Instant loans: DMBs, MFBs jostle for market share

By AYOOLA OLAOLUWA

Deposit Money Banks (DMBs) and Micro Finance Banks (MFBs) operating in the country have intensified their quest for the control of the instant loan market, Business Hallmark investigation has revealed.

Nigeria’s instant loan market has continued to attract an unprecedented level of interest, after financial technology firms (FinTechs) stole the initiative from conventional banks by making it possible for Nigerians to get loans from the comfort of their houses or offices while using their mobile phones and without even owning an account.

For instance, two leading startups, Fairmoney and Carbon, boasted a combined loan disbursement of over N70billion in 2020 alone.
Experts in the industry who spoke with our correspondent put the conservative size of instant loans paid out by FinTechs to borrowers in 2020 alone at over N550billion.

“These (N70billion) are just the combined figures released by only two lenders. The actual payout for non-bank retail credit should be in the region of N550billion if large lenders who didn’t report their numbers are factored in. The market is huge, really huge. In fact, presently, we have close to 50 lenders offering instant loans”, declared Taiwo Oni, a credit manager in one of Nigeria’s leading commercial banks.

According to Oni, who underwrites and evaluate applicant’s requests for credit using credit scores, projected profits and losses, as well and risk factors for his bank, available data put the the size of Nigeria’s working population at 62.2million, with around 99 million unique mobile subscribers.

“Despite the fact that we don’t have enough data in the country to patch together to make accurate assumptions, we still have enough to know that there is a gold mine waiting to be mined.

“For instance, a research done in 2020 shows that salaried workers take an average of N23,000 six (6) time s a year. If 50% of our 62 million-strong labor force takes an average of about N23,000 loan six times a year, that’s a N4.3 trillion loan segment.

“And we are just looking at a conservative estimate. There is no doubt that we have a wide gap in the nation’s credit market.

“We (banks) also want a piece of the cake. The competition for the huge instant loan market, I assure you, is going to intensify”, Oni claimed.

One of the banks aggressively competing for control of the instant loans market is Access Bank Plc. The bank, checks on its website suggest, have different packages for both public and private workers desiring instant loans. They include Pay Day Loan, Device Finance (DFPS) and Salary Advance (SADV).

For Access Bank’s PayDay Loan, an applicant can borrow money at low interest rate with no documentation or collateral needed, as long as he receives salary regularly.

To apply, an applicant just needs to dial *901*11*1# or through internet banking such as WhatsApp banking, Access mobile app and quick bucks app. The service is 24 hours.
Features of the loan package include: no documentation required; no collateral required and up to thirty-one (31) days tenor, with the loan amount automatically deducted from the applicant’s salary account.

However, the maximum amount an applicant is eligible to get is 75%of his or her monthly salary, subject to ₦500,000 disbursement cap.

The interest rate for pay day loan is 4%. Othercharges are 1%managementfee and0.3%creditlifeinsurance, which are taken upfront.

For Salary Advance (SADV), beneficiaries must be salary account holders with Access Bank who earn a minimum of N50,000. The applicant can access up to200%of his monthly salary.

The loan has 180days tenor (6 monthly instalment payments, interest rate of 3.9% (on reducing balance), management fee of 1% and Credit Life Insurance fee of 0.7%.

The Small Ticket Personal Loan (STPL) on the other hand, is for salaryaccountholderswithAccessBankwhoearnaminimumofN100,000. They can access up to 400%of their monthly salary, with 365daysrepayment tenure (12 monthly instalments).

The interest rate for the package, unlike SADV, is 3.7% (on reducing balance), while management fee of 1% and Credit Life Insurance fee of 1% is charged.

Another instant loan package offered to customers is Device Finance (DFPS). Like other packages, beneficiaries must be salary account holders with Access Bank.

A beneficiary can access upto33%of his annual salary, but subject to a maximum of₦500,000. The package comes with 365 days repayment tenor (12 monthly instalments; interest rate of27% (flat) and Credit Life Insurance of 1%.

Meanwhile, benefiting customers of the packages will face 1% penalchargepermonthfordefaultingontheloanfrom31dayspastdue.
Another bank heavily involved in the instant loan scheme is GTBank. It’s Quick Credit, which offers year-long loans at 1.33% interest rate per month, is the industry’s lowest.

The bank has 3 packages on its bouquet lists, namely GT Salary Advance, GTB Quick Credit Loan and the GTBank School Fees Advance (GTBank Student Loan).

The GT Salary Advance offers account owners with the bank up to 50% of their monthly salary upfront. It is available to only private companies and government employees who have their salary accounts domiciled in GTBank.

Likewise, the GTBank School Fees Advance, also known as the GTBank Student loan, is a GTB loan facility that provides account holders the opportunity to pay school fees for their children and wards.

One of the major conditions for accessing this loan is that the institution of learning must be in Nigeria. The credit facility is available to staff of private and public organizations who have their salary accounts with GTBank.

Lastly, the bank has the GTB Quick Credit Loan for both salary earners and self-employed. The quick credit loan facility provides account holders the opportunity to get cash instantly and pay back over a period of 6–12 months at an interest of 1.33%.

Applicants for the loan have 3differentwaystoapply. They include using the GTBank internet banking platform; using the bank’s loan code *737*8*2# or visiting any branch of GTBank or ATM.

While banks are upping their games in the push to gain control of the market, microfinance banks are not relenting in their determination to protect their turf.
One of the MFBs at the forefront of the scramble is Spectrum Microfinance Bank which offers two instant loan packages, Salary Earners Loans and PayDay Advance Loans to civil servants and private sector employees.

A civil servant or a worker with a private firm applying for the two loans will need to provide a valid means of Identification (Driver’s License, National ID Card, International Passport, work ID Card, recent utility bill and a bank statement for the last 6 months (for private employees).
The interest payable on the loans starts from 2.8% and does not exceed 3%.

“We will review our rates downward for you should you find a lower interest elsewhere”, the firm promised Nigerians in an effort to win them over..
The beauty of the loan packages is that an application does not need to operate an account with Spectrum before accessing a loan.

Apart from this, marketers employed by the company, dressed up in customised attires, visit government and private owned offices, particularly schools, cooperative societies, secretariats and market boards, wooing staffers to come take loans from them.

Aside that, any worker who introduced a client gets a percentage as commission for his efforts.
Another MFB making wave is Ibile Microfinance Bank owned by the Lagos State government. Established in 2017, the firm is particularly favoured by workers in the state’s civil service looking for loans, probably because it is owned by their employers and because they believe they will get the best deals.

Like other firms offering instant loans to Nigerians, a salary earner can only access Ibile MFB loans if he works in a well established organization outside the MDA sector.

To qualify, an applicant must upload his statement of account (6months), letter of confirmation of appointment/employment, authorised a direct debit to be placed on his account.

Tenor of the loan is between3-6months, and it attracts a management fee of1% and insurance fee of 1%.

After disbursements, the loan facilities are deducted from beneficiaries’ monthly pay.

Mutual Trust Microfinance Bank is another dominant player in the instant loans market. However, its instant/payday loans can only be accessed by federal civil servants.
According to MTMB, interested federal workers can apply for loan to pay house rent, medical bills, household projects, or personal expenses. The company charges between 2% and 2.50% interest rates on its pay day loans.

Not to be left out is Zedvance Limited, a consumer finance company with headquarters in Lagos.

The firm, BH learnt, particularly targets public workers working with the Lagos and Rivers State governments and those with blue chip companies such as Dangote Group, BUA, Nestle Nigeria, Nigerian Breweries Plc, Guinness, Multichoice and other firms who get their salaries regularly.

The minimum loan an applicant in the private sector can get is N50,000, while the maximum is N5,000,000. A monthly interest fee of 3.5% is applied and a flat management fee is charged upfront.

The loan has a maximum tenor of 18 months, and comes with requirements such as the supply of official email, staff ID card, valid means of identification, employment letter, utility bill (not more than 3 months old), a passport photograph, up-to-date bank statementsofnotlessthan6months, repayment instruments to achieve easy repayment of loans and beneficiaries must be between 22 and 55 years of age.

On the other hand, applicants from the public sector can get a minimum loan of N20,000 and a maximum of N3,000,000, with maximum tenor of 24months. A monthly interest fee of 3.5% is applied and a flat management fee is charged upfront.

Requirements needed are more flexible unlike those placed on their colleagues from the private sector.
Applicants applying for Zedvance loans can apply for payroll loan via www.zedvance.com; chat with Zee on WhatsApp via 09095017151or down load MoneyPal from Google PlayStore; call customer center via 07001001000 or visit any branch of the firm.

The decision of the DMBs and MFBs to offer lower interest rates on its loans, BH gathered, is pulling the carpet off the feet of hitherto market leaders that charge a minimum of15% flat rates on two-week loans starting from N10,000 to N30,000.

“Most people are now abandoning them (fintechs) for conventional banks owing largely to the huge differences in their rates.

“If the trend continues, FinTechs will soon be in trouble as they don’t have the war chest to