The number of companies approved to offer digital loans in Nigeria, commonly known as loan apps, has surged to 320 in September, up from 284 in May. This increase comes amid rising demand for loans as economic conditions in the country worsen.
According to the lenders, loan applications from Nigerians have quadrupled this year. The 320 companies now active in the digital loan market have received approval from either the Federal Competition and Consumer Protection Commission (FCCPC) or the Central Bank of Nigeria (CBN).
The FCCPC database shows that 264 digital lenders have been granted full approval, while 42 operate with conditional approval. Additionally, 14 companies are licensed by the CBN.
Why more firms are entering digital lending
While the FCCPC has introduced a Limited Interim Regulatory/Registration Framework to regulate digital lending and clean up the sector, the ease of registration has attracted many companies to the business.
“The first thing you’d want to do in the financial sector right now is to go into digital lending,” said Gbemi Adelekan, Chairman of the Money Lenders Association, the umbrella body for registered loan apps in Nigeria. “Microfinance regulations are stricter, and licenses are more expensive. That’s why many are entering this space,” he added.
Rising demand for credit
Beyond the ease of entry, the growing demand for quick loans by Nigerians presents a significant opportunity for digital lenders, despite the high risk of non-repayment.
Adelekan noted that many Nigerians are now reliant on credit to get by, with loan apps offering fast access to funds. He highlighted that the demand for loans has quadrupled compared to the surge experienced during the COVID-19 pandemic.
“For example, during COVID-19, our company, QuickPay, would receive about 1,000 loan applications weekly. Now, we’re seeing between 5,000 and 6,000 applications each week,” he said.
However, Adelekan pointed out that most applicants are rejected due to poor credit history. He said around 90% of applicants fail the credit history check after passing the Bank Verification Number (BVN) verification.
“Out of 5,000 applications, the system rejects 4,500 immediately. Many people don’t realize their credit history matters,” he explained. Some lenders, however, lower their risk threshold by only conducting BVN verification and offering small, high-interest loans to cover potential losses.
Unregistered loan apps remain a concern
Despite the increase in registered digital lenders, many unregistered loan apps continue to operate, often preying on desperate borrowers. These apps have been accused of defaming and harassing borrowers through their contacts.
The FCCPC has placed 88 loan apps under its watchlist and delisted 47 from the Google Play Store as it works to regulate the digital lending space. Dr. Adamu Abdulahi, Executive Commissioner of Operations at the FCCPC, emphasized that the goal of registration is to identify the companies behind the apps and hold them accountable for any misconduct.
Abdulahi also acknowledged the challenges loan apps face with defaulting customers but noted that they still play an important role in the economy.
