Ibukun is an accomplished product manager and technologist with extensive experience in developing innovative solutions across sectors such as lending, payments, and e-commerce. He is a seasoned product leader, currently with Lupiya, where he leads product efforts across the lending, payments, and investment businesses.
According to the Global Findex 2021 report published by the World Bank, financial inclusion remains a significant challenge across Africa, despite notable progress in recent years. Sub-Saharan Africa leads the world in mobile money adoption, with 33% of adults holding a mobile money account compared to the global average of 10%. However, access to formal financial accounts remains limited, with only 55% of adults in the region owning such accounts—falling behind the 71% average reported for developing economies.
One of the key drivers of financial inclusion is lending—a cornerstone of formal banking that supports economic activities and contributes to broader financial stability. From personal lending to individuals, SME or capital lending to businesses, to infrastructural lending to nations, lending has evolved from its largely informal origins to become an indispensable service in modern economies.
In ancient Mesopotamia, lending relied heavily on trust and personal relationships. Similarly, in many African communities, trust-based lending practices like Rotating Savings and Credit Associations (e.g., stokvels in South Africa and esusu) are prevalent. These groups operate on mutual trust, allowing members to save and borrow within their community.
The enduring value of trust in lending offers a unique lens to reimagine credit systems. Today, technology presents an opportunity to scale this trust, bridging the gap between informal practices and formal financial systems.
However, several barriers impede the adoption of formal lending solutions. Lack of credit history is a significant challenge, as many potential borrowers in Africa lack established credit histories due to their reliance on informal lending practices.
High interest rates also pose a problem, as formal lenders frequently have rates that can be problematic for low-income individuals and small businesses. Furthermore, the exclusion of informal sector workers is a major issue, as a significant portion of Africa’s workforce operates within the informal economy, where income can be irregular and unverified.
To address these challenges, technology can play a crucial role in scaling trust, increasing financial inclusion, and providing more equitable lending solutions.
Digital Trust: The Game Changer
Biometric Verification and Digital Identity
Building a robust credit system requires trust, and digital identity systems offer a foundation for scaling that trust. Biometric KYC (Know Your Customer) processes, such as facial recognition, Personal identity information (PII) verification, fingerprint scans, and voice authentication, are transforming how individuals access financial services. These technologies ensure accurate identity verification, reducing fraud and fostering confidence in digital lending.
In Nigeria, the Bank Verification Number (BVN) has been pivotal in improving identity authentication across financial platforms, linking individuals to their credit activities securely. Similarly, Kenya’s M-Pesa integrates biometric verification to ensure transaction integrity, illustrating the value of these systems in expanding financial access. By creating verifiable and inclusive identities, biometrics provide a bridge for unbanked and underserved populations to access loans and other financial services.
Alternative Data Sources
Traditional credit scoring methods rely heavily on established banking and credit histories, excluding vast segments of Africa’s population. The integration of alternative data sources—such as telco data, mobile payment histories, and utility bill payments—offers a game-changing solution. By leveraging these datasets, lenders can create alternative credit profiles for individuals without formal banking footprints. Interestingly, mobile network operators across Africa are now partnering with fintech companies to assess creditworthiness based on airtime purchases and mobile money transactions. This approach opens up credit access to millions of informal workers and small business owners, who previously lacked the documentation to qualify for traditional loans.
The benefits are transformative: informal sector participants gain access to formal financial systems, creating a pathway for economic growth while reducing over-reliance on exploitative informal lending practices.
AI in Risk Assessment
Artificial intelligence and machine learning are redefining risk assessment in digital lending. These technologies analyze vast amounts of data in real time, providing lenders with deeper insights into borrower behavior. AI-powered credit scoring models can identify patterns in spending, income flows, and repayment behaviors to predict creditworthiness more accurately.This approach not only speeds up decision-making but also enhances fraud detection by identifying anomalies and inconsistencies in applications.
The Efficiency Factor
One of the most significant advantages of digital lending is its speed. Unlike traditional loan processes, which can take days or weeks to complete, digital platforms offer near-instant approvals and disbursements. This capability is particularly vital in addressing urgent financial needs, such as medical emergencies or unexpected business expenses.
Kenya’s Tala and Branch have pioneered instant mobile loans, enabling users to apply and receive funds within minutes. Compared to the lengthy paperwork and bureaucratic hurdles of traditional banks, these platforms highlight how technology can enhance efficiency while meeting consumer expectations. Lupiya is also driving this initiative in Southern Africa and East Africa.
Transparency and Consumer Trust
However, speed alone isn’t enough—transparency is equally critical. Many borrowers remain wary of formal financial institutions due to unclear terms, hidden fees, and exploitative interest rates. Digital lending platforms must prioritize clarity in loan terms, repayment schedules, and interest rates to build long-term consumer trust.
User-centric interfaces play a vital role here. By presenting loan details in a simple, digestible format, neobanks and other fintech companies can empower borrowers to make informed decisions. Moreover, providing tools for repayment tracking and early warnings for defaults reinforces a culture of financial responsibility and trust between lenders and borrowers.
Addressing Economic Realities
No discussion of Africa’s credit system is complete without acknowledging the broader economic context. Macroeconomic factors such as inflation, exchange rate volatility, and political instability significantly impact lending dynamics. High inflation rates drive up interest costs, making formal loans less affordable for borrowers. Exchange rate fluctuations can also deter cross-border lending or investments, particularly in regions dependent on foreign funding. Moreover, political uncertainty often discourages long-term investments in financial infrastructure, slowing down progress in creating inclusive lending systems. Addressing these realities requires collaboration between policymakers, financial institutions, and technology providers to create stable environments that support innovation and trust in lending.
By leveraging technology to scale trust and transparency, Africa’s credit systems can evolve into inclusive and efficient ecosystems. This transformation has the potential to empower individuals and businesses, driving economic growth and redefining the financial landscape for generations to come.
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