“We also build proprietary credit risk models for financial institutions, utilising big data analytics to help facilitate affordable lending to underserved qualified borrowers. Our model leverages the Black Scholes model to generate accurate estimations of the borrower’s probability of default,” said Rahmon Ojukotola, the company’s founder.
Ojukotola answered How we made it in Africa’s questions.
1. How did you finance your start-up?
We have raised millions from local investors, which has enabled StartCredits to grow exponentially from Q4 2017 to Q1 2018.
A lot of Nigerian startups find raising capital to be very difficult, this is partially due to the fact that local investors do not understand their business model. Once the investors understand the model and it’s within their risk profile, they are usually willing to invest.
2. If you were given US$1m to invest in your company now, where would it go?
Any new investment would go towards hiring more data scientists for our research and development department. We are mapping the credit default distribution in Nigeria and researching the relationships between the variables that drive credit default in Nigeria. The investment in human capital will lead to more microfinance institution clients and increased revenues for StartCredits.
3. What risks does your business face?
StartCredits is disrupting traditional consumer credit decision processes in Africa with innovative ways to measure credit risk. As such it will take educating both loan providers and borrowers to overcome the resistance to change and to understand the benefits of increased access to credit.
Another key risk is the relatively high cost of data for Nigerians to access the internet. This limits the pace at which our potential users can reach our services.
4. So far, what has proven to be the most successful form of marketing?
Whilst our digital marketing has been productive, it’s our targeted direct marketing that has proved most successful. Our marketing and products are helping to shift the borrowing habits of Nigerians online, where there is greater price discovery and transparency.
5. Describe your most exciting entrepreneurial moment.
The most exciting entrepreneurial moment occurred when I helped my first microfinance bank client implement new credit risk controls that led to a 14% reduction in defaults within three months. The positive results show StartCredits is fulfiling its objective of helping financial institutions extend loans to underserved qualified borrowers and contributing to the Central Bank of Nigeria’s financial inclusion policy.
6. What has been your biggest mistake, and what have you learnt from it?
I have made so many mistakes in every aspect – such as marketing, R&D, sales and hiring – that it’s hard to keep count. I feel mistakes are part of the learning process when starting a new venture. I always say to myself when something goes wrong that “you win some and you learn some”. This states that there are positives to be gained from mistakes.