The MD/CEO of Access Bank Plc, Herbert Wigwe revealed the bank has set a daily target of N400 million loans daily to at least 20,000 customers. Mr. Wigwe made this comment during the bank’s investor and analyst call on Monday, September 9th, 2019.
Competition: Nigerian Banks are in stiff competition with FinTech startups over what is regarded as the highly lucrative Quick Loan Segment. FinTech’s startups with a huge financial war chest from patient investors have deployed their cash towards marketing and tech innovative products that have changed the way borrowers receive money via loans.
Currently, Nigerians who qualify for these loans can obtain them between 5 minutes to less than a day with no collateral or documentation. Some obtain the loans via native mobile apps owned by the FinTechs relying only on their phone numbers as documentation. These aggressive initiatives have put the banks on the defense, resulting in the release of competing quick lending products.
Target: Access Bank claims its Quick Loan Scheme or Payday Loan (as the bank calls it) disburses about N200 million daily to 4,600 customers and the bank is eager to double that number to N400 million and 20,000 customers by end of the year.
We have also grown our digital loan business as far as our financial inclusion and normal traditional retail strategy by expanding on our digital lending capabilities to include more products such as salary advancements, small tickets, personal loans and device financing in addition to what we call our payday loans.
And all of this is done on our QuickBucks application which basically houses all of these products. Today we are disbursing on average ₦200 million to 4,600 different customers through the click of a button daily. And we have set for ourselves a target of about ₦400 million daily to at least 20,000 customers, and we are on course to achieving this. This basically generates very low NPLs and is properly priced because a lot of it goes to customers who have their salary accounts
Charges: Access Bank charges an upfront fee of 1% flat, 4% flat interest and insurance of 0.15% of the loan amount is taken upon loan disbursement (5.15% total all payable upfront). The loans are for 31 days.Average all-in lending cost in the market is between 4-6% monthly.
On the offensive: Access Bank also claims it has been aggressive with the marketing of its payday loans and has now booked about N18 billion in the first half of 2019 alone from N11 billion a year earlier. The CEO also claimed the bank has issued out about 1 million unique loans as at June this year.
Default rates: Quick lending loans are highly susceptible to default risks so we sought to know what the bank’s response what. They reported that default rates for its payday loans are below 3% claiming that in most cases it is 0%. Explaining further, they assert that the reason for the low default rates was because their borrowers were salary earners who already have accounts opened with the banks and their salaries domiciled in those accounts.
So for the digital loan book, which is largely dominated by payday loans at the minute, the NPL ratios there have typically been well below 3%. Now, the reason for this as Herbert alluded to earlier on is they are based on customers who already have their salaries with us. Therefore, typically the loans do not go bad in the traditional sense. In some cases, you might find the occasionally delayed salary payment, for that period we might see an inching up in the NPL ratio. But the NPL when you get the salaries as you know is going to be very low for a long time to come. So those are the kinds of ratios you have seen. There are periods when it is 0%. Almost every employer has fully paid up the salaries. When there are delays in payment typically in some cases it can take three or four months for those salaries to come through. Eventually, they come through and the NPL again trends to 0%.
On the bank’s website, they highlight that you do not need to have a salary account in Access Bank for you to access the Payday loan. The bank claims you will, however, need to open an account in the bank for the loan to be disbursed.
What this means: Nigerian Banks may not be nimble, but they have the financial muscle to engage in a long-drawn battle in the quick loan space.
- While stifling regulations and inroads into this space by deep pockets like MTN remains a huge threat, their acquisition route is shorter as most of the borrowers are already customers within the bank.
- Access Bank claims it has 31 million customers and acquires at a rate of 500,000 new customers daily relying mainly on digital means and its agent banking initiative.
- Access Bank has signed up about 1.6 million new customers since it merged with Diamond Bank.