Technology plays a pivotal role in the fast-moving world of finance. This is particularly true in West Africa, where the intersection of economic growth, financial inclusion, and technological advancement has created a rather unique environment.
According to the World Bank, West African Economic and Monetary Union (WAEMU) countries have seen a spike in financial account ownership since 2014, with mobile money accounts driving adoption and usage.
On average, 41% of adults in the WAEMU now have an account with a bank or a mobile money service, rising to 56% in Senegal. With this rise of digital banking, a significant number of West Africans who were previously unbanked now have wider access to financial services. And this is empowering small businesses and consumers alike to leverage financial products that were previously out of reach.
Against this backdrop, credit risk decisioning software providers are having a positive impact on West Africa’s financial landscape, using data and analytics to extend credit to those who would have been previously denied it.
Here are seven ways in which the latest technology is reshaping lending practices across the region.
- Empowering smarter, data-driven decisions. Credit risk decisioning software providers enable financial institutions to better leverage vast amounts of data, both traditional and alternative, to assess credit risk more accurately. In Nigeria, for example, a significant proportion of the population is underserved by traditional credit scoring systems. But new technology-driven solutions can tap into mobile money transactional data, bill payment history, and other digital footprints to evaluate creditworthiness. This enables lenders to make more informed lending decisions for individuals and SMEs that were previously excluded.
- Enhancing financial inclusion. In Ghana, where rural and remote areas often lack access to traditional banking services, credit risk decisioning software can make a significant difference. By incorporating non-traditional data points – such as agricultural sales and livestock ownership – lenders can extend credit to farmers and other entrepreneurs who were previously deemed high risk due to a lack of formal credit history.
- Providing real-time decisioning for fast-paced economies. The dynamic business ecosystems of countries like Senegal demand quicker lending decisions. Credit risk decisioning software provides instant decisions for microloans, which enables street vendors, artisans, and small businesses to access vital funds swiftly, boosting their cashflow. In Senegal’s pulsating markets, this agility can be the difference between seizing an exciting new opportunity or missing out on it altogether.
- Mitigating region-specific risks. Cote d’Ivoire, like many of its neighbours, faces a huge challenge when it comes to identity verification and fraud prevention. Credit risk decisioning software providers can integrate biometric data and transactional behaviour analytics to better verify identities and detect irregular patterns. This helps lenders to mitigate risks associated with identity theft and fraudulent loan applications.
- Providing customised risk assessment models. Mali’s diverse economy, which comprises both urban and rural sectors, benefits from tailored risk assessment models. The latest credit risk decisioning software can consider region-specific factors like livestock ownership in remote rural areas and import/export data in the larger urban centres. This more customised approach ensures that lending decisions align with the economic realities of each region.
- Supporting regulatory compliance. Regulatory compliance is vital for maintaining a stable financial environment. Credit risk decisioning software incorporates both local and international regulatory requirements into lending decisions, ensuring that lenders adhere to responsible lending practices and ethical standards.
- Driving economic growth. In Sierra Leone, where access to credit is a crucial aspect of post-conflict economic recovery, credit risk decisioning software facilitates lending to the small businesses that are seeking to rebuild. By assessing credit risk more accurately, the country’s lenders can now provide the necessary capital for entrepreneurs to invest in their ventures, stimulating economic growth and job creation.
In summary, credit risk decisioning software providers are playing an increasingly transformative role in West Africa. Through data-driven decision-making, enhanced financial inclusion, real-time agility, and risk mitigation, they are reimagining lending practices in ways that cater to the diverse needs of the region’s population.
By empowering financial institutions to extend credit responsibly and fairly, and therefore promoting much-needed economic growth, they are contributing to a brighter financial future for the region and its people.