- Jul, 2018
Ismaila is a busy entrepreneur in Abidjan. He has many diverse businesses: a men’s barbershop, a shoe boutique and a sheep farm. On a typical day, Ismaila moves around the city buying supplies, following up on opportunities and solving problems. His mind is constantly occupied with a running to do list and trying to plan next steps for his business ventures and not to mention managing family life. Then, he receives an SMS from Baobab telling him he is eligible for an automated loan renewal. Finally some simplicity!
He calls his portfolio manager (PM) to find out more. His PM explains: You’re a good a client, and we trust you.
One of the key challenges for many entrepreneurs is obtaining cash at the right moment to take advantage of business opportunities. From 2015 to 2016, Baobab began working on various solutions for this. One of these solutions is a fully automated process enabling Baobab’s best customers to renew their loans hassle free.
Last year automated loan renewal was launched in 7 countries in Africa and is being piloted in China.
So how does it work?
Just before a client arrives at the end of their loan, they receive an SMS letting them know that they are eligible for an automated loan renewal and they should go to their Baobab branch to obtain the loan.
Before the SMS is sent, the client’s eligibility is determined by our internal scoring algorithm which takes into account a number of factors based on the client’s loan repayment history and consistency of payments.
At the branch, the client signs their contract and the loan becomes immediately available on their account. No need to provide any documents, no paperwork, no need for a guarantor in most cases and no need to revisit their businesses with their portfolio manager – the process is easy and fast.
What are the clients saying?
The main benefit to clients is the time savings and obtaining cash immediately. A client in Ivory Coast explained, “It’s like a knock-out punch (very fast in Ivorian street slang). Usually it takes 3 or 4 days, and you have to go to town hall to get your documents. [With this automated process] getting your loan is like withdrawing your money from the bank.”
Another client talking about the procedure for the loan renewal with the portfolio manager said, “Usually [when you renew a loan], you have to go to your house, go to your business. Me, I have a lot of businesses. You have to show everything. Go to Dabo street, then to Bassam street, it’s a little bit tiring.”
And the benefits for Baobab?
Within Baobab, there are numerous benefits for our operations. The first obvious benefit is that staff spend less time on loan renewals and have more time to spend on new client prospects or following up existing borrowers. Another less obvious benefit is that the service can be used to encourage client behavior change in the form of better repayment behavior which will impact the portfolio risk.
Concretely, client retention rates are also showing a positive trend; in some countries, we have reached a 95% retention rate thanks to the quick renewal process.
Finally there are some unexpected positive outcomes. Portfolio managers are proud to offer this new service to their clients. The most important benefit to Baobab of the automated renewal process, is that it makes clients very happy and their confidence in their relationship with Baobab is boosted. These are key factors for client loyalty and satisfaction.