The digital lending sector in Nigeria continues to flourish as an increasing number of loan app companies receive the green light from regulatory bodies.
Recent data from the Federal Competition and Consumer Protection Commission (FCCPC) reveals a significant rise in the number of approved digital lenders, with the count escalating from 211 at the close of 2023 to a robust 263.
This surge in approvals reflects the FCCPC’s commitment to fostering a regulated environment for digital lending, ensuring consumer protection and fair competition.
Out of the 263 companies, 215 have secured full approval to operate within Nigeria’s burgeoning digital lending space.
Meanwhile, 38 companies are operating under conditional approval, pending the fulfillment of specific requirements set by the FCCPC. In a move that underscores the collaborative regulatory framework, the FCCPC has also acknowledged 10 additional companies that have been licensed by the Central Bank of Nigeria (CBN) to offer loan app services.
This recognition integrates the CBN’s stringent licensing criteria with the FCCPC’s consumer-centric regulations, aiming to create a more transparent and reliable digital lending ecosystem.
The updated list published by the FCCPC is part of its ongoing efforts to provide clarity and oversight in a sector that has witnessed exponential growth, driven by the increasing demand for quick and accessible financial services.
As the number of approved digital lenders rises, consumers are afforded a wider array of choices, while also benefiting from the enhanced safeguards that come with a regulated market.
This expansion comes amid the issue of rising non-performing loans in the digital lending space and a growing list of illegal apps leveraging technology to lure people into taking collateral-free loans with exorbitant interest rates.
According to some industry stakeholders, the allure of high interest rates charged by the loan apps is encouraging more companies to see business opportunities in digital lending.
However, the President of the Money Lenders Association, the umbrella body of registered digital money lenders in Nigeria, Mr. Gbemi Adelekan, said high-interest rates are only peculiar to lenders offering small and short-term loans, known as Nano loans.
For him, the main reason more players are coming into the digital lending space is because fintech is one of the major booming sectors in the economy and there is ease of entry.
“I think more people are also coming into digital lending without proper risk assessment due to the minimal entry requirements and regulations,” he said in a telephone interview.
While noting that commercial banks are now also getting digital banking licenses separately from the CBN to be able to go into digital lending, Adelekan said, “You know how Nigerians are, once they see that one business is booming, they all move into it. If it’s stock, they move into it; if it’s hairdressing that is doing well today, everybody will rush it.
“Meanwhile, as some people are rushing in, a lot of people are rushing out because of the risks involved and the rising non-performing loans. Recovering debt from the people is now becoming more difficult.”