By Sylvester Okumu
In a fast-growing digital economy, businesses need to find new ways to remain relevant in a competitive credit market. Billy Owino, CEO for TransUnion Kenya talks about the organisation’s recently launched Mobile Loan Scorecard that offers Risk Information Solutions to businesses.
TransUnion (TU), a global leader in information and risk management gathers analyses and deliver information for consumers and businesses to help them maintain a competitive edge.
With its headquarters in the United States, TransUnion is operational in more than 30 countries worldwide including a large presence in Africa. In Kenya, the firm is headed by Billy Owino who serves as the Country Executive. In a lengthy engagement with The Startup Magazine team in his office recently, Owino discusses how TransUnion creates an economic and competitive edge for customers and businesses through specialised risk information solutions.
A youthful and charming executive, Mr. Owino is passionate about data analytics and credit in Africa, and articulately elaborates what he envisions for TU’s regional unit.
“We are a tech firm that helps businesses manage risk, improve efficiency, reduce costs and optimise their potential through risk based solutions via a renowned Mobile Loan Scorecard,” he begins.
TransUnion Mobile Loan Scorecard Invention & Relevance
“With Africa having one of the highest mobile penetration rates and Kenya leading at 39 million subscribers, an equivalent of 88 per cent of the population, it is no doubt that mobile devices have become an integral component in our lives. Mobile today defines customer engagement across many fronts. As such, if early adopters take this advantage, they can strengthen consumers’ interactions and set themselves ahead of the pack,” explains Mr. Owino.
Explaining further, Mr. Owino argues that there are more registered mobile money users in Sub-Saharan Africa than the rest of the world with 5 million customers in Kenya alone having a mobile loan. Due to the vibrancy of the Finance-Technology (Fin-Tech) industry disrupting the status quo, more Kenyans now access financial services on mobile phones compared to traditional financing channels.
“The mobile loan market is moving fast, and if you want your business to remain relevant, you must move with it,” asserts Mr. Owino.
Because the ability to make fast, consistent credit decisions is vital for any individual or business, the mobile loan access gives that competitive advantage. A good example being of a ‘mama mboga’- Street, vegetable vendor in Nairobi who wants fast and secure access to mobile loans. More often, the vegetable vendor takes on a loan via a mobile device to buy stock in the morning and repay in the evening, all within a span of 24 hours. We also have bigger population of Kenyans who are borrowing via mobile phones and don’t have traditional bank accounts. As a lender, it becomes integral to understand the needs of these consumers and provide loans quickly and efficiently without putting their own business at risk. Hence, the introduction of TransUnion’s Scorecard.
“While it is true one way or another people are going to get loans, too often this happens at a high cost to the customer thus credit providers must step in to ensure that customers take loans responsibly and safely,” reiterates Mr. Owino in one of his writings on TransUnion’s website.
TransUnion basically creates enabling environments for current and future generations of local entrepreneurs and businesses whose enterprising spirit jerks our economies by helping them get access to the resources they need, safely and quickly, to further their businesses.
How the scorecard works
Using their mobile devices, consumers send the lending institution minimal information, such as their name and identity number. The Scorecard then quickly delivers a recommended outcome of—Approve, Decline or Refer—based on the lender’s internal credit policies and an accurate assessment of credit risk.
Information being an empowering tool rather than just numbers and data, Mr. Owino says the Mobile Loan Scorecard uses the most complete, multi-dimensional information available to help businesses extend the right credit, to the right people, on the correct terms. By doing so, the efforts become part of a nationwide initiative instrumental in cleaning up the mobile lending industry by working together for the good of the people.
“Individuals need to regularly check their creditworthiness so that they know where they stand and encourage them to utilise the once-a-year free credit report,” adds the jovial director.
Despite credit information sharing having a negative perception in the minds of consumers, the industry has massive potential for growth. In his own opinion, the Director says that the credit information sharing industry in Kenya is only a shadow of its great potential. “We ought to be in a place where individuals are rewarded based on their risk levels. Credit Information Sharing still produces negative reactions in many consumers by the mere mention of the word ‘listing. ’We are trying to change this through educational initiatives about the need for credit scoring.”
Credit information sharing is good for the people, businesses and the economy at large and according to Mr. Owino, capping of the interest rates offered by banks by the Central Bank of Kenya has had an adverse effect on credit provision. As a result, banks are now using more stringent ways to assess risk for one to access credit. Now credit access by SMEs has dropped by a whopping 30 per cent while personal loans by 15 per cent.
Compared to 12 per cent for traditional loans, delinquency rate for mobile loans is much lower with the market rates at 4 per cent.
This in a way has forced banks to get out of their comfort zones, be innovative and offer customised solutions.
There is a lot of information about an individual that is never captured, but is vital in credit decision making, like credit reports by shopkeepers and other informal lenders.
Owino says, “We are looking forward to ways of tapping alternative data which is going to be a big decision-making tool in the future.”
“We want to crack the agricultural sector and optimise its potential. Agriculture contributes massively to Kenya’s GDP to nearly 70 per cent, but it is extremely underserved in terms of credit provision. Credit access to the sector still stagnates at 2 per cent which is very unfortunate,” he concludes.