Getting credit with your reputation

It's a cash flow dilemma facing many millions of people around the world: How do you get a loan without access to formal credit? And how can you ever get that access with no credit history?

China's social credit score relies on digital companies mining their own data about their users. Now, a company in Nigeria has come up with a different approach.

Social Lender, led by CEO and co-founder Faith Adesemowo, looks at a borrower's social media footprint to determine credit worthiness. Instead of requiring a traditional credit score, they rely on algorithms to do an audit of the potential borrower's social media profiles. From that audit, they assign something called a social reputation score. Based on that score a borrower can be quickly approved for a micro loan.

Nora Young:  

So what is the social reputation score?

FAITH ADESEMOWO:  

The social reputation score is an accumulation of an individual's digital finger prints.  So what happens is a user will get onto the platform and then give us access to his LinkedIn account, his Instagram account, his Twitter account, all his Facebook accounts, or a combination of all of them and then there's an audit that is shown on all of this.  When the audit is completed, the social reputation score is given.  With this score, an individual can now apply for credit.

NY:  

So what kinds of information are you looking for to figure out what someone's social reputation score would be?

FA: 

It's a multitude of things, we're sitting on a lot of data right now, we're looking at where the person works, what kind of friends this person has, people who visit his page, kind of communications.

NY:

So why is your behavior on social media a good predictor of a person's ability to pay?

FA:  

Well, there's a lot of things you look at.  First thing first, one of the things we've found out is that people actually put a sort of value on themselves, so we would start with themselves as individuals. They put a value on themselves; you don't want to mess with your own accounts.  You don't want to mess with the profile you have created over the years; that's one of the guarantees.  And then secondly, we are building this community around these people, so it's not just a social fingerprint or digital fingerprint of this person, but digital fingerprints of all the people around this person.  So if someone wants to access some sort of credit we do micro-lending for now, let's say about $40.00.  If he gets onto the platform and he gets a social reputation score of 85 percent then he can actually request for his friends to come onto the platform as social guarantors.  So what his friends will do is 'oh, I don't have the money to give this person, but I think he's good for it, and so if he's not going to pay you back, I can stand surety for a certain sum of this money.

NY:

I see.  So they are micro-loans for now.  What size of loan can your customers request?

FA:

Yeah, our customers will request –- well, what we've done so far is to do 10 U.S dollars to about 50 U.S. dollars.

NY:

And are people doing this with an app on their phones or how are they interacting with the platform?

FA:

So it's web-based but the apps are almost ready to launch in the market, but right now it's only web-based.  Though, when a user already has a social reputation score, what the user can do, at a later date, is apply for credit using USSD or send an SMS.

NY:

Do you have a sense of who your typical customers are?

FA:

Yes we do.  Of course we have done our research on that, and so we typically have from ages between 18 to 40 year old, low income earners and who typically would not have access to credit cards.  And so we have a demographic of about 13 million Nigerians who fall into this category.  That's not in Africa, just in Nigeria alone.

NY:

Do you have a sense of, I mean, how well people are doing? How many people are defaulting, or how successful the social reputation score is as a predictor of people's ability to pay back?

FA:

Ya, I think that's the best part of what we do right now, that's what keep us really really excited.  We've been able to manage less than 5 percent default rate and so it's amazing.  People say 'oh, nothing good can come of this.' And that's not true.  People put value, there's a lot of value on what people are doing out there, you know, there's a lot of value in your digital fingerprint.  You can do a lot more than what we're even doing right now.  For us, Social Lender is only one of it, there is so much more we can do with that data.

NY:

Do you have a sense of what kinds of things people are doing with the money? What kinds of projects are funded?

FA:

Yes, oh, yes!  People have been able to use this money for school fees, I know it's surprising, school fees, medical emergencies, even businesses.  People have started small scale businesses with this money.

NY:

How far do you think this kind of thing can go, in terms of addressing the fact that it's hard for regular people to get credit?

FA:

I think the possibilities are honestly enormous, for credit especially – we believe that we can do this beyond the whole micro-lending, and the easier to reach -- people are able to access to this credit also makes things a lot better for them, so it's quite heartening, it's quite good to know that I could wake up in the middle of the night and  I have an emergency for 40 dollars, and I can just simply send an SMS and I can just take care of that emergency, so there is so much use for it.

NY:

Faith, thanks so much for telling us about it.

FA:

Thank you Nora for having me.

Faith Adesemowo was in Lagos, Nigeria.