Jumia extends lending service to consumers to boost profitability
Jumia Nigeria has begun offering its customers quick, small, digital, personal loans via its lifestyle app Jumia One. For now, only its Android OS users can access the loans which can go as high as N100, 000 or US$275. Jumia’s lending platform isn’t exactly new but was previously open to its merchants alone.
The e-commerce company Jumia is extending its lending service to consumers in a move that suggests it is seeking ways to rapidly shore up revenue. Recall that in January, its Kenyan arm announced plans to begin offering as services on its platform to help advertisers target niche buyers on its platform.
Experts believe consumer lending will help Jumia improve revenue via interests coupled with a possibility to bring new customers and boost overall GMV in the Jumia platforms. They reason that if the loan default rate stays low, it could fix a key paralysis Jumia has been battling for years: profitability.
According to Prof. Ndubuisi Ekekwe, Chairman of FASMICRO Group and a regular contributor in the Harvard Business Review, if the loans bring more customers and also deliver good interest rates, from Jumia’s expanding pool of about 6.1 million customers, the derivable marginal value could help the company.
“No matter how you see it, Jumia is now a fintech and when you discuss Carbon (old Paylater), you need to mention Jumia One. Beginning with 6.1 million customers, Jumia One should be one of the leading fintechs in the lending space,” he said, adding, however, “provided Jumia avoids the old demon of giving people loans – those with no means to pay back – just for the sake of boosting sales, Jumia should be fine”.
“A few years ago, some Nigerian banks ravaged their vaults, giving crazy people loans to boost their market caps; the parties were great until the DJs fell asleep! Jumia must avoid such,” he advised.
For Francis Oguaju, an industry expert, Jumia’s move is one of the strategies brand owners can use to ‘lockdown’ their customers, turning them into loyal fans.
“You give them loan, they spend it within your ecosystem; and everyone lives happily ever after. General Electric did a similar thing with its GE Capital, which helped greatly to turn it into an industrial behemoth, until the devil gate crashed the part.
“If Jumia executes well, it will find glory; though noise usually overshadows substance in many of these endeavours. We will see how it goes,” he quipped.
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