Character for Credit in Nigeria

Financial situations change, but your personality will hold steady.

LenddoEFL has shown that credit scores based on behavior and personality traits are continuing to accurately predict default risk, despite the unprecedented economic disruption caused by Covid-19 lockdowns.

LenddoEFL customer, LendMe in Nigeria, has witnessed this new credit-score reality first-hand. They have used LenddoEFL solutions for more than three years to evaluate applicants for Nano-loans. Despite the entire country going into lockdown earlier this year, LenddoEFL’s models have shown strong resilience throughout the crisis and continue to successfully discriminate customers based on their risk level, enabling their lending business to continue at a critical time.

LenddoEFL VP Corporate Development, Camille O’Sullivan, said, “For us, COVID19 has shone a light on the fact that, while your financial situation may change, your core character traits tend to be much more stable. By looking at a customer’s interests (through the apps they download), their reliability, perfectionism or stability traits we are able to provide a more complete profile of an individual.”

Getting credit in Nigeria

Nigeria is an entrepreneurial economy with an estimated 37 million micro, small and medium-sized companies . The World Bank predicts many of these businesses could grow if they had access to finance. However, to access loans, consumers need a credit score. It is estimated that only 40% of adults in Nigeria have a transaction bank account . With no account, these people are ‘invisible’ to banks using traditional credit scoring.

When COVID-19 arrived in Nigeria early this year, the country moved into lockdown restrictions, resulting in millions losing their income. In Nigeria, as around the world, loan default rates have dramatically increased. The Nigerian economy, Africa’s largest, was hit hard. The economy contracted 6.1% in the second quarter of this year and 27% of Nigeria’s labor force (over 21 million Nigerians) are unemployed.

An economic shift of this magnitude results in significant changes in consumer behavior. This has impacted credit scoring models. Predictable behavior has become unpredictable. This makes it difficult for lenders to know who to lend to.

How can you assess the risk of applicants when you are in uncharted waters? The result is less money being lent, at a time when people need it the most. Alternative data decisioning can help financial institutions find a way forward.

Credit through Covid-19: Results at LendMe

While LendMe has seen a slight increase in late payments, especially with recurring customers accessing larger loans, LenddoEFL models continued to accurately predict default risk across the entire portfolio of loans. By combining a tighter credit policy and credit risk models built with a focus on long-term stability in addition to predictive power, LendMe has been able to continue lending to customers needing credit without taking unnecessary risk.

Camille O’Sullivan continues, “We believe that one of the reasons our models continue to hold up is that we only add features that are stable over time and that make business sense. We ensure that the model passes our stability algorithm checks before being selected for implementation.”

LenddoEFL Executive Chairman and CFO, Paul Devine, said, “The results at LendMe are a validation of what we’ve been working on for a decade. We’ve shown that your ability to access financial services shouldn’t only be determined by your bank balance.” “As the effects of the pandemic continue to play out around the world, banks and lenders will have a critical role to play as stabilizers, and they will need to rely on new solutions to do so. Our models are proving that your character is a strong indicator of your likelihood to repay. We’ve already assessed over 7 million people worldwide. And we’re just getting started.”

World Humanitarian Day 2020

It's #WorldHumanitarianDay2020 and we couldn't be prouder to be standing virtual-shoulder-to-shoulder with organisations like Oxfam Pilipinas to say thank you to the #RealLifeHeroes and every person doing their part on this journey.

At LenddoEFL, seeing things differently is central to our mission.

We use technology and science in new ways to reach people in emerging markets around the world who may not have access to financial services. We have developed ways to ‘see’ people who have always been invisible to traditional financial services.

Access to digital financial tools has never been more important than right now. 2020 has forced many people to change the way they work and live and it’s making people consider new ways of solving problems, like financial exclusion.

We have been working on this for a long time, and we are hoping that we can use our skills and solutions to help more people as the global effects of the pandemic continue to play out.

We know that, in the face of a humanitarian crisis, economic resilience is critical to people getting back on their feet. Digital financial technologies also provide a safer and more dignified way to support affected communities, and help jumpstart local economies by increasing people’s access to financial services.

We are proud to be providing our verification solutions to Oxfam to enable identity verification to be carried out more effectively and efficiently to ensure cash can reach the recipient as fast as possible, in a more secure way, and straight to them - can be via a prepaid card or mobile phones.

On behalf of LenddoEFL, our heartfelt thank you to all those on the front lines at Oxfam and in communities around the globe doing everything they can to support people through this challenging year.

We are standing behind you, ready to use our expertise to support you.

The Role of Financial Technology in Disaster Recovery Efforts

Oxfam Pilipinas, together with the Department of Health and other l non-government organizations, visited an evacuation area to assess the immediate needs of those affected by the Taal Volcano eruption in Batangas. (Photo: April Bulanadi/Oxfam)

When Taal Volcano erupted in January 2020, over 70,000 people were forced to take shelter in 300 evacuation centers – the start of a long period of displacement for many. A state of calamity was declared for the entire Calabarzon region. Local authorities expect this to be in effect for the rest of the year.

Elizabeth Embrado had just given birth to her child when Taal Volcano erupted in January. Fearing for their safety - because they lived just a few kilometers away from Taal Lake, in Barangay Nangkaan, in the town of Mataas na Kahoy -she and her family immediately evacuated. Elizabeth's family stayed at a school, which served as the local government's temporary evacuation facility back in January.

Along with displacement is the loss of livelihoods of thousands who rely on agriculture for a living, especially those who are subsistence farmers and fishers. The Department of Agriculture estimated damage to crops to be over $60 million, while local fisheries suffered more than $30 million in damages. This was another burden faced by Elizabeth's family, whose husband works as a fisherman. She said her husband had to stop fishing in the lake because of the eruption. All of this while they had new financial needs with their newborn.

Elizabeth, with her one-month-old baby, in a classroom which serves as a temporary evacuation center in Mataas na Kahoy town, Batangas province. Elizabeth and her baby are among those displaced by the Taal Volcano eruption in January. (Photo: April Bulanadi/Oxfam)

The loss of livelihoods will impact the recovery of affected communities for a long time to come. Humanitarian and development agency Oxfam highlighted early on the need for emergency response plans to anticipate the prolonged displacement of communities within the hazard zone. There was initially an outpouring of support to help displaced families, but there is a critical need to ensure that support continues into the recovery phase.

During Oxfam’s visit to Elizabeth and other displaced families in January, while they expressed gratitude for the relief assistance they received from various groups, they expressed how they would actually much rather receive cash assistance. Indeed, cash support would empower Elizabeth and others to prioritize their needs and increase their sense of self-worth, dignity, and control over their lives. For Elizabeth, her priority needs were essential items for her newborn baby, and livelihood support.

“Our experience in responding to humanitarian emergencies has taught us how economic empowerment is critical to the resilience of Filipinos, particularly women from marginalized communities. This includes access to financial services, access that can be facilitated increasingly through digital platforms. Not only that, digital financial technologies also provide a safer and more dignified way to support affected communities, and help jumpstart local economies by increasing people’s access to financial services,” Oxfam Pilipinas Country Director Lot Felizco said.

Digital financial technology is playing a key role in helping communities in the recovery effort. Oxfam has partnered with Singapore-based FinTech, LenddoEFL, for its digital identity verification solution, known as electronic know your customer (eKYC). This technology allows the user’s identity to be verified faster and more effectively, directly from their mobile device. This enables cash to reach the recipient more efficiently during a humanitarian response. LenddoEFL is providing its services free of charge to support the disbursement of funds to families displaced by the eruption.

“The task of rebuilding requires a considered and tailored approach, guided by those on the frontlines. It is through authentic partnerships, like Oxfam and LenddoEFL, that effective change can be made,” LenddoEFL CEO, Paolo Montessori said.

“We are a mission-driven company, and we are proud to be working with Oxfam at this critical time for the people in the Calabarzon region,” Montessori added.

LenddoEFL first partnered with Oxfam Philippines in 2018 following the devastation wrought by Typhoon Ompong. LenddoEFL’s eKYC solution was deployed to streamline financial assistance to over 1,000 farmers in Cagayan province.

This means the registered farmers were able to access a wide range of financial services, including savings accounts and loans from Philippine financial institutions, in line with regulations of the Bangko Sentral ng Pilipinas (BSP). Regulations in the Philippines have required face-to-face or real-time online interviews to register new-to-card, or new-to bank current account/savings account customers. With this innovation, farmers could be verified faster and more conveniently from their mobile phones.

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About LenddoEFL

LenddoEFL offers software solutions to bridge the gap between lenders and the underserviced. Financial Institutions trust our software solutions to power their financial products, enabling them to reach previously untapped market segments, driving their bottom line. LenddoEFL is built upon over ten years of academic investment purely in risk and decision-making algorithms, having been founded at Harvard. We use AI and advanced analytics to bring together the best sources of digital and behavioral data to help lenders in emerging markets confidently serve underbanked people and small businesses.

About Oxfam

Oxfam is an international confederation of 20 organizations networked together in more than 90 countries, as part of a global movement for change, to build a future free from the injustice of poverty. Oxfam Pilipinas has been working in the country for more than 30 years. Its goal is to contribute to the eradication of poverty by supporting women and other vulnerable groups in saving lives and building livelihoods, enhancing their resilience to crises, and making their voices heard of holding duty-bearers accountable.

Header Photo by Lance Lozano on Unsplash

The looming credit-gap in a post-Covid world

As the economic effects of Covid19 reverberate around the world, it is clear that there will be an impact on credit scores, and that impact will be felt differently in developed and emerging markets.

“LenddoEFL has always, since inception, focussed on emerging economies. Fundamentally, we take alternative data sets and we use them to build credit-risk models for areas of the markets that don’t have traditional credit bureau scores. And we do this in markets where there are no credit bureaus, or where the bureaus only cover 10 - 30% of the market.

In developed markets, credit-bureaus already exist, generating scores for financial institutions which are used to make credit-risk decisions based on historical repayment behaviour. But there is suddenly an unprecedented spike in unemployment - we’re seeing upwards of 20 million people in the US alone and the numbers are climbing - and that’s the same in many countries.

We’re in an interesting dynamic now. Lockdowns are having a real impact on consumer income and we could be in a place where we see a ‘black-hole’ as it relates to credit-scores.

There is a massive change in the market. People’s lives have changed, very unexpectedly. And, sooner or later, we are going to see a spike in defaults. And at a certain point, this unexpected event will damage traditional credit-risk scores.

When the economy does start to restart, and when the governments do start encouraging banks to lend again, they will go to the credit bureau to ask for credit-scores on borrowers, and they are going to get a lot of challenging results.

At LenddoEFL, we do believe that this pandemic will see a lot of financial institutions push towards new digital solutions. Banks have been encouraging their users for some time to embrace digital solutions, online banking. Well now those branches are closed and people are picking up online banking in a way they haven’t before. And that’s a positive thing.

We think there will now be an increased reliance on using new sources of data; such as social data, mobile phone data, psychometric data etc. These data sets are going to be increasingly important in predicting someone's repayment behaviour following this anomaly of significant default that is coming.

In a developed market, someone who had a perfect credit score might soon have a 3 month gap.

Additionally, in these western markets, where governments are providing relief, there is the possibility they are ‘kicking the can down the road’ and consumers are going to be faced with some type of ‘balloon payment’ in the coming months which could be insurmountable.

In an emerging market, we look at people who have no credit score, and LenddoEFL solutions can generate a score for them.

At LenddoEFL, one of the things we do is, we look at behavioural science. We look at the behaviour of the individual at a snapshot in time - now - and use that behavior to predict the repayment of an individual. We look at thousands of data points from different sources to bring out significant information that historical repayment data doesn’t show.

The pandemic is creating a great opportunity for emerging economies to take a step forward. There is going to be capital available to be deployed. At LenddoEFL, we have seen that in emerging markets there is a greater acceptance of these types of new solutions. Emerging markets have the opportunity to push harder and faster to get out of this.”

Photo by Gabe Pierce on Unsplash

How psychometric testing is making sanitation accessible in Ghana

“Would you rather have $1,000 now or $2,000 in 6 months?”  These are the kinds of questions Sama Sama asks when deciding who should receive a payment plan for a new toilet.

LenddoEFL is partnering with iDE Ghana to deliver a mobile-based credit risk model for assessing loan worthiness. The financial survey employs a psychometrics-based predictive model based on research that has shown it is possible to assess credit-worthiness based on a series of questions.

The results of the survey are used by iDE’s Sama Sama Social Enterprise to approve applicants for a line of credit which allows them to purchase a new personal toilet for their household. 

iDE is a global NGO with a mission to create income and livelihood opportunities for poor rural households. They have been working in Ghana since 2010. Sanitation is an ongoing challenge in Ghana. According to Unicef, “As at 2015, only one rural household out of ten were using improved household toilets”

Before partnering with Lenddo EFL, iDE Ghana was using a paper application, which was time-consuming and costly for both the application and processing. By using LenddoEFL’s score instead, iDE reduced it’s turnaround time from 2 weeks to 2 days. This enabled iDE to process more customers and reduce its cost of acquisition and increased it’s loan portfolio significantly as a result - All this while keeping the NPL% at the same level. 

The psychometric testing has been created to meet Ghana-specific market needs. It takes around 30 mins to complete on an Android device. Applicants work their way through a series of questions which assess their credit-worthiness based on factors such as fiscal responsibility, understanding the time value of money, and their internalized norms.

By helping iDE Sama Sama to reduce the acquisition cost and grow their loan portfolio, our partnership has helped to make more affordable toilets available to Ghanians who need them. 

In the words of Sama Sama,

“This will make the unproven market a bit more proven, spur further finance innovation in the development sector, and get more important products and services to the underserved.”

Photo by Virgyl Sowah on Unsplash

LenddoEFL joins the FinTech Fast 101 list

IDC Financial Insights has released the 2020 update of its FinTech Fast 101 research which details a list of fast-growing FinTechs in Asia/Pacific.

LenddoEFL welcomes its inclusion on the list. IDC’s FinTech Fast 101 research refers to fast-growing fintech players based on extensive on-ground analysis of fintech players from China, India, Indonesia, Singapore, Hong Kong, Thailand, Malaysia, the Philippines, Vietnam, South Korea, and Australia. IDC Financial Insights Asia/Pacific applied its Triple U framework – ubiquity, utility, and usability – to determine this year’s FinTech 101 list. The framework evaluates fintech data across the following key metrics: addressable market, customer adoption, investments, alliances and partnerships, innovation, chance of survival, and marketing.