[Interview] Marvin Akankwasa, CEO, Social Lend Africa, Uganda
Social Lend Africa is a Uganda-based financial technology company that facilitates transactions between micro-lenders and small business owners on its web and mobile app
It has registered over 400 users on its mobile application in the last 6 months, 80% of whom have successfully applied for financing. It has also financed more than 340 MSMEs with a record low 1.24% Non-performing Loan Ratio. The company’s CEO Marvin Akankwasa explains:
Tell us about your company?
Social Lend Africa is an award-winning financial technology solution based in Kampala, Uganda. Our solution enables Micro or Small, or Medium Enterprises owners to quickly access a cash advance or a business term loan on their mobile application anytime, anywhere through a 6-minute application process and 24 hours of conducting due diligence.
We are deploying innovative business process and proprietary technology to improve service delivery and customer experience in the financial services industry. Our technology assesses various data points like geo-location, culture, demographic among over 400 data points.
When and why was it set up?
The idea was conceived over six years ago and we have over the years helped Micro, Small, and Medium Enterprises access affordable credit.
The business was established in 2015, initially lending small unsecured amounts of money to small business owners and students around Makerere University.
We initially traded as Spectrum Xchange (U) Limited before rebranding to Social Lend Africa in June 2018 due to the need to launch a fresh suite of digital lending products.
We needed to leverage technology to ease the application process and also provide access to credit to more small business owners, so our first step towards building a digital lending platform began in May 2019 when we shifted from a manual paper-based application process that required supporting documentation to a web-enabled application process.
This process focused on fully digitizing the business loan experience. We achieved this by making the loan application process faster and frictionless for Micro, Small, and Medium Businesses (MSMEs) with loan funds availed 24/7 and disbursement made into a borrower’s bank account within 24 hours.
What would you say gives Social Lend Africa the competitive edge?
Our competitive strength majorly lies in our speed of service delivery and the efficiency of our business process.
Business owners quickly sign up through the mobile application using an existing social media account or their mobile phone number. The user can then proceed to apply for a cash advance or business term loan.
After the user fills in online forms in six minutes, the system sends them an e-mail acknowledging their application and immediately scores the application. Our system is developing to quickly assess the customers’ creditworthiness basing on over 400 additional data points that include geo-location, culture, and history, demographic, spend activity, mobile money transaction history, credit reports, social data from social media, referral data.
We then conduct due diligence under 24 hours and credit the borrower with the requested funds which are settled in real-time. Additionally, our digital process dramatically lowers the costs of offering financial services and puts us at a very competitive cost-to-income ratio of 29% compared to the average cost-to-income ratio of commercial banks in Uganda that stands at 56.6%.
With this level of efficiency, we expect to financially include 225,000 Micro, Small, and Medium Enterprises across major cities in Africa by 2023.
How has the market responded to your services? Why do you think that is so?
We have registered over 400 users on the mobile application in the last 6 months, 80% of whom have successfully applied for financing.
We have financed over 340 Micro, Small, and Medium Enterprises with a record low 1.24% Non-performing Loan Ratio.
We have also retained most of our customers and achieved $312 Customer Lifetime Value. This record of success is mostly attributable to our focus on a superior customer experience and on operational efficiency.
What, in your opinion, are the dynamics that have shaped the fintech space?
Local mobile money service providers like MTN and Airtel in Uganda have already created traction with the number of mobile money transactions growing by 19.3% to Ugx. 79.8 trillion in 2020 .
Additionally, by the end of 2020, there were 30.5 million registered mobile money accounts in Uganda. We believe this trend on mobile money services is paving way for even more digital transactions as more and more people own smartphones in Uganda.
The uptake of digital lending services is most apparent in Sub-Saharan African countries like Kenya, Nigeria, and South Africa where there are multiple players like Tala, Kopo Kopo, Carbon, among others. These Financial Technology companies are already successfully deploying proprietary technologies to quickly and effectively score borrowers.
In fact, our own authorities in Uganda have taken cognizance of this trend and quickly passed the National Payments Systems Act, 2020 to regulate digital payments service providers.
What can you say about the changes and developments that Social Lend Africa has undergone since its inception?
Our company has undergone tremendous changes since 2015 when we conceived the idea. We started with customers physically moving to our office to fill in loan application forms and now we can take the customer through a paperless, convenient, and customer-centric journey.
Before 2018, we had very low credit risk analysis capabilities which caused us financial loss but now we have efficient data analysis tools to properly assess customers. Additionally, we have developed in terms of our product and market research abilities, customer relationship management, and operational efficiency.
Tell us about your client portfolio? Who are your clients?
Due to the nature of our business, relations with our customers are confidential. However, our customers are Micro or Small, and Medium Enterprises owners. They are based in the urban areas of Uganda like Kampala and Wakiso.
They are mostly youthful male and female persons aged between 18 years to 30 years. We have further segmented them into; 80% traditional “Dduukas” (small retail stores) which are in the trade and commodities sectors and 20% technology, health services, and haulage services.
How has COVID-19 shaped your business and how have you managed to remain resilient?
In the first and second quarter of last year, the COVID-19 impact on the economy forced many financial institutions and alternative lenders to scale down lending operations. Small business owners found it difficult to access financing quickly since most banks discouraged visiting physical branches to encourage social distancing.
While banks provide many services online, only 1% are capable of extending loans digitally. However, we saw an opportunity to serve the already cash-strapped merchants digitally and financed them to help them survive.
As the economy started to recover in the third quarter, many were able to pay back smoothly and we were also able to start offering Lending As a Service to financial Institutions and alternative lenders.
How is competition in your industry and how are you weathering it?
The financial services industry has many players including commercial banks, SACCOs, credit companies, alternative lenders, and informal lenders.
Lately, Financial Technology companies have emerged and they are revolutionizing credit services by digitizing the loan application process, instantly underwriting credit risk, and enabling borrowers to pay back loans conveniently on mobile apps and USSD.
We are keeping ahead of the curve by continuously improving customer service, deploying superior technology at all stages of the loan process, and aiming for operational excellence.
What is the greatest threat to your business and industry?
Our greatest threat is commensurately improving our technology with evolving customer demands and fast-growing scale. A failure in our technology is a serious threat to us. As an industry, we have witnessed an increasing level of micro-debt burden due to the ease of borrowing from digital and mobile lenders.
Most borrowers spend the loans on consumption rather than use them to generate more income, forcing some to become perennial borrowers. Alternative lenders also charge exorbitant interest rates and this makes it nearly impossible for borrowers to pay back.
These are serious threats to the sustainability of the operations of most financial services providers and the whole industry as a whole.
What are Social Lend Africa’s plans in 2021?
This year we are hastening our efforts to offer Lending As a Service to commercial banks, SACCOs, alternative lenders which are focused on financing small business owners.
With this initiative, we hope to ethically lend small unsecured amounts of money at scale to over 3,000 Micro, Small and Medium Enterprises through their smartphones anytime, anywhere across major cities in Uganda.
What does Social Lend Africa need to grow and prosper?
Our company needs a couple of things to grow; improving technology to keep up with customer demands; hiring a highly motivated and talented team with relevant experience and expertise in offering financial services; sufficient follow-up funding to sustain scaled operations and meet high Customer Acquisition Costs.
What is the latest news from your company?
We have launched Lending As a Service where banks and alternative lenders can lend as much as $50,000 in funding to small businesses via a process that takes place completely online using the applicant’s web or mobile device. We believe this is a game-changer.