Strategies for Digital Lenders to Address the Growing Need for Online Loans in Emerging Markets
By Olayemi Jemimah Aransiola
June 05, 2024

The surge of smartphone adoption in emerging markets is rewriting the financial services landscape. With nearly 3 billion new internet users expected to emerge from these regions by 2025, the demand for online financial services, particularly access to credit, is booming. However, a significant gap remains between this demand and the reality of obtaining online loans. Digital lenders have an important role to play, but navigating the unique challenges of these markets requires innovative strategies.

Beyond Traditional Credit Scores

One of the biggest hurdles for digital lenders is the limited availability of traditional credit history in emerging markets. A 2021 World Bank report estimates that over 1.7 billion adults remain unbanked globally, with a significant concentration in developing economies. This lack of credit history makes it difficult for lenders to assess creditworthiness using traditional methods.

Furthermore, financial literacy levels can be low in these regions. The World Bank’s Findex data indicates significant variations, with some countries showing concerning gaps in basic financial knowledge. This necessitates a customer-centric approach that prioritizes financial education alongside access to credit. ​​A report by the International Finance Corporation highlights the importance of alternative data sources in these regions. Mobile money transaction data, utility bills, and even social media activity (with proper consent) can be harnessed to build robust creditworthiness assessments.

Finally, the regulatory landscape in emerging markets often evolves rapidly, and financial infrastructure, such as address verification systems and robust payment rails, may not be fully developed. However, this landscape also presents opportunities for digital lenders to leverage technology and innovate with alternative credit scoring models, ultimately providing convenient and accessible loan products to underserved populations. Digital lenders need to stay informed of regulatory changes and find creative solutions to navigate potential limitations.

Strategies for Success: Tailored Products, Mobile-First Solutions, and Collaboration

To effectively address the growing need for online loans in emerging markets, digital lenders must adopt a strategic approach tailored to the unique challenges and opportunities present in these regions.:

  • Tailored Loan Products and Alternative Credit Scoring: Develop loan products that cater to the specific needs of emerging markets, such as microloans for small businesses or education loans for students. Building credit scoring models that leverage alternative data sources like mobile money transactions and utility bill payments becomes crucial to assess creditworthiness effectively. A 2023 study by the Center for Financial Inclusion at Accion highlights the promising potential of alternative data for driving financial inclusion.
  • Financial Education and Mobile-First Design: Integrate financial literacy modules within the loan application process, empowering borrowers to make informed decisions. Design user-friendly mobile applications that prioritize a seamless experience, keeping in mind varying levels of digital literacy. This focus on mobile-first solutions becomes even more critical as smartphone penetration continues to rise.
  • Leverage Alternative Data for Credit Scoring: Traditional credit scoring models often fail in emerging markets due to the lack of comprehensive credit history data. To overcome this challenge, leverage alternative data sources, such as mobile usage patterns, social media activity, and utility payment records. By developing machine learning models that analyze these non-traditional data points, lenders can establish more accurate credit risk assessments and extend loan opportunities to individuals and businesses with limited or no formal credit history. However, it is essential to ensure compliance with data privacy regulations and obtain proper consent when using alternative data sources.
  • Partnerships and Collaboration: Partnering with mobile network operators (MNOs) can leverage their extensive reach and access to valuable data points on mobile phone usage. Collaboration with established financial institutions can provide digital lenders with access to a more robust financial infrastructure and regulatory expertise. Additionally, collaborating with agent networks can facilitate customer acquisition and service delivery, particularly in regions with limited digital infrastructure.
  • Regulatory Considerations and Compliance: Operating in emerging markets requires navigating complex regulatory landscapes. Digital lenders must obtain necessary licenses and comply with local operational requirements, consumer protection laws, and fair lending practices. Additionally, ensuring data security and privacy is paramount, as digital lending involves handling sensitive personal and financial information. Implementing strong data protection measures and adhering to data privacy laws and regulations is essential for building trust with borrowers and maintaining regulatory compliance.

The Positive Impact: Financial Inclusion and Economic Growth

By addressing these challenges and implementing successful strategies, digital lenders can unlock a wave of positive change in emerging markets:

  • Increased Financial Inclusion: Millions of individuals who were previously excluded from traditional financial systems can gain access to credit and financial tools, fostering economic empowerment.
  • Growth of SMEs: Microloans can provide the necessary capital injection for small and medium-sized enterprises (SMEs) to thrive, driving economic growth and job creation.
  • Cashless Society and Innovation: Digital lending can pave the way for a more cashless society, fostering financial innovation and the development of new financial products and services.


The future of lending in emerging markets is undeniably digital. By embracing innovative solutions, digital lenders can be a driving force in financial inclusion and economic development. Policymakers also have a crucial role to play by creating a supportive regulatory environment that fosters responsible digital lending practices and protects consumers. 

By Olayemi Jemimah Aransiola
June 05, 2024
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