4 alternative lending channels to reach underserved borrowers

Africa is massive, with a potential customer base of 1.4 billion people. However, only a fraction, about 43%, has internet access. The financial exclusion rate stands at over 350 million Africans, emphasizing a widespread issue. 

Most African countries need easier access to credit. While there has been substantial progress over the past decade, access to finance remains a daunting constraint in Africa, particularly for SMEs. Available information indicates a financing gap of 72% for SMEs in Sub-Saharan Africa and 80% in Middle East & North Africa.

In developed countries like Estonia and Greece, there is one loan for every adult. Eastern Europe and Central Asia experienced record credit growth in the past decade and now average 367 loans per 1,000 adults. Meanwhile, Sub-Saharan Africa still has the lowest loan penetration.
So, how do we connect with these underserved populations and bring credit closer to them? Drawing on our years of experience providing lending technologies across Africa, we’ve narrowed down four (4) alternative lending channels. They’re proven solutions that tackle (still tackling) the credit gap across the continent. Let’s get into it, shall we?

USSD

With USSD, you can reach even the most remote areas because the average African owns at least a mobile phone. Ownership is highest in South Africa, where about nine in ten adults own a mobile device. With Lendsqr’s loan management software, our lenders can design their loan products to cater to borrowers who can only use the USSD code to access a loan. Imagine a village miles from a bank, finally getting access to loans and more. The USSD channel makes that happen, promoting true financial inclusion.

Field agents

You can also build your loan business to ride successfully on an agent network. If your customers can’t come to your loan business. Bring your loan business to your customers. Your field agents can go to places where your target market is most concentrated and advertise your loan products, offers and T&Cs, profile them and manually book loans for them as a third party. It will interest you to know that this approach not only expands your audience reach but also builds a more personalized interaction with your borrowers, establishing trust and rapport with those who may be wary of traditional financial institutions. See how to expand your audience reach with manual loans today.

URL links

Some members of your underserved market may not be completely tech-illiterate. They have access to smartphones and the internet; they’re just not big fans of mobile apps and, therefore, fall under this category of underserved populace. With a custom URL link, you can send them through a funnel that lets them land directly on your loan products’ website page. This piques their interest and allows them to browse through the options available. Here’s what we mean.

SMS lending

The simplest and often ignored lending channel that lenders need to explore is SMS lending. In this lending channel, Borrower A communicates with Lender B via SMS. They discuss and agree to the loan offer, interest rate, tenor, and other terms and conditions, all conducted through SMS. A phone call with an in-depth question-and-answer session can serve as a method for assessing risks and confirming the accuracy of provided data. It’s an uncharted territory that Lendsqr would be happy to put you through. Learn more about the problems we’re solving for lenders in Africa.

Reaching the 1.4b Africans with credit

While the statistics may show a stark picture, the answer lies not in replicating old systems but in embracing both likely and unlikely channels to reach these underserved borrowers effectively. By leveraging USSD, field agents, URL links, and SMS lending, lenders can broaden their reach, grant access to credit, and contribute to the financial growth of individuals and the continent. 

Are you wondering how to get started with these channels? Send us a message at [email protected].