A busy mother of three running a produce stall in Lagos’s crowded Balogun market has enough urgent matters to deal with—keeping her business afloat, feeding her family, paying her kids’ school fees—and researching bank loans rarely makes her to-do list. She may be dreaming of a loan to grow her business and put her family on more stable ground, but the prospect of borrowing money from a bank seems not just daunting, but unattainable. So far, she has relied on limited credit from suppliers, friends, or family—when and if they make it available—so she can meet her most pressing financial needs.
Enter Nigeria’s Diamond Bank, which in collaboration with Women’s World Banking rolled out a savings account for low-income women entrepreneurs who had previously been saving only through informal methods, such as piggy banks or savings groups. Diamond Bank’s BETA Savings account, offers a more reliable and convenient savings solution to this segment of Nigeria’s mostly unbanked population (as of 2012, 73% of Nigerian women and 64% of men had no formal banking relationship). The bank sent more than 500 agents called BETA Friends into the market to reach out to the business owners and help them open savings accounts. Thanks to the success of BETA Savings, which has led to 154,000 new accounts —35% opened by women—Diamond Bank has decided to add another benefit: extending short-term loans to its BETA Savings clients. The new KWIK Loan program, set to launch in May 2015, will give low-income women, loans to help sustain and grow their businesses or support them during emergencies.
Women’s World Banking has played a key role in designing Diamond Bank’s KWIK Loan pilot, helping the bank align the offering with its business goals and its clients’ needs. For the bank, the pilot loan program offers an opportunity to learn more about this sizeable market segment and its credit behavior. For clients, the chance to access short-term loans can lead to larger bank loans in the future.
The new KWIK Loan pilot offers terms designed to meet local clients’ financial capacities and ambitions. Women’s World Banking tested a prototype on two groups of BETA Savings clients: large and wholesale business owners, and small business owners and both client segments affirmed a need for short-term credit to bridge business and personal cash flow liquidity gaps. During the KWIK Loan pilot program, the bank will offer preapproved loans in small amounts at a 30-day term.
To qualify, clients must have been BETA Savings clients for at least six months. Their accounts must show activity within the last three months and maintain a positive balance with a minimum of 500 NGN ($2.50 US). The maximum loan amount is double the savings balance (up to 50,000 NGN or $251 US), and once repaid, the loans are renewable. Loan offers and acceptances will occur through cellphone and the loan disbursement will be transacted through the client’s BETA account. The bank’s BETA Friends, the agents in the market will play a key role, receiving the payments of the loan installment as well as educating clients about the importance of on-time loan payments.
True to their name, KWIK Loans are pre-approved for qualifying clients, meaning that clients can access funds almost immediately. “We’ve heard from microfinance clients all over the world about the importance of shortening the time from when you apply for a loan to when it gets processed,” notes Anjali Banthia, product development specialist at Women’s World Banking, who led the market research for the product. “When you apply for a loan, clients have told us that you need that money fast to take advantage of a business opportunity or bridge a financial gap. So, we’ve developed technology to leverage the data on BETA Savings transactions to pre-approve clients, making credit available anytime it’s needed. This is a huge advantage for clients.”
One of the challenges involved in designing the KWIK Loan program has, ironically, been the overwhelming popularity of Diamond Bank’s BETA Savings accounts. “I would describe the new [loan] product, and the first thing people would say is: ‘Please don’t change BETA Savings – we love it! If you want to add something, just make sure that you don’t mess it up,’” Anjali explains. “It puts a little pressure on Diamond to continue that high bar they have set. You need to be very transparent on how it works and how clients can qualify. People have stalls next to each other in the market and word-of-mouth is very powerful.”
During the prototype phase, Diamond Bank and Women’s World Banking noted the importance of visually driven marketing tools that incorporate financial education, because low-income Nigerian women tend to have low literacy. In addition, the test phase underscored the importance of maintaining an updated database of clients’ banking activity to manage new accounts and keep track of top-performing clients. Tracking client information and activity has presented a challenge for banks worldwide, particularly in developing countries, and Diamond Bank is working with Women’s World Banking to improve its data collection practices.
The KWIK Loan pilot incorporates the learnings not just from Diamond Bank’s own prototype phase, but also from a similar program called M-Shwari in Kenya, which offers low-interest 30-day loans. The decision to use M-Shwari as a model came during an exposure trip to Kenya, which Women’s World Banking arranged to help Diamond Bank executives fine-tune their loan pilot to strengthen the business case and to better serve the target clientele.
“M-Shwari is working very well in Kenya,” notes Bettina Wittlinger de Lima, product development manager for Women’s World Banking. As of last June, 6.5 million Kenyans had signed up for the new M-Shwari loans, with 12,000 new clients coming onboard daily. Diamond Bank and Women’s World Banking hope to tap into an equally robust, growing clientele as Diamond Bank launches its KWIK Loan pilot this spring and build on its success making financial services more accessible to low-income Nigerian women.
