Martin Endjala
Today’s consumers are redefining the next normal for the African credit market while they also have new digital demands, heightened experiential expectations, and evolving purchasing and repayment behaviours.
This means forward-focused lenders are increasingly being challenged to respond in new and creative ways simply to stay competitive.
This evolution in the consumer credit space is taking place against the backdrop of African economies experiencing a mixed post-pandemic recovery, as each country adapts to current conditions and strategizes for the future.
External headwinds, such as the effects of global conflicts and inflationary pressures continue to pose a challenge to progress.
As a result, consumers find themselves facing heightened uncertainty around job security and increased demands on their already strained disposable income.
According to the Head of Africa Regions, TransUnion Africa Thabo Molefe, consumers are responding in diverse ways, with behavioural changes reflecting a new set of priorities across the lending landscape. Lenders are also responding with a clear shift towards short-term, revolving and micro-loans to address the immediate cost of living expenses.
He said that credit is critical to consumer well-being and financial inclusion. By accessing credit products and services, consumers are empowered to manage their daily and often unforeseen financial needs.
“Financial inclusion allows economic advancement and upward mobility opportunities for consumers looking to buy their first vehicle, or first home or to fund higher education. Smaller loans are becoming increasingly popular as consumers look to cover the cost of recurring expenses like utility bills, various taxes, and everyday living expenses and services,” explained Molefe.
He highlighted that credit awareness, education and access allow consumers to build and improve their credit profiles and remain actively engaged in the credit system.
Until recently, Molefe noted, there was little available alternative, non-credit-based data that could be used as a verifiable source of insight into the historic and predictive financial behaviours of the underserved and underbanked.
Moreover, he stressed that in today’s fast-paced digital era, data has emerged as a powerful catalyst, reshaping the landscape of the credit market and revolutionising the way consumers navigate their financial journeys.
He said that gone are the days of one-size-fits-all approaches, as the abundance of data offers the opportunity for consumers and the credit market to thrive. He maintained that alternative data is the key to unlocking several of the challenges facing the multitude of financial sectors across the African continent.
By accessing a larger pool of consumer data, institutions will be able to bring underserved people into the financial mainstream, grow their books, and reduce non-performing loans through better risk management and predictions.
Data-driven lending and decision-making are said to be essential to the success of any modern financial institution.
In addition to this, he underscores that it is vital that the credit market starts considering these alternative sources of data to make more informed risk decisions.
“Consumers are leaving clues to their behaviour all over, and lenders must find, and use, that data, which is the foundation of future consumer credit – but the financial services sector must seize the opportunities it offers now,” opined Molefe.
This includes the availability of more comprehensive and wider-reaching data that facilitates the development of innovative FinTech solutions tailored to the unique needs of African consumers.
Mobile money platforms, for instance, have already gained significant traction across the continent, providing convenient and secure financial services to millions.
By leveraging data analytics, these platforms can offer personalised credit options, such as microloans and pay-as-you-go models, empowering individuals to invest in education, healthcare, and entrepreneurship, ultimately driving socioeconomic progress.
Furthermore, a data-driven credit market opens doors for international investors and partners, attracted by the potential of Africa’s emerging economies. With access to reliable credit information, investors can make more informed decisions, fostering increased foreign direct investment and fuelling economic growth across various sectors.
