If you’ve ever seen those get a quick loan in five minutes ads, then you’ve probably also thought of the wry tactics lenders use in getting defaulters to pay back.
As the digital lending space grows larger, so does the possibility of defaulting on those loans. In Nigeria, the average percentage of defaulters across top digital lending companies is 10%. In Kenya, the rate for defaulting, at 2018, was 12% while Tanzania’s was 31%.
This translates to thousands of customers who are unable to pay back their loans due to one reason or the other. It also translates to hundreds of thousands that hang in the balance.
To get defaulters to pay back, digital lenders often engage in scare tactics or even shame peddling, sending messages which pronounce the defaulters as fraudsters to their families and contacts. In fact, the Nigerian Information and Development Agency (NITDA) recently fined Soko Loan for doing something similar.
Not everyone wants to use unethical means though.
BFree, Africa’s first digital credit collection company, wants to help digital lenders get their money back while retaining the trust and confidence of their customers.
An ethical approach
Far far away from the approach of other debt collection solutions, BFree focuses on ethics and technology in debt recovery.
BFree helps lenders collect loans from their borrowers for a fee.
The startup’s ethical approach to loan recovery is guided by a data-backed belief that the majority of customers take a loan with the intention to repay. Of course, with the exception of isolated cases of fraudsters and fraud victims.
Believe it or not, their approach involves a bit of understanding and it’s worked so far.
How does it work?
This debt collection process basically starts as a self-service platform where customers can log in and see their own repayment plans.
Customers also get SMS messages and perform loan repayment activities themselves. This way BFree reduces the number of man-hours spent on making calls and customers aren’t forced to deal with unexpected phone calls during working hours.
In the case where a customer defaults, BFree reaches out to the borrower to find out why and to also get a promised date of payment.
It doesn’t always work though and even though the startup has 460,000 active customers from over 20 lenders in Nigeria and Kenya, they’re also accepting that sometimes, defaulting on loans is inevitable.
Daniel Adeyemi has more in How BFree is improving trust in the lending space.