IF YOU CAN'T BEAT 'EM...

As regulators turn sights on fintech, a Nigerian startup is first to secure credit rating

An aerial view shows the central business district in Nigeria’s commercial capital of Lagos, April 7, 2009
An aerial view shows the central business district in Nigeria’s commercial capital of Lagos, April 7, 2009
Image: Reuters/Akintunde Akinleye
By
We may earn a commission from links on this page.

Fintech companies in Africa are increasingly playing in spaces dominated by traditional financial institutions.

One Finance, parent company of Nigerian lending platform Paylater, has secured a “BB” credit rating from Global Credit Rating, an Africa-focused credit ratings agency after a testing process. It’s the latest step as African fintech companies start to go mainstream by winning customers and earning investor conviction along the way.

Indeed, payment startups facilitating online transactions in key African economies are increasingly getting validation with global payment giants including Mastercard, Stripe and Visa paying closer attention and investing in Nigerian fintech companies.

Being assigned a credit rating means One Finance will be “held to the same levels of transparency and scrutiny as other leading financial institutions in Nigeria,” says Chijioke Dozie, chief executive of One Finance. It also potentially allows the company access latent sources of local capital from institutional investors, such as pension funds. “We want to look at pockets of funding in Nigeria and it’s easier if you have a credit rating,” Dozie tells Quartz. Access to finance is crucial for Paylater, One Finance’s lending app. Two years after it was founded the company says it now approves over 1,500 loans a day—with an average value of $80 per loan.

The credit rating approval has more significance given recent moves by Nigeria’s central bank (CBN) which is mulling new regulation would likely make it more expensive for fintech companies to obtain licenses with minimum shareholder fund requirements ranging from $275,000 to $14 million. Given the apex bank’s increasing regulatory focus on fintech companies, Dozie says being “fortified” and “seen as strong” is necessary.

But even though much of the tech industry has railed against the central bank’s pricey license regime, Dozie suggests increased regulation is not necessarily a bad thing as fintech companies become more significant in the financial sector. “CBN improving regulation doesn’t mean you can’t innovate,” he said. “Yes, it might stifle innovation but we also have to watch out for the protection of the customers.”

 

Update: This story previously stated One Finance’s credit rating is a continental first for a fintech company. That has been corrected

Sign up to the Quartz Africa Weekly Brief here for news and analysis on African business, tech and innovation in your inbox