19 November 2016, Lagos — Graham Lee is a Zimbabwean-born chief executive officer of RenMoney, a Russian company that introduced simple consumer financing in Nigeria. Besides seeing Nigerians as very warm and interesting people, his primary attraction to this country with a massive population it’s huge opportunity to grow his business. Four years down the line, he tells Kasie Abone in an exclusive interview that despite the recession, his company has got what it takes to deliver simple consumer financial solutions to Nigerians.
What is the origin of RenMoney
RenMoney was founded by Stephen Jennings who founded Renaissance Capital, an investment banking founded in Russia in the 1990’s and became large emerging market business banking which focuses on emerging markets, particularly in Africa. Stephen is a very successful man and he founded other businesses one of which is RenMoney. Stephen believes that this type of idea is lacking in Nigeria in particular and across Africa in general. He saw many conditions in Nigeria that he saw in Russia and Europe in 1990’s, the possibility of growth in the economy and explosion in consumer purchasing in the middle class and the need for credit driving these purchases. His intention was to have a massive success of business he can take to the rest of Africa. And that is what we are working towards.
How long has RenMoney been in business and how has doing business here been?
RenMoney has been in Nigeria for four years. Business has been quite good. In the last year and half our business has grown significantly. In order to achieve that, we have to reduce our loss rates. So, our loss rates have come down drastically. So, the growth we have done was quite fast and sustainable. I will say business has been good but there are challenges as can be seen in inflation in the market that has affected our clients’ financial well-being and the ability to pay; they have been under more pressure.
Are your services unique in Nigeria market? What is the response rate to paying back loan?
The experience has been very good; loss rate has been quite low. We have lost rate of about 6% and what we see in the industry and other areas is roughly 22%. And I think from the start consumer financing is something that is new in Nigeria though it is something that has been available to other parts of the world for quite a long time. People in Russia, for instance, are able to walk into stores and purchase an item of financing maybe television or cell phone. It is available in China and India where it is easy to use consumer services. We have also introduced money solutions available to ordinary Nigerians, not just the people who are well served by the big commercial banks but also those other people who have real needs to save towards a particular goal and very real needs on the credit side. There are times when they don’t have enough money to pay for what they need. For instance, school fees. Twenty percent of the loan we give today is on school fees financing. And the services we give is such that these people should be able to walk in and get what they need. I think RenMoney opened the door for these services. There are a number of players offering similar services but I will argue that their services are not complete; our services are much better.
What are those services that differentiate you from competitors?
Under savings side, I want you to understand that RenMoney services are not only on the credit side but also on the savings side. On the savings side, we introduced Target Savings Account and this is for people who want to save towards a particular goal. And this goal can be those who want to save towards University Education or whom want to buy a car in future. But what we find is that people don’t have the discipline to save for themselves and that is really the reason behind the design for Target Saving Account. It helps people to enforce the discipline to save each and every month for a particular goal. First, we use prompting to encourage people to save. We also use the mechanism we use for loan collection to actually help the customer put the money aside. In that savings account, there is zero fees so savings is not eaten away. And our interest rates are high. We are offering interest rates of 10% which is ahead of others. And lastly, we help the customer meet the needs of the savings plan. It’s really up to them. The customers may decide to withdraw the savings and there are no charges on them. We understand that emergencies have to arise and customers have to withdraw their funds earlier. And the fact there is no charges; the high-interest rates and the discipline to save are those things that make this plan quite attractive. And for customers that have investments, it is not just enough that they have investments, there is also a consideration for the risk level. Our risk level is very low and we have very strong liquidity and we are very strong organization. I will argue that we are very strong in this consumer financing industry. And the return that we offer in terms of the interest that we pay is better than most commercial banks.
On the lending side, lending is about understanding the purpose of the loan. One thing to do is to continue to expand and understand the purpose for which the loan is meant for. So, we designed the school fees products. And we understand how that is use and why that is used. We have the reduced rate we charge our clients. So, school fees financing is the least we charge because we understand the risk. We also try to understand the lending cost of giving money to our clients. And the risk of repayment. So, we manage those costs very well. We focus on operational efficiency to make sure that our risks are low. We make sure that the low risks clients are not subsidizing the high risks clients. That is very important and that distinguishes us from our competitors.
Do you require collateral?
So, what mechanisms do you put in place to ensure that you recover your money?
We make sure we understand the financial status of our clients and the likelihood of repaying us. And we make sure we understand where cash flow is coming from to understand the ability of the client to repay us. We don’t lend recklessly. Reckless credit is something to be avoided. So, we make sure that the client has the ability to pay us and from his past experiences he is willing to repay us. And then we work with different banks as partner companies to collect appropriate data of the clients on time; when salary is being paid for instance.
Specifically, who are your target audience?
Our target customers are anyone who has a need for simple money solutions. Our target market is broad but we find out that our services appeal to everyone from clerical workers and small businesses; we offer specific types of loans to agents who are selling airtime and prepaid electricity all the way through to executives of oil and gas companies. Anybody who has a need for saving towards a goal or having a high return on investment or that have a need but have a shortfall of funds.
We have not expanded outside Lagos but we do have internet banking which is a virtual channel and we do have telesales channels. And both channels take applications outside Lagos. What we do is, we make sure that everything is processed here in Lagos at the head office. The nature of these channels is that they can receive applications from anywhere. We have six branches in Lagos but our expansion is not just the number of people working for us or offices we have, our expansion is really in using the people we have and branches we have more efficiently to enable us grow faster; because we grow by serving our customers effectively through those available channels.
Challenges encountered in the cause of doing business in Nigeria for four years
There has been a number of challenges. Expectedly not every show is easy but I will say it’s been four years of continuous improvement. There have been challenges in four years but the economy we operate in has seen a lot of improvement. When we started the Credit Bureau was unable to offer speedy services. The majority that comes to take a loan from us didn’t have information about the Credit Bureau. What we see in that the rate has gone up from 20% to more than 60% now. Credit Bureau has improved on the number of people they have information on, the quality of the information; the depth of the information on the individual has improved. So, the entire ecosystem of the Credit Bureau working together with RenMoney has improved.
Issue of Fraud
Fraud is a very significant problem. We receive fraudulent application almost every single day. However, we have a very strong underwriting team and we make sure we catch all of them. It costs us more to be able to do this because we need to hire people, computers, and servers to work; we put a lot of resources into preventing fraud.
Secondly, we take a zero tolerance approach on fraud. In every single case of attempts at fraud, we prosecute and there have been cases in the past where staff members were involved.
Growth strategy going forward
We are not going to pay a lot of attention to physical growth as being the chief engine of growth. We will expand, we will even expand our branches but our growth is not going to be in line with the number of branches we have; our focus is to be the foremost consumer financing organization in Nigeria. And that focus allows us to pay particular attention to the needs of our clients, add more products & services and implement them. Our growth strategy is to remain focused, to get our message throughout the entire country, ensure we continue to expand and design our products so they appeal to more Nigerians e.g. self-employed customers both on the saving and credit sides. We have the funding in place and we have the system; we are a very strong organization.
How has the recession impacted on RenMoney
It affects all businesses in different ways. First of all, we are primarily institutions set up to deliver simple money solutions to the financial needs of ordinary Nigerians. The recession has not just affected the oil and gas sector but also has affected most sectors. The economy is actually in contraction now. That has affected our clients generally. Most of our clients are mostly employed. Employment is generally down now.
Any other African operation
We are only in Nigeria. We will continue to focus on Nigeria till we achieve certain level of success that we can transfer to other countries. Firstly, Nigeria is the biggest economy in West Africa and of course Africa. But it also has the biggest growth potential; the population, education population to be really a super power. Besides, it is a market that is under-served. So, there is a big gap. There still remains great potential for growth; that is why it remains our main focus.
How long have you been in Nigeria and what has been your experience with Nigerians?
I have been in Nigeria for two years. My experience in with Nigerians is that they are wonderful people. I moved here with my family; I have a wife and two children we all feel pretty welcome from the day we arrived. Nigerians are very effusive and welcoming people; always very interested in you. I am an introvert. It is very easy to become extrovert in Nigeria. You have little choice. People are very friendly with you. I found that very welcoming; very interesting. They pay close attention to what is happening around them. There is a high sense in Nigeria to know what is happening around them. Nigerians seem to have an eye on both the inside and outside of their country.
What message do you have for your clients this anniversary
We will remain excited to serve them. We will remain excited to design the kind of products they need and excited to serve them and help fulfill their needs.