Voice of the Industry

The potential of instant lending: why traditional banks hold the key

Wednesday 10 May 2023 10:23 CET | Editor: Irina Ionescu | Voice of the industry

Paul Weiss, Head of Growth at Simbuka, discusses the potential for traditional banks in East Africa to offer instant lending services to an underserved market. Banks can benefit from leveraging their customer base and data-driven decision-making processes to offer these instant lending services.

A closer look at East Africa’s financial services industry

The financial services industry has undergone a significant transformation over the last decade, with the advent of financial technology companies disrupting traditional banking practices. East Africa is no exception, with fintechs providing almost instant and small ticket-size loans, which have proven to be very popular with consumers. However, traditional banks in the region are now looking to catch up by leveraging their vast customer base and data-driven decision-making processes to offer instant lending services.

Riding the wave of instant lending

The global instant loans market has seen exponential growth in recent years, with a value of USD 11.71 billion in 2020, and a projected compound annual growth rate (CAGR) of 24.8% from 2021 to 2028, according to a report by Grand View Research. One region that attracted significant attention in this industry is East Africa, which became a hotbed for instant lending. The area has a large unbanked population, with 32.6% of the adult population without access to formal financial services in 2018, according to the World Bank. This translates to approximately 103 million unbanked adults in the region. 

Additionally, a Deloitte report estimated that the East African middle class is expected to double in size by 2030. The population is predominantly young, with over 60% under the age of 25, and has seen significant growth in mobile phone penetration, with over 400 million mobile phone subscribers as of 2021. The success of mobile money services, including M-Pesa, has contributed to bridging the gap between the banked and unbanked populations, further driving the growth of instant lending. With a favourable regulatory environment, a growing middle class, and a competitive fintech landscape, East Africa is poised to be a prime location for the continued growth and development of the instant lending industry.


The secret sauce of instant loans: the Big Four

1. Data is the currency of instant lending's pot of gold

Traditional banks have vast amounts of customer data at their disposal, including transaction histories, credit scores, and other financial information. By analysing this data, banks can gain insights into customer behaviour and preferences, as well as their ability to repay loans. Understanding customer data is also crucial for creating loan products that are tailored to specific customer needs, ensuring that loans are not only approved quickly but also meet the individual needs of each customer. Customer data is the pot of gold that banks are sitting on.

2. Automated scorecards: A match Made in instant loans heaven

Automated scorecards allow banks to quickly evaluate a customer's creditworthiness, considering a wide range of factors, such as past payment history, and debt-to-income ratio. It also allows for consistency and fairness in loan decisions, as they are based on data and do not rely on subjective judgments or biases.

3. Connecting the dots: the need for speed 

Speed is of the essence in the world of instant lending, and technology is key to meeting the demand for fast, streamlined processes. A seamless technology back-end is also critical, ensuring a connected experience that integrates with all systems, including core banking and credit bureau checks. This helps to ensure that loan decisions are made based on accurate and up-to-date information, reducing the risk of errors, and improving the overall customer experience.

4. Low-touch and high-tech approach 

Customers should be able to easily apply for loans through USSD, mobile apps, or even WhatsApp, with a simple and intuitive interface that makes the process as smooth as possible. The process should be tailored to suit their preferences and needs, without the hassle of visiting a physical branch or filling out lengthy forms.

The Tanzanian success of instant lending

One Tanzanian traditional bank has largely benefited from instant lending, through a partnership with Simbuka. By automating various manual processes and incorporating the key ingredients of the secret sauce, the bank could streamline its lending operations and improve its overall customer experience. 

With a deep understanding of customer data, automated scorecards, a seamless technology back-end, and a low-touch, high-tech approach, the bank has been able to process up to 40,000 loans on peak days with a negligible non-performing loan (NPL) rate of close to 0.1% and a time-to-decision (THT) of just 2 seconds. Instant lending enabled the bank to meet the needs of an underserved market and generate substantial revenue while minimising risk.

The growth of instant lending in East Africa has presented a significant opportunity for traditional banks to serve the unbanked and underbanked populations. It is in the interest of both banks and customers to prevent individuals from becoming overindebted. Therefore, proper implementation of instant lending, coupled with effective risk management, is crucial for the success of all stakeholders involved. The future of banking in East Africa looks promising, with traditional banks now riding the wave of instant lending.


About Paul Weiss

Paul Weiss is the Head of Growth at Simbuka, a software provider that automates lending processes for financial institutions worldwide. With a passion for driving growth and transformational change, Paul has a proven track record of successfully running transformation programmes for financial services providers in Europe and Africa, ranging from global tier-1 banks to rural microfinance institutions. Paul previously worked for Accenture in the Strategy, Financial Services department at the Dutch office. He is based in Kampala, Uganda. 



About Simbuka

Simbuka is a provider of software solutions that simplify and automate lending processes for financial institutions worldwide. We enable financial institutions of all sizes to stay ahead of the competition by turning their operations into anadvantage. Our solutions cover personal, SME, corporate, and agriculture lending, and are active in 37 countries across five continents. Our software solutions empower financial institutions to reach new heights of success and profitability. 

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Keywords: lending, SME lending, digitalisation, corporate card, online banking, credit scoring, Corporate Social Responsibility, digital banking, credit card, fintech, financial inclusion, financial institutions, financial services, mobile banking, mobile money, mobile payments
Categories: Banking & Fintech
Companies: Simbuka
Countries: Africa
This article is part of category

Banking & Fintech


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