empower her family and you’re able to empower her network, too. So, it’s important that we continue to increase those numbers.
Another thing that I find worthwhile as part of the experience is the fact that we are imparting knowledge. Though the education part has been pretty expensive, it has been worthwhile. It’s been amazing just being able to deliver the service, and free of charge. It’s been tough and grinding work to be able to reach this number of people, but I will say it has been worth it. It’s been interesting having this conversation about facilities; about credit and why they should invest and save money in the banks. This is the kind of conversation we should be having more often with people in the rural areas, and that in my experience has been a very fulfilling one.
You said women are better borrowers. I imagine that the men haven’t always paid back?
Well, that’s not what I meant, I don’t want to be quoted. I said that the women perform better in the platform, generally, when you look at the numbers. They are better borrowers.
But have there been instances where people took money and just the walk away?
Of course, you will always find people in that category. But I will say that we have performed very well. We have done much better than traditional unsecured lending where the rate of default is between 10 percent to 15 percent. We have been able to manage less than 2 percent. Default rates among people with reputation score of over 50 is very minimal. Our social reputation score is between one to 100, and among people who with scores of over 50, we have seen that they are very particular about their ecosystem; they are particular about their network and they are not quick to damage those relationships. People with scores of 30 percent and above have also done well. Typically you will find more defaults among people with less than 7 percent score in that category. So, I think in all, we have performed very well. Yes, we still see some level of default, but we have kept them at very minimal level.
You mentioned that you give farm inputs to local farmers. But we now see a situation where many farmers are no longer able to access their farms due to insecurity. Has it had an impact?
Ok, let’s think about it this way. Maybe we considered the possibility of this happening and that’s why we introduced the insurance products. Part of what we do is to encourage the farmers to also take insurance to protect themselves, such that when such happens it doesn’t affect them. However, we haven’t had any record of people who said their farms were destroyed. Regardless, that’s a possibility, and that’s why we encourage them to take insurance to protect themselves. This is why we are also driving the insurance offering in Nigeria.
Do you deal with the farmers in cooperatives or as individuals; because I’m thinking that it would be easier to interact with them in cooperatives?
You have to look at it from the perspective of the problem we’re trying to solve. The problem we are trying to solve is that of access. Yes, farmers being in cooperatives is valuable, but for now, what we are saying is that no matter how small your farm is, you can have access. It doesn’t matter if you are in a union or not. If you find out that you need more fertilizer for instance, you can just go ahead and use our service. We also encourage you to go ahead and take our insurance products to be able to protect yourself. So, part of what we are driving is big circles, small circles; anyone can come in. It’s basically just about access for everybody, really. We are more focused on individuals and that’s our own roadmap at the moment.
Tell us more about the insurance aspect. Which are the insurance companies you’re working with?
For our insurance offering, we are looking at GOXI Micro-insurance. We are concluding on that product, though we haven’t announced it just yet. But it is something that we will be announcing soon, as soon as we finalize all the integrations that we are doing. We are also working towards partnering with FBN Insurance. This too, is in the pipeline. These are the two main companies that we work with. We are very interested in working with them because they are very innovation minded, and they are interested in embracing innovation to solve problems, especially for people below the poverty line. But we also have partnership with OCP Africa coming. OCP is one of the biggest phosphate fertilizer companies in Africa, and we will work with them to provide fertilizers for our farmers.
Generally, people are becoming skeptical of online lending platforms. The complaint is that sometimes, you pay back the loans but they keep charging you interest. At other times, they make it difficult for you to pay so that your interest keeps accumulating. How will you explain to people that your platform is different?
I think again, I’ll mention that we cannot be compared to online lenders because the average online lender has a balance sheet. We are not providing any of those service, what we’re simply doing is that we are scoring an individual, and when we score that individual, we are allowing that interaction or that process to take place on our platform. So, any of the partners, even online lenders, can use our platform such that they don’t have to depend on their own solutions. They would prefer to depend on our scorecard and our end-to-end lending service. What I mean by end-to-end is that from discussing to collecting, all of that is done on our platform. But we don’t have a balance sheet, we are just a technology company. Again we are very ethically driven and we have a strong technology to be able to recognise when payments are made. Don’t forget that this payments that are made are not payments to us, they are repayments to the financial institutions that are our partners. So, take for example, FCMB Microfinance Bank, I don’t see how an FCMB will continue to charge you if you have made payments on a certain day. It doesn’t happen and it certainly won’t happen with Sterling Bank. Sterling Bank cannot continue to charge you after you must have paid back, so that’s where we are different from all of these other credit companies. We are not a credit company, we are just a technology company driving that access and interaction, so that our partners can just plug into the platform and leave the rest to us. But they are the ones that have been connected to the end users so we don’t see that kind of situation.
What’s the plan for Social Lender going forward?
Looking forward, Social Lender is that alternative scoring platform; end-to-end service platform, and our future is to be the experience of Africa and beyond. Our vision is to be the MasterCard of alternative scoring, that’s where we are going. We want to be that platform where every bank or financial institution use to do KYC (Know Your Customer), in case you want to assess your customer; your end users to determine whether they will be suitable for the service you’re trying to deliver. It’s like the way you would apply for an FCMB ATM card, and you will see MasterCard written somewhere in the bottom. That is how we really want to be; that platform where everybody is leveraging on to solve one problem or the other. Like I said, our solution is a problem solving one and can be used in many ways. The more the merrier, and that’s the future for us.