Instant loans dry up as FCCPC rules force lenders toward safer borrowers

Nigeria's digital lending sector is experiencing a notable transformation as lenders shift away from unsecured instant loans and focus on borrowers with verifiable income, established credit histories, and predictable cash flows. This change is driven by stricter regulatory requirements from the Federal Competition and Consumer Protection Commission's (FCCPC) Digital, Electronic, Online or Non-Traditional Consumer Lending Regulations, 2025, increasing default risks, and higher costs of originating and recovering small loans.

Industry stakeholders have expressed difficulties in relying on aggressive debt recovery methods or extending credit to borrowers with unverified repayment capabilities. Instead, lenders are gravitating towards structured installment loans, longer repayment periods, and business financing, where repayment can be tied to identifiable income sources or verifiable business cash flows.

Notably, the CEO of KwikPay Credit and the President of the Money Lenders Association, Mr. Gbemi Adelekan, highlighted the industry's departure from unsecured nano loans, typically with 30-day tenures, due to high default rates. Furthermore, digital lending firms are reducing their exposure to unsecured lending and concentrating on customers with proven repayment capacity.

However, the complex economics of nano lending, coupled with fraud, recovery challenges, funding costs, regulatory requirements, and evolving customer behavior, make these changes increasingly challenging for lenders. The FCCPC's enforcement of stricter rules on digital lenders has also contributed to a decrease in unethical collection practices and increased registration requirements for digital lenders, with 525 fully registered, 33 with waivers, over 1,000 loan apps under FCCPC supervision, and 54 apps removed from Google Play Store for rule violations.