It is believed that digital lending companies in Nigeria lose over 2 Billion Dollars to loan defaulters per annum. The digital lending industry faces an obvious problem: how to leverage available data to decide on creditworthy borrowers, thereby mitigating the risk of bad debts and increasing their profit.
CreditChek seeks to provide a solution to the problem of verifying creditworthy borrowers by assessing and verifying the creditworthiness of consumers in Africa. It uses pre-approved data received from bank statements, government, and other real-time financial sources to offer financial data verification services for retail businesses and other lending institutions.
This will enable these companies to avoid loan stacking through historical profiling and determine appropriate financing.
I spoke with co-founder, CEO, Kingsley Ibe and Lionel Orishane, CTO. They took me through the behind-the-scenes at CreditChek as well as the challenges involved and their plans for the future.
CreditChek: Origins and starting out
The idea for CrediChek was based on a personal experience.
Kingsley who has almost a decade of experience in the Nigerian tech space told me that in 2019 he had initially founded a company called MicroMonie which was later merged with a bigger fintech called AjoCard.
But even before his first startup was merged, Kingsley said that he realised a problem while running his business. There is a high number of bad debts owing to loan defaulters.
” I realised that out of every ten loans we gave out, four of those come out as bad loans which isn’t a sustainable way of running a business. And one of the biggest challenges we had in 2019 was the unavailability of credit assessment companies in the space. So even when my company merged we still encountered the same problems of high loan defaulters”.
This Kingsley tells me is a big problem in the digital lending space as high default rate forces digital lending companies to give out loans at a high rate in a bid to hedge risks but this also affects them as high-interest rates cause low retention making it difficult to build a sustainable lending business.
The idea for CreditChek started in June 2021, at a social gathering where Kingsley shared the Idea with Lionel who is his brother-in-law (as their wives are sisters). Lionel is a cybersecurity expert who is very knowledgeable in Data privacy, policy and data protection with over a decade of experience in the industry.
Kingsley recalls sharing his observation having worked in two different lending companies. Seeing that they had both observed the same problems and possessed the required skills and experience, the duo set out to build a solution that will tackle the problems they observed in the digital lending space.
The business model
CreditChek first launched as a consumer business in December 2021 with the intention to solve the credit problems in Africa. They hoped to achieve this by helping to profile consumers and present them to lending companies that offer different types of loans.
Kingsley tells me that they realised it was a terrible business model after running it for a few weeks. According to him
“as with every consumer application or solution in the Nigerian or even African market, the consumer acquisition cost is often super high, so having run this model for a few weeks we realised it was a terrible model and decided to pivot.”
The founders realised that the consumer model requires giving freebies to attract users even though there is no guarantee the user would continue using the product once the freebie is exhausted. They did the maths and realised continuing with the consumer solutions model wasn’t sustainable as their cost was too high. this led them to change their business model
“We pivoted and launched as a B2B Business in private Beta by April 2022 and onboarded five businesses which we believed would be patient with us through the iteration and testing process of our products”, Kingsley added.
Simply put, the solution CreditChek provides is to help these digital loan companies easily assess & verify the creditworthiness of their customers in Africa through the various products they offer to these businesses.
Its products are:
- Credit insight- which gives easy access to historical credit data from different sources including credit bureaus to give insight into your customers’ credit status
- Income insight- which grants digital loan companies, easy access to historical credit data from different sources including credit bureaus to give insight into customers’ credit status
- Identity- which unearths the true identity of potential borrowers and their location in real-time
- Radar- the products that make it possible for these lending companies to easily access other NUBAN bank accounts linked to a borrower’s mobile number or BVN to assess all account statuses.
These solutions offered by CreditChek help tackle fraud, and loan stacking by borrowers and can be used For Microfinance institutions, savings and credit cooperatives, e-commerce and retail. businesses and software engineers.
The CEO tells me that the solution they offer help their customers to reduce risks well as expand their market to include the underserved which these businesses would ordinarily not offer credit to owing to the risk as a result of the unavailability of data for that demographic.
A very practical example is that lending companies are more likely to give out loans to salary earners since they can be verified or have an accessible profile with the data we provide, these companies can expand their client base to those who may not be salary earners but because they are verified the lending companies find them creditworthy.
“When these companies use these products and data that Creditchek makes available, several things are very likely to happen such as the reduction of the number of people who are underserved and previously did not have access to credit. The businesses are now able to build more innovative products around their lending solutions. They can also increase their bottom line by lending more and also reduce their interest rates possibly from double o single digits which is beneficial both to the companies and their customers.”
Building a solution such as this is very technical and as the CTO of CreditChek Lionel Oshikane tells me, on the difficulty of a scale of 1-10, it is a 10!
Lionel explains that building the kind of solution CreditChek is doing is very technically challenging.
"Creditchek is an infrastructure and this requires connecting to multiple systems or having them connected to you. This means that you don't know or control the kind of system, their security standard or other variables beyond your control. This means that you need to think wider as to what can conveniently make connecting or being connected to you as the epicentre of the fracture easier. This alone requires a lot of skill, expertise, and experience to decide what can allow us to build today and be able to scale horizontally and vertically without hindering our business tomorrow which requires a team effort. It is hard as it is a lot of technology that you have to build competence around".
Building a solution that can stand globally with other solutions like this also requires global talent and expertise and due to the current Japa trend in the Nigerian professional space, a lot of those who have that expertise or experience have relocated or are working remote jobs for foreign companies.
This Lionel tells me is another challenge, finding developers who understand the business context and align to the technological solution which is why the job f the CTO is to ensure that the developers do the quality of work needed for this sort of solution.
Kingsley adds that finding the right talent is a challenge but considering the budget they had, they had to work with what they can find and train them to do the job as they should.
Since the startup changed its business model and relaunched a B2B model earlier in the year, they have onboarded over 60 businesses, processing over five thousand API calls.
The startup has also raised $240 thousand for a seed funding round led by their lead investor, a US-based venture company, Atom capital. Other investors include Adamantium investors, Ham Serunjogi of Chipper Cash, Gbolade Emmanuel od Adi Ventures and other angel investors.
Speaking on the competitiveness of the credit industry, the founders said that the startup is more interested in collaboration and does not regard others in the same industry as competitors.
According to lionel, the real competition they have are the bad debtors and loan defaulters
“There is no need to see the guys that we have the same objective with as competition. rather than compete let’s collaborate to spot out the bad guys from the good guys, so when we see another company doing the same thing as us, we are thinking about how to collaborate. This is what drives our idealogy and our culture at CreditChek”
Kingsley adds that the credit global credit market is worth over 300 billion Dollars, while the Nigerian credit market is worth about 150 billion dollars and is growing at the rate of 18% per annum.
He believes that the Nigerian credit industry doesn’t even have enough companies serving the growing industry, especially with the heavy inflow of investments into Africa.
Speaking on their plans for the next five years, Kingsley told me that they are focused on achieving their vision which is “to be the most reliable credit infrastructure for any business in Africa by the year 2025”.
He also revealed plans to launch some exciting products in a few weeks as well as enter some solid partnerships by 2024 to take them closer to actualising their vision.
“We are being stubborn on our vision but flexible in the mission. We are confident that a bright future awaits the startup based on the results they have achieved barely months after relaunch”, he adds.
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