Branch MD, Dayo Ademola, talks about digital banking ambitions in Nigeria

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Running a startup is tough. Managing a consumer-focused lending platform, used by more than 5 million people in four countries, during a historic global economic crisis is a nearly impossible task. Branch International’s management team faced this reality in 2020 when the company had to cut its loans in a depressed economy.

In Nigeria, Branch had launched a money lending license three years earlier to offer quick loans to individuals and had processed more than 2 million loans to more than 700,000 customers by the end of 2019. When the pandemic hit , it was forced to pull the brakes in order to manage default rates.

“With many people out of work after the big economic shock, Branch made the decision to temporarily halt lending. This was necessary to preserve capital and avoid risk exposure in the face of skyrocketing default rates and arrears,” Dayo Ademola, who was appointed as the Branch’s Nigeria Unit General Manager last March, said in a call.

The branch has since resumed instant lending, with loan approval numbers rebounding as the impact of the pandemic lessens. By the end of 2021, the company had processed more than £50 billion ($120 million) in more than 4 million loans, according to data made available to TechCabal.

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Beyond lending, however, its business in Nigeria has evolved over the past few years. In 2020, the local unit acquired a financial company license from the Central Bank of Nigeria (CBN), enabling it to offer more banking services to subscribers, in line with a plan to become a digital bank fully fledged.

“In addition to weathering the heat of the pandemic, we’ve also been working on transitioning to large-scale digital banking,” Ademola told TechCabal. “As you know, Branch started life as a lending as a lending company, providing microloans to retail customers, but we’ve added many more.”

Branch’s mobile app (available only for Android) now includes a wallet that offers users unlimited money transfers and commission-free bill payments, as well as instant loans of up to ₦500,000 ($1,200 ) in a few minutes. There is also an investment product that promises high returns (20% per year) to clients who invest with Branch.

Since adding the new features to its app at the end of 2020, Branch has seen significant growth in its Nigerian user base, which stood at over 1.26 million Nigerians as of last December. According to Ademola, the company saw an almost 90% increase in active users between 2020 and 2021. “We saw a threefold growth in monthly active users, which is exponential between those two years. “

Branch is set to acquire a microfinance banking license as part of its vision to become a full-service digital bank in Nigeria, Ademola has revealed, with the company “hoping” to obtain it before the second quarter of 2022. would see Branch join the growing number of Nigerian loans. -first fintechs that matured into digital banks. Carbon and Fairmoney are a few players in this category.

Financially included but underserved

In Nigeria, the bank is not omnipresent. Although the number of active bank accounts has steadily increased, a study by EFInA on trends in access to financial services published last year shows that many gaps remain. For example, over 42 million adults live in rural areas lacking basic banking services and over 60% of rural communities surveyed had no bank branch, mobile money agent or ATM. .

Although there are several conversations and efforts aimed at funding the unbanked, not enough is said about Nigerians who are under-banked. That is, those who have access to a financial product but who are deprived of it more, says Ademola, who before joining Branch International was head of innovation at EFInA. It is the latter group, she said, that Branch Nigeria is targeting with its banking services.

“There is a huge population of people who have BVN and savings accounts with traditional commercial banks, but only deposit and withdraw with no access to loans or investment products,” notes the Branch MD. “So that’s really our target market. We are structured to be able to address this issue for those who are included but underserved. »

Nigeria has well over 100 million subscription-based mobile phone users. But less than 20% of the population uses smartphones while the rest rely on feature phones, limiting their options to voice calls and text messages and, moreover, the potential user pool of digital-only banks.

Whether Branch will at some point adopt agent networks to reach more potential customers beyond smartphone users and the already banked population? Ademola didn’t give much. “You cannot operate a bank in a country like Nigeria without considering some sort of offline access,” she said. “So that’s something we’re thinking about. Are we going into this space? Maybe yes, maybe no.”

Nigeria is Branch’s largest market, headquartered in Silicon Valley, followed by India. The company also has a presence in Tanzania and Kenya with plans to launch in South Africa, Ghana and Uganda this year.

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