Unlocking the Mass Potential for Retail Credit in Emerging Markets.

Retail credit or (consumer credit as it is also popularly known) may be defined as the provision of loan products to the general public by a financial institution for the sole purpose of acquiring goods and services.

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What is retail credit?

Retail credit or (consumer credit as it is also popularly known) may be defined as the provision of loan products to the general public by a financial institution for the sole purpose of acquiring goods and services. Examples of financial products that fall under the umbrella of retail credit include: mortgages, personal loans, debit cards and credit cards.

How does retail credit work in developed markets?

In developed financial services markets, retail credit is readily available to any persons who have attained the legal borrowing age in their respective country. This is possible through mandatory and advanced credit information sharing amongst financial institutions and utility service providers. In the US, for example, the FICO (Fair Isaac Corporation) score forms the minimum standard for assessing consumer credit risk. Such robust data wealth means that credit pricing is able to cater to the specific risk of an individual. Statistics from the US Consensus Bureau show that retail purchases reached a record $6 trillion in the year 2018. Approximately 15% ($800 million) of these consumer purchases are acquired on credit illustrating the vast demand for retail credit products.

Who has access to retail credit in Kenya currently?

While Africa has some way to go in terms of having credit risk mechanisms in par with the West, we are making strides in the right direction. This is a vast topic and this subject of conversation will be broached on a later date. In Kenya, retail credit products offered by Commercial Banks, MFIs and other credit providers include — Asset Finance, Mortgage Facilities and Credit Cards. The CBK rate cap (introduced in 2016 by the Central Bank of Kenya (CBK)) has largely put a choke-hold on advancement of credit to the private sector. As a result of the rate cap, there has been a decline in lending to the private sector as financial institutions become more risk adverse to cater for the anticipated loss in future interest income. This implies that majority of Kenyans are unable to access much needed credit let alone retail credit (which is typically unsecured).

Who does Lipa Later serve and aim to serve?

Enough jargon and rhetoric, so what is Lipa Later? Lipa Later is a financial life partner that makes living affordable and dreams come true. This is our mission statement and this is what defines us as an organization. We avail our services to customers of any background wishing to acquire retail products such as household goods, electronics and furniture giving them the convenience of paying in manageable monthly installments.

Who have we served thus far?

At the time of writing this article, we have received over 100,000 applications highlighting the real demand for our services. We currently have 5,000 active customers enjoying the flexibility of paying for their goods on a schedule that’s convenient to their budget.

What next?

We at Lipa Later believe that our biggest competitor is the traditional credit card. We are well on our way to disrupt POS (Point of Sale)and check-out services in Africa by offering ourselves as a preferred retail purchasing option.

By Peter Wamburu,

Business Analyst.

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