Changing how people think about lending
Millicom's lead specialists regularly report on important new activities within their own areas of expertise. Here, Africa CEO Cynthia Gordon describes one of Tigo's latest and most innovative lending products as it goes to market.
March 2016: Mobile technology has brought financial services to a huge part of the population, allowing them to be active participants in their countries’ economies. However, great challenges remain.
For example, if you do not have a bank account your options for getting a loan are limited – only a fraction of the population can benefit.
We believe that telecoms companies can play a fundamental role in addressing this challenge.
At Tigo, we are focused on responsibly filling the gap in access to credit for all kinds of customers.
We plan to do this by keeping five key principles at the forefront of our business as we launch an innovative lending product in Tanzania called Tigo Nivushe which is based on the premise of ‘We will trust you until you give us a reason not to.’
Include everyone: We decided that we would not require any security to lend – no rights to your mobile money, no grab-back from your airtime wallet, no freezing your savings – a true unsecured loan. All you need is an active Tigo Pesa account.
Only lend what you know people can afford to pay back: With a specialized algorithm based on analysis of the customer’s mobile experience we are able to determine the right amount for someone to borrow.
And to enable this, we are working together with JUMO, the market leader in using technology and data to provide financial solutions.
We don’t want to lend too much money to someone who will find it hard to pay back. That does not help anyone. So here is the big change – if you don’t pay back your loan in the agreed period, Tigo will try and recover the loan and fees over a longer grace period. If the customer is unable to pay off the loan then it is written off but customers won’t be able to apply for another one.
The customer keeps their Tigo Mobile and Tigo Pesa accounts, unaffected.
Deliver flexibility: We are launching this product with 1, 2, and 3 week pay-back periods with variable fees based on length of tenure. Our customer insights showed us that this was what was needed. These insights will continue to drive the product variations as we progress, allowing us to continuously improve our services
Immediate access: Loans are processed in real-time so funds can be transferred within minutes. There is no need to visit a bank, no forms to fill in, no registration process. Because the funds are delivered to the wallet on the phone customers have immediate access to the funds and can send a person-to-person transfer, pay bills, or cash-out at an agent location. Even though the loan itself is delivered digitally, you don’t have to travel far to convert the loan into cash.
Simple and well-timed communication: We strive to make our products easy to understand and keep an open communication channel with our customers. It’s important to listen to customers and test the messages. We went through several iterations to explain the product which had varying results both from an uptake and repayment perspective. Customers also told us that they like being kept in touch with their financial situation. For example, getting a text message the day before your repayment is due is very helpful.
Disruptive E-money services delivered through the mobile phone have already changed the lives of millions of people.
With this new credit model Tigo wants to change the way people think about lending.
Let’s start to trust people, until they give a reason not to.
I think we will all be surprised.