Consumer Credit – Guidance for Investors & their CEOs

Even though Nigerians use a variety of providers to access credit, from microfinance banks to Ajo and cooperatives, consumer credit is still in its infancy. 

Nigeria’s consumer credit market grew 44% from ₦2.5T in 2019 to ₦3.6T ($9 billion) in 2021. From commercial banks, microfinance banks, and fintech, to Ajo and cooperatives, Nigerians use a variety of providers to access credit.

Consumer credit in Nigeria is still in its infancy. With stagnant incomes and high inflation, how might loan providers mitigate the risk of high default rates in 2023?

Welcome to the first issue of Transaction Informatics Weekly in 2023, your source for quick, actionable, data-driven consumer insights.

Transaction patterns in consumer credit can tell us when, how much, and how frequently people use credit. However, it is even more important to understand who is borrowing, how they’re borrowing, and most importantly – why they’re borrowing. This was the focus of a recently completed REACH survey of about 5,000 Nigerian borrowers.

The findings showed that age, gender, income, and urban location have a material impact on how, why, and how much people borrow. For instance, people in their twenties in tier 2 cities tend to borrow 25% more than their tier 1 counterparts. But beyond the impact of age and urban location, we identified 7 building blocks that should govern the design of consumer credit products for the Nigerian market.

How might this inform your market playbook?

Block 4 of 7 says, “Marketing is Education is Marketing.” Acquiring quality, valuable customers is likely more about educating and training them than it is about employing typical marketing tactics. What then should marketing look like for you given your 2023 goals? Below are some metrics we suggest tracking monthly:

  1. Change in monthly incomes
  2. Layoffs – sectors, roles
  3. Inflation & CPI
  4. People’s comprehension of your loan terms

What are Your Next Steps?

To learn more about the demographic profiles of Nigerian borrowers, join our Consumer Credit briefing event – Lunch and Learn on February 23rd, 12pm WAT.

Lunch and Learn with REACH

To unpack the 7 building blocks and apply them to each step of the consumer credit journey, book an executive consultation with our CEO, JR Kanu, and the Market Playbook team.

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