In this exclusive interview with The News Chronicle, Mikail Adeniyi, COO of KiaKia Bits Limited—a fintech company that provides accessible loan services to entrepreneurs—discusses the company’s achievements and challenges in digital lending.
He also explains the importance of financial literacy for young entrepreneurs and the role of government policies in supporting MSMEs.
TNC: Since KiaKia started in 2016, what key achievements have defined its growth?
Mikail Adeniyi: We’ve been able to get an increased user base since when we started. Our user base has grown steadily; we’ve also been able to expand our loan book and carry out amazing projects. Basically, what has defined our growth is an increased user base—our increased lending base, as well as because we do peer-to-peer lending. At the same time, we’ve been able to get to other markets. Even though our growth was in terms of market penetration and the markets we’ve entered, we’ve given loans across 18 states. It happened very rapidly at the beginning, and since then, we’ve just expanded, more like in the sizes of the loans that we’ve given, in the quality of the clientele, expanding our loan books to be more SME-based, and just an increase in penetration generally.
TNC: What challenges do you face when providing loans to MSMEs, and how do you manage the risks of lending to businesses without formal credit histories?
Mikail Adeniyi: Clearly, the question has already highlighted the risk, and that’s the whole fact that you know, you’re lending to many people who are unbanked. You’re lending to a lot of people who don’t essentially give their books in the correct way, so all of that lack of information is a very big challenge. Although we try to use non-traditional data these days, you know, non-traditional data that can help us profile the person more correctly, the challenge is just access to information. So, you know, there are a lot of lenders that are not reporting to the Credit Bureau; there are a lot of lenders that are not working on the surface level of the financial industry. So, being able to access that data from them and share information across them is a challenge. If that information were readily available and easy to share and access, then it would help make lending more friendly and easier, and then even recovery of these monies, because it’s a very big risk for you giving these people information and then you can’t share.
Someone can come to you, borrow money, go to another person, borrow money again, and before you know what’s up, people are taking money that they don’t need or taking money that they claim they want to use for business to do personal stuff. That ends up creating a conflict of interest and then makes it difficult for them to pay the loans. And then, even when the loan goes back with some of these lenders, because of the lack of information again, you don’t know. Because banks readily give them, there’s nowhere to keep this information like the Credit Bureau. So maybe we need a sort of credit bureau, or we need a headway to expand our bracket outside the traditional lending institutions and start to get other kinds of information and other institutions that are outside the traditional lending information so that this information is readily accessible and credit decisions can be made more accurately.
TNC: Based on your research and customer relationship, what factors prevent Nigerians from building good credit histories?
Mikail Adeniyi: I think, first of all, it’s the sensitization and the education. A lot of people have demonized credit, making loans look bad and making a lot of people feel like loan sharks. I mean, you look at the proliferation of credits through these online vendors; online vendors are not doing us a world of good because someone at 17, 18, or 19 has access to these loans, and with access to these loans, they’re able to take credit that they don’t need. You see, like someone that’s in the university at 19 years old, maybe doing a makeup business, and she’s able to access up to a million naira from these online vendors.
So clearly, she didn’t find it difficult to manage such funds, and when you find it difficult to manage such funds, they turn into bad loans, and so your whole idea of credit is skewed. There’s a great need for sensitization, financial literacy, financial education, and, at the same time, financial advisory to a lot of small businesses. So if someone can fill those gaps, then they’ll help businesses and individuals better build their credit history, better document their businesses well, and better create an atmosphere where people can borrow progressively, use it for business, and grow the economy and their own personal lives as well.
TNC: As a company that provides loan services, do you believe loans should be the first go-to option for entrepreneurs looking to start a business or project?
Mikail Adeniyi: Okay, so the truth is that loans are actually good—yes, if you want to start a business or project, because I think nothing is better to use to do business than other people’s money. It’s not just in terms of taking risks; it’s because nobody is an island. Look at even the richest men in the world; they take credit. So, I mean, you have a good idea, you have experience—let’s say you were working for somebody, you’re good at what you’re doing, and you want to expand to yours. But clearly, because there’s no capital, and like I said, there are different types of loans. So, being educated enough to know the types of loans that you should take for capital expenditure and the kind of loan that you take for operating expenditure is important. Loans as a startup are good, but then the type of loan also matters.
If you take a short-term loan and your capital expenditure, for example, you want to buy machines and the rest, they don’t exactly translate on a day-to-day basis into profit. So, taking care of that loan will now become difficult because a short-term loan is something that you should be taking for operations and other things that will essentially bring in money—may be buying goods and services that you’ll be selling immediately, carrying out contracts, and the rest. But when you want to do capital expenditure now, you need long-term loans. So, again, it boils down to financial literacy to be able to tell whether a loan should be your first option because that financial literacy will help you pick the type of loan that you need. At that point, you’ll now see the advantages; the loan will come with advantages rather than disadvantages.
TNC: How do you think government regulations could better support the growth of digital lending platforms like KiaKia?
Mikail Adeniyi: To be fair, government regulations have been tricky. The CBN, despite its stringent measures, wouldn’t make sense for the traditional financial institutions that they’re currently regulating and operating. Currently, lending is governed by the state lenders’ app, and the regulation in that area is low. That’s the reason why we had a lot of people penetrating and doing what they were doing before the FCCPC came up with their regulations, and even the FCCPC regulations do not necessarily seem to be doing a lot.
So, government policy in this area is quite—will I say—minimal, and you know, a lot of things are opaque. We would like the government to step in, create a lot of regulations, and at the same time, make it easier for us to do business and to help, basically, our collaborations. Like what I said now about this whole sharing of information: if the government can bring in laws to make that possible—that look if you’re going to run this thing, you have to make your books available to a certain extent and share certain information like your defaulters’ list and the rest—it will help us a lot. So, government policies—yes, the government has a role to play, even though policies will follow certain actions. I think the lending action of digital lenders has been going on for a couple of years and is prevalent.
The government should keep an eye on that area, take a look into it, try to regulate it better, and create policies that will make the business-friendly. For example, you see, even the law sort of protects the borrower over the lender. Most of the time, the borrower is seen as the victim, and the lender is seen as the aggressor. Meanwhile, sometimes it’s not even that way. Sometimes there are borrowers that I know who are very tricky and want to come against the lender because of certain loopholes in the law. So, it’s important that the law protects borrowers and gives us the confidence to do business with these people, especially with some of them who are unbanked.
TNC: What can be done to encourage more investments in Nigeria’s MSME sector, especially from international partners?
Mikail Adeniyi: First and foremost, the government needs to make the policies and the country more conducive. I mean, you look at things like not allowing our cards to do international payments and remittance of forex. From the government angle, government policies can be more friendly. The government can attract foreign partners to want to invest in the economy through SMEs and businesses like ours by making friendlier policies. On the business side, I think our track record and history in how we have been able to manage some of these international fundings matter.
There are certain companies that can do better. There’s a lot that goes unsaid. Some people have taken certain risks; the kind of returns that they made and how the businesses performed—we need to hold ourselves accountable to perform better, use this knowledge more judiciously, and show them that, ‘look, when you invest in Nigeria, there are a lot of returns that can come, and it’s favorable; performance is good.’ Those are things that can encourage more international companies to want to invest. So, we have a two-pronged approach—both from the government and the angle of the businesses as well.
TNC: With increasing competition in the fintech space, what are KiaKia’s key strategies for staying ahead, both in terms of product offerings and geographical reach?
Mikail Adeniyi: For geographical reach, like I said in the past, our expansion to all 36 states in Nigeria means we already have that reach. As we continue to use technology to deliver our services, we will stay ahead of the curve, even though anybody can do it. In terms of product offerings, we have a particular niche that we play in.
There are different kinds of loans, and we have a particular niche that we cater to. As long as we continue to carve that niche and cater to that particular aspect of the business, then I think we’ll continue to stay ahead of the curve. Everybody has the kind of loans that they give and the areas that they play in; that’s the secret sauce in the lending ecosystem and in the value chain. As long as we continue to play where we play and also find other places that are unmanned at the moment, we’ll be fine. For example, when you look at the lending value chain—when I talked about sharing of information—that’s one part of the value chain. You look at the recovery of loan funds; currently, in Nigeria, I think traditional banks have AMCON, which can bring tech into addressing bad loans. We need something like that in the fintech space, too.
There’s nobody that I think is currently mopping up and buying people’s bad loans and trying to help them stabilize. These are different areas in the value chain that have benefits and can continue to grow, and they are places that KiaKia is currently looking at and looking to carve our own niche in this area by expanding the businesses to fit into these other areas in the value chain.
TNC: Finally, what is the most important financial advice you would give young people?
Mikail Adeniyi: The most important financial advice I’m going to give young people—like I said, people borrow money they don’t need. So I’ll say, first and foremost, don’t borrow money just because it’s accessible to you; borrow it because you have a need for it. Use the money for the precise need that you’re using it for, and know exactly how it translates into forward momentum in your life.
Are you trying to take a loan to cater to a personal need? Then understand that this is the personal need it plays to; cater to that need and then pay back. Because sometimes, when you take money that you don’t need when it’s time for you to pay it back, there’s something called debt fatigue—you start to feel uncomfortable paying it back. But when you know that, okay, this is what I used the money for—for example, I bought a car—as long as I see my car, I remember the value of that loan I got. If it’s a loan for a business, that business brings profit, and I can pay back the loan and enjoy my profit. So, it’s important: you don’t take money you don’t need.
Another important thing I would say is to keep your records properly. Record keeping cannot be over-emphasized. This is what makes you favorable and open to getting financial assistance when you need it. As long as you keep your records correctly, you’re not defaulting on your loans because you take the money you need for what you need it for, and then you can pay on time—timely and efficiently. I think doing all that will make you a darling of the lending sector and help you grow and differentiate rapidly.
