How Smart Asset Financing Increases Productivity and Boosts Africa’s Economy
Within Africa’s financial services landscape, smart asset financing, as well as non-collateralized loans are becoming increasingly popular. This is in no small part due to the financial incapabilities of many individuals and organisations across Africa.
Even with this growing popularity, the World Bank reports that private credit bureaus have recorded only 11% of the credit information of Africa’s population.
This lack of coverage has deterred many entities from offering credit services such as loans and financing due to a lack of data rather than demand.
This suggests that there is still a large deficit and consequently an opportunity to make credit services available to Africans.
Many young Africans willing and energized to work are still unable to avail themselves of opportunities that allow them not only to work but to work for themselves.
For countries like Nigeria with a 42% youth unemployment rate, this is even more significant.
Asset financing has been a viable financing option for individuals and other organizations looking to establish or expand their business activities, essentially helping them create employment opportunities.
Asset financing practices involve the funding of an asset or piece of equipment by a financial institution, whereby the lender buys the asset and leases it to the organization or individual requiring it.
It allows businesses to obtain advanced technology that they otherwise could not afford. It can be extremely beneficial to organisations and individuals who want to start out or expand an idea but do not have the available funds.
Typically, asset financing equips the individual or organisation with the high-value asset it needs at the time, Smart Asset Financing, however, looks for the best scenario for productivity and success.
How MAX Employs Smart Asset Financing
Where smart asset financing differs from regular asset financing is in its use of data and analytics to decipher what candidates are best suited for any certain credit service.
For instance, within a financial institution like MAX, this plays out in calculating what candidates are best suited to be its Champions (commercial drivers).
These champions are then trained and equipped with high functioning low or zero-emission vehicles (including cars, two-wheelers, and three-wheelers, some of which are locally assembled). These vehicles are then leased to them for eventual full ownership.
Within MAX’s structure, drivers go on to serve everyday commuters, hence, creating immediate employment and a steady cash stream. Therefore one could draw a direct link between smart asset financing to increased productivity and a boost in the local economy.
Localized smart asset financing when used properly has proven to be quite effective in curbing unemployment. And such financial services that provide credit are in short supply in relation to the population and the demand for them.
This highlights an increased need for financial deepening within Africa. Because even with the endeavours of entities like MAX, a large portion of the population is still not being served.
Increased financial deepening expresses itself in private sector investments. With additional private sector investments, entities that provide credit services are able to extend said services to even more people in need of them. These investments when made through proven channels have the potential to better the lives of many more individuals across Africa.
Investments made by MAX in its drivers significantly impact these drivers and their families. MAX champions make three (3) times the industry average, and packages designed for health and vehicle insurance improve their quality of life.
Smart asset financing can serve as an outlet through which people who otherwise are not able to start a business on their own are able to do so.
There still remains a large section of the African population who are unable to avail themselves of the capital they need to kick start business operations, due to the fact that they cannot apply for collateralized loans, since they do not have collaterals they can leverage.
Using data and advanced analytics, entities like MAX ensure assets are made available in a system where people can be productive for themselves, their industry, and Africa as a whole.
