The Chief Executive Officer of Mobile Money Fintech Limited (MMFL), Shaibu Haruna, has called on digital lenders, regulators and financial technology players across Africa to strengthen consumer protection systems as digital credit services continue to expand rapidly across the continent.
According to him, although digital lending had significantly improved financial inclusion and access to credit for millions of people, the industry must ensure that customers clearly understood the obligations attached to the loans they accessed.
Speaking at the 3i Africa Summit in Accra, on the theme, “The Next Frontier: Shaping Africa’s Integrated FinTech Future,” with a focus on responsible growth and consumer protection, Shaibu said the speed and convenience associated with digital loans should not come at the expense of responsible lending and customer trust.
“It now takes less time to approve a digital loan than it does for me to finish a sentence,” he said.
He explained that across major African cities thousands of digital loans were processed every day, with decisions made within seconds through the use of technology and data analytics.
However, he said the industry needed to pause and critically examine whether borrowers fully understood the terms and conditions associated with those facilities.
“But let us pause and reflect. In those few seconds it takes to approve a loan, are we certain that the borrower fully understands the terms?
“Do they grasp the interest rates being applied, the penalties for late repayment, or the discipline required to manage that obligation?” he asked.
Shaibu noted further that if the answer to those questions remained uncertain, then industry players had a collective responsibility to do more to protect consumers.
“If the answer is uncertain, then we must be honest with ourselves, we need to do more to protect our customers. Because without protection, there can be no real inclusion,” he stressed.
Digital lending expanding inclusion
He described digital lending as a major game changer for the continent, particularly for individuals and small businesses that had traditionally been excluded from formal financial systems.
He said many market women, traders and small business owners were now able to access credit quickly without the bureaucratic delays that characterised traditional banking systems.
“We have all seen the stories, the market woman in Medina whose life has been transformed through access to credit,” he said.
Shaibu explained that traditional credit systems relied heavily on physical infrastructure and lengthy approval processes that often took weeks before loans could be disbursed.
Today, he said, advances in big data and financial technology had enabled credit providers to process and approve loans almost instantly.
“Powered by big data, credit moves at the speed of light,” he said.
4 Pillars of consumer protection
Despite the progress, Shaibu cautioned that the increasing competitiveness within the digital lending space also posed risks if operators failed to build responsible and sustainable systems.
He identified four key pillars that industry players must prioritise to protect consumers and sustain confidence in digital financial services.
The first, he said, was transparency.
According to him, customers must clearly understand the true cost of credit, including interest rates, penalties and repayment obligations.
“Are disclosure mechanisms simple, accessible and embedded in our systems? If a customer cannot easily understand our terms, then we are failing them,” he said.
The second pillar, he explained, was responsible usage of credit.
He expressed concern about the growing trend of customers borrowing simultaneously from multiple digital lending platforms, a practice commonly referred to as “loan stacking.”
“Are customers using credit productively, or are they trapped in cycles of repeat borrowing across multiple platforms?” he asked.
The third pillar, he noted, related to data integrity and fairness in lending decisions.
Shaibu said while financial technology firms depended heavily on customer data to assess creditworthiness, there was the risk that biased datasets could unintentionally exclude some customers.
“We rely heavily on data to make lending decisions. But are our datasets free from bias? Are we unintentionally excluding customers based on location, behaviour patterns or other proxies?” he queried.
The fourth pillar, he said, was shared responsibility.
According to him, consumer protection should not be left to regulators alone, but must involve lenders, service providers and customers themselves.
“Consumer protection is not solely the responsibility of regulators, service providers or customers, it is a collective obligation,” he said.
Call for smarter regulation
Shaibu warned that if stakeholders failed to act responsibly, African markets risked repeating debt crises experienced in some countries where rapid digital credit expansion resulted in harmful consequences for borrowers.
“Our goal must be sustainable prosperity, not short-term growth,” he stressed.
Touching on regulation, Shaibu said the solution was not necessarily more regulation, but smarter and more adaptive regulatory frameworks.
He advocated tiered and risk-based regulation that would differentiate between small short-term loans and larger credit facilities.
He also called for real-time data sharing among service providers to help prevent harmful borrowing cycles, as well as outcome-based supervision that would enable regulators to monitor loan rollovers and detect customer distress early.
Improving customer experience
From the perspective of service providers, he said practical reforms could also help improve customer protection.
Among the measures he proposed were break-off periods to discourage immediate re-borrowing and simplified loan agreements that customers could easily understand.
“If your agreement runs into pages of dense text, you have already lost most of your customers,” he said.
He also stressed the importance of responsive customer support systems and effective dispute resolution mechanisms.
“Responsiveness is not optional, it is essential,” he added.
Responsible borrowing campaign
On the sidelines of the summit, Mr Haruna told journalists that the scale at which digital lending services currently operated made consumer protection discussions even more important.
“We are achieving at a very high scale currently and that brings to fore the question around consumer protection. How do we ensure that as lenders we are lending right and responsibly and also how do we ensure that we are actively engaging consumers to also borrow responsibly?” he said.
He said MMFL had already started a responsible borrowing campaign aimed at educating customers on repayment discipline and the true cost of borrowing.
According to him, borrowing could be beneficial only when loans were used productively.
“Borrowing is good, but you have to borrow and utilise the funds for productive use because if you use the funds productively, you are able to repay,” he stated.
He explained that high default rates increased the overall cost of lending because financial service providers priced repayment risks into their products.
“If you borrow and default, what it means is that when service providers are pricing the service, they would add the risk of your default to it and that makes borrowing expensive for everyone,” he explained.
Shaibu, however, said most customers on MMFL platforms honoured their repayment obligations and that non-performing loan ratios were improving steadily.
He attributed the improvement partly to advances in artificial intelligence, data mining and customer scoring systems.
He further clarified that the loans facilitated through MMFL platforms were funded by banks and savings and loans companies, while MMFL only coordinated the digital delivery process to customers.
Data governance and trust
The summit also featured discussions on data governance and trust, with regulators and industry players emphasising the importance of ensuring that customer data collected by financial institutions was used strictly for its intended purpose.
Panelists stressed the need to strike a balance between innovation and customer data protection.
They also called on financial institutions to adopt minimum data collection principles and allow customers to decide what personal data they wished to share.
