In the beginning, banks only wanted to lend to trusted, high-value corporate clients like Dangote and Nestle. It was cheap, simple, and less risky. The banks that did this successfully were the most profitable and did not have to worry about the retail end of the lending market.
Large corporates have traditionally accounted for most of Nigeria’s private lending market—at the end of 2019, the Oil & Gas sector held a quarter of all bank loans, despite employing less than 1% of Nigerian workers.
But this model was never built to last.
Over the past decade, venture capitalists have deployed nearly two-thirds of their funds to disrupt global retail banking. The same is happening in Nigeria. According to EFInA, Fintech investments into Nigeria increased at a CAGR of 53% between 2013 and 2018, with digital lenders receiving a chunk of these investments. Only last year, Migo and Aella Credit raised $20 million and $10 million, respectively. The reason for this is simple: as Citigroup asserts, retail banking is the most profitable segment of conventional banking.
In Nigeria, the market potential is huge. Only 5.5% of the adult population had access to formal loans in 2018. For context, 36% of Nigerian adults used formal payment products or operated a savings account.
Today, digital lenders like Branch, Carbon, and Fairmoney specialise in providing quick consumer loans from as little as ₦10,000 to as much as ₦500,000. All these lenders share common features: an emphasis on quick loan disbursements, flexible collateral requirements, and most importantly, a commitment to leveraging digital technology at every stage of the process.
Despite all this activity, one element of financial inclusion has largely been ignored: financial literacy.
When Akan Nelson and Daniel Osineye, the founders of Evolve Credit, first got together, they intended to key into the large gap in Nigeria’s large consumer lending market by building an application that allowed consumers to access personal loans from merchants at point-of-sale.
Once they started, though, Akan kept getting calls from customers who had been denied loans, asking basic questions like: “Where else can I get a loan?” “How much will I pay?” “How long will I pay for?” “When will they collect the money?”
At first, Akan and Daniel thought a quick Google search could answer these questions. They were wrong.
The experience got them wondering: Why was there no go-to site for every single consumer finance question a borrower might ask?
Their company, Evolve Credit, was built in response to that. Evolve Credit addresses the financial literacy element of financial inclusion and consumer lending by reviewing the strengths and weaknesses of consumer lending products
Even though there are more loan providers today than there were 10 years ago, consumers are still very poorly educated about the prices, terms, and other features of financial products. In the last decade, there has been no meaningful growth in education about which financial products are best for each borrower.
When providers offer information, it is often overwhelming and confusing for the borrower. After all, borrowers do not want to learn every single thing about personal finance; they just want to know enough to avoid messing up their loans.
Evolve Credit’s marketplace demystifies Nigeria’s consumer loan market by providing ratings, reviews, product comparisons, research, and personalisation support for borrowers looking at financial products. On the platform, borrowers can go all the way from reviewing loans to applying directly for funds.
This model has already proven successful in other parts of the world. Lenders are happy to pay steep finder’s fees to partners that bring them the best customers since what those consumers will spend every year far exceeds those fees.
In the US, NerdWallet, a consumer loan marketplace founded in 2009, is now valued at $500 million with revenues over $100 million. In Europe, comparison marketplace GoCompare is valued at $499 million with revenues over $190 million. And, in India, BankBazaar is currently valued at $300 million with revenues in excess of $15 million.
Nigeria’s consumer loan market is younger and less transparent, meaning there is more room for Evolve Credit to grow, particularly as Nigeria targets retail credit penetration of 40% over the next decade.
There is more, though. The more information Evolve credit provided to borrowers, the more it learnt about consumer lending in Nigeria. Akin and Daniel quickly saw that the market was more broken than they had imagined.
For one, they noticed that lenders use outdated and inefficient processes to manage loan applications.
To address this, they are building an end-to-end digital lending platform that allows microfinance and commercial banks to digitise their entire loan process from origination, through identity and income verification, all the way to disbursement.
As exciting as all these products are, here is the main reason we decided to invest in this consumer lending business: we believe we have found Founder-Market fit.
Akan and Daniel have displayed a unique understanding of a fast-growing market, as well as the necessary grit to survive as Nigerian entrepreneurs.
Born to a family of bankers, Akan’s family has been in the banking industry for over 25 years. When he was 14, Akan was already doing regular bookkeeping and accounting jobs. In his previous stint at UBA, Akan was part of a 10-man team that worked directly with the CEO’s office to map every single process in the bank, line-by-line, in painstaking detail. The experience gave him rare granular insight into how Nigerian banks operate and innovate. He knows the market in detail.
His co-founder, Daniel, brings the kind of innovation-mindset that is sweeping Nigeria’s financial ecosystem. A software engineer with experience in building and shipping web and mobile apps, he has worked and consulted with organisations like the African Leadership Academy and Bridge Labs in Johannesburg, as well as Riby, a cooperative banking platform in Lagos.
Their growth so far is inspiring. When they decided to pivot from a lender to an information provider, the team went through a 10-day boot camp to successfully launch a new version of the business.
Evolve Credit has grown from zero to 4,300 registered users in three months and keeps growing. In a survey of about 80, all of them confirmed that the on-site reviews were helpful, and they would recommend Evolve Credit to their friends.
This story reveals something important; Akan and Daniel are the kind of founders willing to do the hard work of building the information layer of the fintech ecosystem while capturing immense value from this process. This is why Future Africa is so excited to back them.
Numerous studies analysing the impact of the consumer lending boom in Sub-Saharan Africa emphasise that increasing credit in developing countries is insufficient for accelerating growth. It is the distribution, reach, and depth of credit markets that drive sustainable economic growth. Lending is only good for consumers and the economy when consumers make well-informed borrowing choices.
By investing in Evolve Credit, Future Africa is proud to be a part of the growth story in consumer lending. Educating consumers about what products to purchase is as important to the sustainability of the lending market as making the loan products available in the first place.
Evolve Credit is on a grand mission. A mission to provide clarity for all of life’s financial decisions, to make sure the 99% get the same quality information as the 1% who have access to financial advisors.
We are extremely proud to invite Akan and Daniel to the Future Africa community.