A lack of customer data is a huge barrier that prevents many small businesses and individuals in Africa from access to loans.
But Uber is looking to use the data it collects from its drivers as a way to help.
The Sidian Bank in Kenya, Reuters reported on Thursday (June 30), has begun using the personal data within Uber’s ride-hailing app to make lending decisions on relatively cheap loans for Uber drivers to purchase their own vehicles.
In order to receive a loan from the bank, an Uber driver is required to meet certain criteria, including accumulating more than 500 trips with the ride-hailing service and having an average passenger rating score of at least 4.6 out of 5.
“It’s really a data-driven approach to credit risk analysis, dispensing with the traditional banking method and relying instead on the data that Uber has collected,” Sidian Bank CEO Titus Karanja told Reuters.
The financial institution offers qualified and approved Uber drivers with 100 percent car loan financing, with the maximum loan amount of 1.5 million shillings. The lending service was launched at the end of May and has since approved 10 three-year car loans with an interest rate of 10.5 percent, Reuters reported.
According to Sidian Bank, a lack of credit history has contributed to just 4.4 percent of Kenya’s population of 45 million people being approved for personal bank loans.
“It’s hard to tap into the credit market in Kenya,” Melekot Abate, an associate for development advisory firm CrossBoundary, explained to Reuters.
“Most individuals have very little credit history or assets to seize so banks are unwilling to take the risk,” he added.