Joda: How Accion MfB is Revolutionising Digital Lending in Nigeria

In this interview with Sunday Ehigiator, the Managing Director and Chief Executive Officer of Accion Microfinance Bank, Taiwo Joda speaks on how the bank has revolutionised digital lending in Nigeria, its approach towards promoting financial inclusion and sustainability through branch expansion, seamless digital lending and partnership

Can you summarize your work on digital inclusion, current progress, and future goals?

Thank you very much. I think first and foremost, the whole concept of digital is not a new trend. It is what is taking over the world.

It’s about driving innovation and I would say, innovation is basically doing things more efficiently to achieve a better result. So if something has been taking three days to accomplish, then the human mind begins to conjecture and say, how can I do it in one day? Or how can I do it in one minute? And so the evolution of digital technology has been a long journey. 

For example, the USSD that banks use, in Nigeria, it’s about 20 years old. So you can say the digital or technology approach to financial solutions has dated back very well. 

It’s something that is there that, if you don’t do it, you become a dinosaur. You just waste away because everybody wants to do things at their convenience, in their room. If I ask us how many times we have stepped into a bank, you know, to do transactions, probably some of us won’t remember.

Somebody was telling me that, when was the last time I signed a checkbook? Apart from the one from the company, I’ve not signed a personal chequebook in about three years. And the same goes for the microwave you use. Instead of putting fire on your stove to heat your food, you have the microwave.

The same goes for virtually everything that we have experienced and has made life easier for us, so financial technology is about the customer. It’s about making life easy for the customer.

It’s about giving convenience and access to the customer, either to do transactions, to take loans, or to save money. 

So we can say that digital lending now is to make it easy for customers to borrow. Digital lending allows you access to a loan in 10 minutes.

So rather than bring your long letter, okay, and everything you need to, the digital lending has, at the back end, complexities, and that has machine reading, that has some level of augmented intelligence that profiles you, look at your phone, how much you recharge your phone, look at the debts that are coming to your account or not, and is able, in two minutes, to tell from the back end, through your profile, to the front end, to the decision maker, that this gentleman is worth N20,000, or N500,000, and so you can give him N20,000, N500,000, or N200,000.

That’s what it does, and in 10 minutes, that is concluded end-to-end. If you compare that to where you have to go to the physical bank to do a transaction, you first have to apply and book an appointment with your account officer, the account officer has to analyse you, print your statement of account, and then it takes you to risk management. Risk management processes it.

If they like your face, they grant the money. If they don’t like your face, they decline. So a lot of things, and then they come up with the alpha letter that you have to sign, documentation, and before you know it, three weeks are gone.

Compared to you having access in two hours, one hour, and 30 minutes, you have a loan. Yeah, so let me just ask. So this information you’re accessing, is it basically within your bank, or are you able to access the customer’s information in other banks? Yes, with the concept of a customer’s information.

How do you pull this through, are there partnerships?

So there are Fintechs organisations now that you can partner with, and are able to access all your statements of account. So the first thing is to educate the customer, because of his privacy rights. Now for us to take this decision, we need to access all of your accounts.

If you have applied recently to some embassies, they will simply ask you to send them a link. They won’t ask for you to print that huge statement of account. They’ll say, send us a link.

So you go to your bank, you send the link, and then you sign that they can open the link. And so they open the link, they see it. Now that’s technology.

So what the system does is that in milliseconds, it looks at the number of debits in your account for a whole year, the number of credits in your account for a whole year as well, across all the banks you use.

It does this through your BVN, absolutely. Across all the banks you use. And it’s telling you that your total turnover in all of these banks, removing double counting of transactions, is N50 million in two years.

And if I build into the algorithm that I’m comfortable to do 10 per cent of your turnover in a year, so it says, or 5 per cent, says N50 million is your turnover, and I say, okay, 10 per cent of that will have been N5 million. 5 per cent of that will be N2.5 million. 

It means that I said, if this person does an N50 million turnover annually, then it should be good for an N2.5 million loan etc. And the system reports back to you that that man is good for N2.5 million.

 But the beauty of technology is that it also looks at inconsistencies. So if it’s only in one day that you just put in N30 million, it throws it up. That is an illusion of flow, so it’s down for you to override or accept.

What are the key challenges and risks involved in digital lending, from both the customer’s and lender’s perspectives?

So risk could be both internal and external. So risk involved is that there could be external hackers who can steal individual people’s identities and use them to take loans. 

When they apply for a loan, they take your BVN, they have access to your account number, and they use your name, use everything, and use it to take a loan. But then there are mitigating factors because now there are facial biometrics that link you to your ID and make sure you are dealing with the right person.

There’s also the internal risk of a system glitch. I mean, the system may not work the way you want it to work at times.

Like they say with systems; it’s garbage in, garbage out. It is the information you’re feeding it that comes up. It could also be, for most banks, it has always been the issue of talent.

Even in developing these things. The type of data scientists, the type of chief digital officers, you want to explore. They are not one; you don’t go to the market and see one that is designed especially for microfinance.

So if you want to get a talent, you are contesting with the likes of Microsoft. They have choices of where to work. You are contesting with the big banks.

So attracting the right talent, the developers for the system, the chief information security officer, the digital officers, the IT experts, attracting them to sit, work for you and retaining them is a major challenge to the continuity of the business. 

Because where you have a very high turnover, okay, it could distort your process of innovation at the time that you want to drive innovation.

What’s your take on the impact of e-transfer levies on Nigeria’s financial inclusion drive?

It’s an interesting question. And I don’t intend to hold proof for the government. But you see technology costs money. It also costs money to maintain. Enjoying convenience also costs money.

I’ve had conversations with very concerned people. And I’ve asked the question; imagine you have an urgent transfer to make to a hospital because your mom is there or a loved one is there.

But you’re also going about your daily work and assignments. And then you’re able to pick up your phone and send the money and have the peace of mind to concentrate on your job. Because you know that the money has gone and that person is going to be attended to. 

Now, that transfer process, if you look at it and the government says it’s going to cost you N15, let’s have a reverse scenario. 

Let’s say you have to take an Uber, a taxi or a bus to go to your bank, go there.

Now, the payment for Uber, maybe this time of day you probably get it for N5,000, you get in there, you do your transaction, then you come out and then you’re taking the receipts to the hospital to show them that you have paid. Or you have to go and withdraw cash, keep cash in your bag and start rushing.

Now there’s a possibility that you can also get into traffic or something. Now if you compare what is being charged to what it will have cost you to consummate the same transaction and do what is important to you, while you’re still using your time productively, you see that the opportunity cost is not as much as we have hyped it to be. 

Now the electronic money transfer, says the clip, there is a cyberspace that needs to be maintained so that every other person can connect to it.

And you must tax every individual user. It’s just like, I’m sure we all have DSTV, Netflix and all that.

It’s interesting how people will subscribe to Netflix at N7,000 a month, okay, and pay N15,000 for DSTV, but don’t want to be debited for N1,000 a month electronic money transfer charges that have made life easy, that has made it easy for you to pay the N15,000 DSTV and made it very convenient to continue to watch your Netflix. 

So honestly, I think it’s in and out. While I think the government has a responsibility to ensure that these services come as cheap as possible, I think when you weigh the opportunities with the costs, it looks reasonable at times.

What’s your perspective on the high interest rates charged by digital lenders in Nigeria?

I think it’s not healthy to have interest rates very high because it may lead to high default rates.

So you collect N2,000. You need to get medication for a life-threatening disease. If you have a high BP, you need to get your drugs.

There’s a digital lender who is ready to give you a consumer loan, and you’re qualified for it. You want to do that first. Now that drive for meeting needs becomes very important for you at that point.

Every economy thrives on credit. In fact, credit penetration in Nigeria is about one of the lowest in the world. If you listen to the MD of FEMA, credit penetration in Nigeria is about 19 per cent.

Okay, there are economies in the world that they’re almost 100 per cent, 98 per cent in terms of credit. Their whole life is a credit card. So that’s how they drive, that’s how they live.

In Nigeria, you have your car, you’re paying cash 100 per cent, building a house, doing it 100 per cent. You hardly see that. Even in South Africa, you hardly see that.

You have your car, it’s on loan, and it is on lease. You have your houses on a mortgage, almost everything. You’re in school, there’s a school fees loan, there is this, but there’s also the capacity to be able to serve it.

So I think we may, and you see, growth comes with its pain and challenges. So we will get to a time, definitely, where the interest rates will moderate because competition will drive it. Customers’ preferences and consumer preferences will drive the interest rate.

And actually, that interest rate is beginning to come down. So it started when we had the first influx of digital members of Fintechs. They were charging as high as 15 per cent per week.

You know they were charging 15 per cent in two weeks. And it was going on, but now, you see someone who will advertise now that from 15 per cent, it’s now 5 per cent per week or 7.5 per cent per week. So you see it has also dropped drastically.

And as we go, we’re going to moderate that. These are teething challenges in introducing technology. The first problem that digitalisation has solved is accessibility.

And that was a major challenge. I should have where I will borrow more than not to have, okay? So the accessibility gives you comfort. When you cross the path of accessibility, and there are a lot of places where you can access, the next question is price preferences.

So where do I go now? And don’t also underestimate the fact that as you do one, you do two, you do three, and you return the money, you’re also growing credibility. 

You’re also growing credibility. And they look at you and say, everybody wants a customer that has borrowed several times and has repaid the money.

So you begin to get many offers. Because they’ll go to the credit bureau and say, where are the people who have good credit history? They will spool the data. And then you suddenly get an alert that you are qualified for this amount, because of the history.

Even the organisation that you’re taking the loan from also reads it and says, you have qualified for a discount. So that goes. And then what it also informs us is that pricing is relative to risk.

The higher the risk, the higher the interest rates, but that is as FinTech is concerned. As the economy is concerned, the monetary policy decision to increase the monetary policy rates, however, is also informed by the inflation rates.

It’s just a simple analogy. If I have a shirt that costs N10 today, and that shirt will cost N15 Naira tomorrow, but you have money that is N10 Naira today, and if you invest it for that tomorrow, it will only give you N2 interest, it means what you can acquire today at N10, if you save and invest the money, you’ll not be able to acquire it tomorrow, because it will have gone to N15, and you will only be having N12 with you. 

So simple logic is, in any economy, where the inflation rate is higher than the interest rates, it’s an incentive to save and invest. So those actions were taken by governments to encourage foreign direct investors to be able to see a good reason to invest in Nigeria, and also to curb demand and to curb excessive flow of cash in the system.

I think that’s the logic of where the government is coming from. Has it impoverished many people? Has it made life very difficult? The answer is yes, but I guess that’s the government’s perspective.

How has Accion’s digital drive impacted your performance this year, and what are your forecasts for next year?

So for our forecast, we have very interesting innovations that are coming up, starting from December 15, 2024. So, we’re having the ‘7M Promo’.

The ‘7M promo’ is purely digital-driven. We’re having the ‘Save to Loan Promo’. We’re having the ‘Buy Now, Pay Later’, as well.

The ‘Buy Now, Pay Later’ is a credit wallet. So, a guy can go and walk into a supermarket, our first partnership is going to be with ‘Just Right Supermarket’. So, you can go into Just Right, buy your groceries, and pay after 30 days.

The whole idea is that no family should sleep hungry. And it’s supposed to create a bridge between this salary and your next salary, or between this income and your next income. So, you can even go in, and then you swipe your card, and they say, oh, the bank gives you a credit limit of N20,000.

But you’re able to buy what you want and take it home. So, I mean, every family should be happy. So, we missed the December target, because we really wanted it to come out in December, and hit the market.

The exciting one is our school fees loan. And by January 2, 2025, everyone can go online; and apply for a school fees loan, to pay for children’s school fees and boarding fees. So, there’s so much area.

And these are products that have been designed so that you can, from end to end, conclude in 10 minutes, without any physical contact.

The only bit of the school fees loan is that we will request from you the name of the school and the accounts of the school. So, we’ll be directing the payment to the school directly to avoid diversion, because we are very heavy on education.

In terms of performance, let me put it this way. Our performance this year is better than last year. But that’s not where we want to be.

Last year, and this year, has been for us, heavy investment in technology. So, it was a must for us this year that we finished the upgrading of our core banking system.

And all of these products we are taking time to recruit. There are kinds of people to review, bring down the product, analyze, and take a risk tour of what the product is like. Until we get to the final point where we say it is time for us to launch into the market.

So the excitement for me is not this year or last year. The excitement for me is 2025. Because like we said, we have seen areas where there is a thousand per cent growth in uptake.

Let me give you an example of how we have excited our customers. We have this platform, Rubik’s platform.

Rubik’s platform is an automated lending renewal platform. So if you are a customer of the bank and have taken a loan from the bank once and you paid it well. Before you make the last payment, there is a message that comes to you that your renewal has been approved.

What would have happened before? The account officer would have come back to you to say, are you renewing? Are you not renewing? Give you an application form, and then start preparing documents again, collecting the same set of documents. But Rubik’s platform will show you, and you will get an alert.

Your loan has been approved. Do you want to continue? You tick yes. It says to download the offer letter. You tick no, that’s okay. Maybe you are content with what you have now. It says to download the offer letter.

You are able to download the offer letter online. And in one day, instead of two weeks, your account is credited. You know, for a businessman and for every individual, time saved is money.

Time to market is critical. So that’s why we have so much excitement about what is coming into the market. 

What banking trends do you expect to see in 2025?

E-commerce adoption of our products. So we are looking at collaborating with a lot of e-commerce platforms. We are looking at a lot of B2B partnerships, we are targeting the youths, the Gen-Z’s. Those are the great focus for us.

And that’s where our products are actually redesigned along. I just wanted to know, you know, since this digital lending, I mean, it’s good you talk about the youth. Because mostly they are the ones wanting to take, you know, funds, especially digital.

What’s your current NPL default rate?

Yes, over this new lending plan. So our non-performing loan (NPL) today is in the single digits. And it has come down from last year.

And that’s also the beauty of technology. Because with technology, you can create a rigorous machine reading that helps you to manage risk. 

Also, I think there is also a misrepresentation of that NPL. If you think the poor don’t pay, they pay. I think I have more problems with the rich than the poor. 

Now, what happened is that we’ve had a lot of issues since COVID in Nigeria, and we deal with the businesses and individuals that are vulnerable because they are at the bottom of the pyramid. 

Macroeconomics vigorously affected their businesses. And some of them are not able to pay because the business failed. Not because of character. So let’s establish that. So as the economy boils, you see a lot of activity.

You have the testimony of someone who says, I started with an N800,000 loan, and now I’m doing N10 million over the years. Some people started with N300,000, and they’re so happy. If you visit our YouTube space, they’re so happy. And look at our customer testimonials.

They’re so happy, so excited to say, I’ve trained three children in school. I’ve built a house. I’ve opened three stores.

Because when they go into the borrowing business, it’s to grow. It’s to be taken out of poverty, so that their financial health improves, but things do happen. We have customers who wake up and their shops have been razed down by fire. Some shops have been demolished.

In some instances, because of our partnership and deliberate action to ensure all the loans, we’re able to refinance them and bring them back. 

So if I look at a number of cases of default. That comes from an intentional mindset to defraud; it’s less than 3 per cent. But in cases of default, because of economic challenges, or because of mistiming of the business, it’s a bit higher.

I’ll give you an example. We financed a customer in Onitsha. He brought out two containers of spare parts.

He had split the two containers of spare parts and brought them to his shop. Then officials of Customs came to his shop and said that they could not open it. Because there are suspected contrabands in there.

They took those two containers and took them back to the port, and it took three months before they eventually released them for him to reclaim.

So you can imagine the number of sales we’ll have made in three months. You can imagine the interest on their account. So with this customer, you start restructuring, because some of them, even from that incident, can develop high blood pressure. So that happens, but when it comes to the intention to want to pay, I score the people very high. 

What’s the total value of loans you issued this year?

For this year, we’ve done an average of N3 billion per month. So we’ve done about N33 billion. But in the last 10 years, we’ve done about N250 billion. And they are very small borrowers. Our average loan is N700,000 to a customer, which is less than $200.

So next year, we intend to do N60 billion, targeted at MSMEs. That’s almost double what we did this year. And we will double it easily for two reasons.

First, even for customers to maintain their business at the same level, they need more because of the situation. And then we intend to also grow our customer base.

So every month, we had an average of 20 new customers. So if I disbursed, like we did in November 2024, where the total disbursed was N4.6 billion in one month. Now, if I do 20 per cent of N4.6 billion to new customers, then you can extrapolate the growth.

And next year, we’re going to four new locations. So we’re going to open branches in Kwara, Abuja, Kano, and Kaduna State. So as you move there, you deploy technology, and you acquire new customers.