Minister of Communications, Innovation and Digital Economy, Dr. Bosun Tijani, has said that low access to credit is pushing more Nigerians to loan shark applications, which further worsens poverty. He said this during the launch of a new digital bank, Kayi Bank, in Abuja on September 28, 2023. He also stressed the need for financial inclusion in the country, which can be strengthened through digital banks. He said that it was extremely important for Nigerians to have inclusive growth in society, and that is financial inclusion.
So, he said that what was being launched was a strong contribution to that mandate of inclusive growth. He stressed that there is no economic growth without financial inclusion. He noted that this was because financial inclusion contributes significantly to economic growth by increasing the number of individuals who do businesses that can participate in the formal economy. He noted that the lack of access to credit has made people go after risky and informal financial practices.
Loan sharks have become increasingly popular and menacing as well.
A loan shark is a person or an entity that loans money at extremely high interest rates and often uses threats of violence to collect debts. The interest rates are generally well above an established legal rate, and often loan sharks are members of organized crime groups. A loan shark can be a person within a personal or professional network offering to provide loans at high interest rates. They may be found in under-banked neighbourhoods, on the internet, or through personal networks.
In Nigeria, these entities operate on the internet, leveraging the power and reach of paid ads on various social media platforms. Also, they are ready to lend people money at seemingly a click of a button. They advertise using buzzwords and captivating promises. It is not uncommon for a loan app to guarantee a N100,000 loan without collateral and for the duration of 90 days. However, times have revealed that these are all lies and marketing strategies.
Data theft and threats have characterized their operations.
However, the companies gain access to borrower’s data through their app. They access personal information such as bank account details, debit card details, and even other private data like pictures and contacts. The purpose of this is to serve as a security measure should the borrower not pay back the loan. And many times, the loans are not paid back on or before the due date. This prompts the loan companies to threaten the users with different actions, going through with defaming many with their pictures and with spamming their contacts.
This is why the minister said that when individuals have access to banking services, they are less likely to resort to risky and informal financial practices. “I am sure you all recognize that when people don’t have access to credit, they don’t have access to financial services, they have to go take loans from people who will ask them to pay significant interest,” he said. By doing so, they will continue to be in poverty because they will continue to try to balance up and pay those commitments, which typically is difficult to combat.
Focus on empowering products, says the minister.
Meanwhile, he urged innovators to focus on products to provide services that would empower ordinary people. An example is the Kayi App, a secure and innovative pan-African digital payment platform that has obtained the necessary regulatory approvals to launch in Nigeria to accelerate access to financial inclusion by individuals and businesses in the country and beyond through secure, seamless, and hassle-free transactions. Speaking on the market opportunity that informed Kayi App’s introduction, its Product lead, Abdulganiyu Rufai said that the African fintech market is brimming with opportunities and that Kayi App is poised to make a significant impact.