Peer-to-peer (P2P) lending has grown in popularity in Nigeria over the past few years, allowing individuals and small enterprises to gain access to capital without going through traditional financial institutions. This article examines the growth of peer-to-peer lending in Nigeria and its implications for borrowers and lenders in the country.
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The Rise of Peer-to-Peer Lending in Nigeria
P2P lending is a comparatively new concept in Nigeria, but it has expanded rapidly over the past few years. The Nigeria Fintech Association predicts that the country’s P2P lending industry will develop at a compound annual growth rate of 23.7% from 2021 to 2028.
The high demand for credit in Nigeria is one of the primary factors for the expansion of peer-to-peer lending there. The World Bank reports that only 36.8% of the Nigerian population has access to formal financial services, leaving a significant portion of the population without access to credit. Individuals and small enterprises now have access to an alternative source of financing thanks to P2P lending platforms.
Benefits of Peer-to-Peer Lending in Nigeria
P2P lending in Nigeria offers both borrowers and lenders numerous benefits. For borrowers, peer-to-peer (P2P) lending offers a means to gain access to credit without going through the lengthy and often cumbersome process of applying for a loan from a traditional financial institution. P2P lending platforms typically have lower eligibility requirements than banks, allowing debtors who may not qualify for a bank loan to still gain access to financing.
P2P lending affords lenders the chance to earn attractive returns on their investments. Typically, P2P lending platforms offer higher interest rates than traditional savings accounts, allowing investors to earn greater returns. Furthermore, P2P lending platforms enable investors to diversify their portfolios by investing in a variety of loans with variable risk levels.
Problems with peer-to-peer lending in Nigeria
While peer-to-peer (P2P) lending has many advantages, it also presents some difficulties in Nigeria. Lack of industry-wide regulation is one of the most significant obstacles. In the absence of specific regulations governing peer-to-peer lending in Nigeria, fraud and other forms of abuse are possible. Nonetheless, the Central Bank of Nigeria (CBN) is devising regulations for the industry that will assist in addressing these concerns.
Another difficulty is the danger of borrower default. P2P lending platforms typically have higher default rates than traditional financial institutions, thereby increasing the risk of investment loss for lenders. Before authorizing loans, numerous P2P lending platforms in Nigeria employ credit scoring algorithms and other tools to evaluate the creditworthiness of borrowers in order to mitigate this risk.
Who can use p2p lending
Peer-to-peer (P2P) lending is a type of lending that is accessible to a large number of individuals and small enterprises. P2P financing platforms can be utilized by anyone who requires credit or wishes to invest their funds.
P2P lending allows individuals in need of credit to borrow money for a variety of reasons, including:
If you have multiple debts with high interest rates, you can use peer-to-peer lending to consolidate them into a single loan with a reduced rate of interest.
If you need to make home improvements but do not have the funds on hand to pay for them, peer-to-peer (P2P) lending may be a viable option.
Peer to peer Lending in Nigeria
Small business owners can use peer-to-peer lending to finance business expenses such as purchasing equipment, employing employees, or expanding their business.
If you have unexpected medical expenses, peer-to-peer lending can provide you with the funds you need to cover them.
P2P lending allows investors to generate attractive returns on their capital. Platforms for peer-to-peer lending enable investors to lend money directly to borrowers and earn interest on their investment. The portfolios of investors can be diversified by investing in a variety of loans with differing levels of risk.
Overall, peer-to-peer lending is a flexible and accessible form of lending that can be utilized by a broad spectrum of individuals. P2P lending can be a decent option whether you’re an individual seeking access to credit or an investor looking to earn attractive returns.
How To Create Loan App
Let’s briefly examine the state of the loan application market in 2023. According to Statista research, the marketplace lending (consumer) segment transaction value will reach $20,391,500,000 in 2020.
And as the graph demonstrates, it will progressively increase to $24,914.6M by 2024. Clearly, there is a demand. But how can you ensure that your lending app captures a significant portion of this billion-dollar market?
First, it is worthwhile to determine what type of loan application you can create. We touched on it when discussing how to construct a fintech application, but let’s go into greater depth.
LENDING APPS BY TYPES OF LOANS
Loan applications differ in the categories of loans they can offer to borrowers. Today, we can obtain loans for virtually any financial circumstance:
- Mortgages (home loans)
- Car loans
- Student loans
- Loans to small businesses
It is important to note that personal loans are the most versatile form of consumer loan.
Borrowers obtain personal loans for a variety of reasons, including automotive or home repairs, credit building, filling gaps in daily expenses, and debt consolidation.
Unlike personal loans, student, auto, real estate, and business loans must be used for a particular purpose. In the past, we have also discussed constructing a loan calculator.
LENDING APPS BY TYPES OF LENDERS
We can also distinguish lending applications by lender. There are three kinds of lenders that offer loans through mobile and online applications:
Traditional financial institutions such as banks
Credit union peer-to-peer lending platforms
Global p2p lending market revenue 2015-2025
Banks have been providing loans for a very long time. It is one of their primary offerings. Consequently, many banks and other financial institutions include a mobile lending option in their mobile banking applications.
Unfortunately, such features typically serve only as a starting point for consumers to initiate the loan application procedure; they must still visit a bank to obtain a loan.
Credit unions are similar to banks; however, in order to obtain a loan, the borrower must join the union and sometimes invest time with it. This other blog has also addressed the creation of a neobank, but that topic lies under a different category.
P2P loan providers are the true industry disruptors. These are online and mobile platforms that connect lenders and investors. Companies such as LendingClub and Prosper recognized the opportunity to guide consumers through the entirety of the lending process on their smartphones and desktop computers.
What distinguishes an effective app?
LENDING APPS BY TECHNOLOGY STACK
The fintech revolution is largely characterized by the digitization of financial relationships, which includes loan applications. Consequently, they utilize the most recent technologies:
Cryptography and smart contracts
Big data Machine learning and AI Chatbots Technologies utilized in the creation of lending application
The blockchain technology powers lending applications that offer cryptocurrencies to borrowers, such as Bitcoin, Ether, and Litecoin. Big data and AI algorithms enable lenders to make more informed judgments regarding the most suitable interest rates and loan amounts.
And chatbots reduce the workload of lenders’ front offices and personalize the consumer experience.
Why You Should Submit a Loan Application
Now that it is anticipated that the demand for mobile lending products will increase, let’s examine the benefits they provide for both parties.
BENEFITS FOR CUSTOMERS
Loan applications exist for various purposes. They simplify customers’ lives by eliminating the need for in-person interactions with financial institutions. Here are the benefits of using a loan application for borrowers:
- Apply for a loan from virtually anywhere, without having to visit an office.
- Transfer funds to a bank account within a day
- Rest assured that your personal data is safeguarded.
- Shop for the finest available options
- Repay a loan quickly using the same app.
- Applicant and funder in a loan request
BENEFITS FOR LENDERS
Lenders also benefit from offering their services online and on mobile devices. Since there is no face-to-face interaction with consumers, lenders are able to reduce operating expenses and concentrate on providing more loans.
Reduce operational expenses
Accelerate KYC protocols
Serve more consumers concurrently
Reach underrepresented markets
Enhance lending products with AI
As can be seen, both borrowers and lenders enjoy numerous advantages when the lending process is conducted using cloud or mobile technologies.
3. Best Consumer Lending Apps
Before developing a loan application, it is worthwhile to conduct investigation on your competitors. So, you can capitalize on their weaknesses and develop distinctive features that will distinguish your app apart. Without further ado, here are the most effective money-lending applications currently available.
PROSPER prosper p2p lending platform logo
Headquarters: San Francisco, California.
A platform for peer-to-peer lending that has been on the market since 2005. Their platform connecting investors’ funds with borrowers has already lent $17 billion to over a million people. Their online lending application suggests loans automatically based on a borrower’s profile.
iOS and Android applications are available for investors, but not for borrowers. Their online application is compatible with desktop and mobile browsers.
innovative innovative p2p lending platform logo
Headquarters are located in San Carlos, California.
A peer-to-peer lending platform that uses AI for risk management. In addition to the FICO score and credit history, the system also considers the borrower’s education and employment history to determine their creditworthiness.
Mobile presence: no mobile apps, accessible via mobile browsers.
LENDINGCLUB logo for its peer-to-peer web platform
Headquarters are located in San Francisco, California.
A peer-to-peer lending web application that has existed since 2007. Personal, business, auto refinancing, and medical loans are the primary focus of LendingClub. The company has provided over $50 billion in loans to over three million consumers.
Mobile presence: iOS and Android applications that enable investors to manage their investment portfolios. Borrowers can access the mobile version of the organization’s website.
AVANT financing app logo Avant
Headquarters are located in Chicago, Illinois
Avant distinguishes itself with a mobile app for iOS and Android that allows borrowers to monitor their payment history, make payments, and receive account notifications. Additionally, the company provides additional options, such as a branded credit card.
Mobile presence: mobile apps for both platforms and mobile web experience.
FUNDING CIRCLE funding circle p2p lender logo
Headquarters: London, United Kingdom
Funding Circle is a p2p lender that helps small enterprises obtain loans through crowdfunding investments. Small business proprietors can qualify for the service only if they have excellent personal credit and an established company.
Mobile presence: iOS and Android mobile apps for investors and mobile web experience.
How Does the Money Lending App Work?
A perfect loan application would guide the borrower through the entire borrowing procedure, from application to funding.
A consumer would arrive on the page of a loan app in the app store after clicking on a link in an install-prompting banner. It is an intelligent banner that appears when a user visits a website associated with a native mobile application.
After completing the registration procedure within the app, users are presented with loan options. Loan options can be implemented as either a catalog of various loan categories or a dynamic screen from which users can select a variety of loan parameters.
Avant’s mobile lending application for borrowers
After selecting a loan, consumers must provide their personal information, including:
History of education, residence, and employment, etc.
The next step is to link your bank account information to the loan application and set up automatic payments. It is necessary to facilitate loan repayment as interest payment due dates approach.
It is now the responsibility of the lending program to inform the user about their payments. The application must display forthcoming and completed payments as well as trigger notifications. Within the app, users should be able to revise their payment dates and make early payments.
Some loan applications enable users to manage additional financial products they receive from a lending platform. For instance, users of Avant’s loan app can manage company-branded credit cards:
• Schedule or revoke payments; • View transaction details;
Cyber security concept for Security and Legal Compliance with a lock and crypto
Imagine you are considering the possibility of obtaining a loan. What will be your initial consideration? That’s correct! Security. It is crucial in determining where consumers choose to borrow.
In order to establish user trust, your app for lending money should exude a sense of safety and security. There are multiple methods to accomplish this. Some are customer-facing, while others remain behind the scenes.
Obviously, a lending application must provide a secure method of user authentication. Today’s handsets include a variety of biometric authentication methods, such as face recognition and fingerprint scanning. Utilize their APIs to safeguard user data.
With two-factor authentication, services such as Twilio and Duo can help you strengthen authentication security. Ideal authorization is when your loan application permits customers to use strong passwords and falls back on a brief PIN or biometric authentication methods.
P2P lending has the potential to be a game-changer for Nigeria’s financial sector, providing a new method for individuals and small businesses to gain access to credit and for investors to earn attractive returns on their investments.
While there are challenges associated with P2P lending in Nigeria, the industry is anticipated to continue to expand in the coming years as more people become aware of its advantages. If you are considering investing in peer-to-peer lending in Nigeria, it is essential to conduct research and select a reputable platform with a track record of success.