Evaluating Lidya: Hope for Small Businesses or Just Hype?
By John Okafor
As someone who’s been in the thick of hustling on this continent, I can tell you for free that access to business loans in Africa is often harder than a rock. Many small businesses, especially those run by young people, struggle to scale because the traditional banking system just doesn’t trust us. “No collateral? No loan.” That’s the song we’ve been hearing for decades. So when I first heard about Lidya, I was intrigued. A platform that provides business loans and uses technology for credit scoring? It sounded like a fresh idea, but as you know, not everything that glitters is gold.
I’ve taken the time to look closely at Lidya, not just on paper but through the lens of someone who understands the struggles of entrepreneurs in Africa. Here’s my honest take.
What is Lidya?
For those who may not know, Lidya is a fintech company that focuses on providing small and medium-sized businesses with quick loans. They claim to use data-driven credit scoring, bypassing the need for traditional collateral. The platform works by assessing your business transactions, cash flow, and other data to determine your creditworthiness. Their promise? Fast loans, no paperwork, and minimal hassle.
Lidya started in Nigeria but has since expanded to other markets, including Europe. But for this review, I’ll keep my focus on its operations in Africa, where the need for such services is the most urgent.
The Good Stuff
Let me not even lie, Lidya is solving a real problem. If you’ve ever tried getting a loan from a traditional bank in Nigeria, you’ll know it can feel like begging. They’ll ask for your great-grandfather’s land documents at this rate. Lidya cuts through all that noise.
1. Speed and Convenience
The first thing you’ll notice is how fast the process is. Once you’ve signed up and provided the necessary business data, Lidya can approve your loan in as little as 24 hours. For a lot of small business owners who need urgent capital—maybe to restock supplies or pay workers—this speed is a game-changer.
2. No Collateral Required
This is a big deal. Most banks will ask for collateral that’s worth more than the loan itself. Lidya’s data-driven approach eliminates that hassle. They rely on your transaction history and cash flow to determine whether you’re eligible. For many small businesses that don’t own land or expensive assets, this is a breath of fresh air.
3. Tech-Driven Credit Scoring
The idea of using technology to assess creditworthiness is innovative. Lidya claims to analyze thousands of data points to determine if a business is likely to repay a loan. For people like me, who are tired of being judged solely by outdated systems like physical collateral, this is a welcome change.
Where Lidya Falls Short
Now, let’s talk about the not-so-glamorous side of Lidya. Because as they say in pidgin, “Every day no be Christmas.”
1. Interest Rates That Can Make You Sweat
Here’s the thing: Lidya’s loans are fast, but they don’t come cheap. The interest rates can be quite high, sometimes reaching double digits monthly. For a small business that’s already struggling, this can be a heavy burden. You might find yourself in a situation where you’re using most of your profits to pay back the loan, leaving very little for growth.
For example, imagine you borrow ₦500,000 for three months and end up paying back ₦600,000. While the convenience is nice, the cost can be prohibitive. This is something Lidya needs to address if they want to truly empower small businesses.
2. Limited Loan Amounts for New Users
When you first sign up, the loan amounts you can access are relatively small. This makes sense from a risk perspective—they’re trying to avoid giving out large amounts to people they don’t yet trust. But for someone who needs significant capital to make a real impact, this limitation can be frustrating.
3. The Data Barrier
Lidya relies heavily on your business data for credit scoring. While this is innovative, it also means that businesses operating primarily in cash or without proper records might struggle to get approved. And let’s face it, a lot of small businesses in Africa still don’t use digital systems to track their transactions.
4. Lack of Personalized Support
One thing I noticed is that while Lidya’s platform is efficient, it lacks the human touch. African businesses are unique, and sometimes you need someone to understand the peculiarities of your situation. The automated system doesn’t always account for these nuances, which can leave some users feeling frustrated.
My Personal Perspective
As someone who’s seen both sides of the coin, I think Lidya is a step in the right direction, but it’s not the ultimate solution. I once ran a small poultry farm, and I remember how hard it was to get capital to expand. If Lidya had been around back then, I probably would’ve given them a shot. But knowing what I know now, I’d approach with caution.
The high interest rates are a major drawback for me. Yes, the loans are fast, but at what cost? If you’re not careful, you could end up in a debt cycle that’s hard to escape. That said, I’d still recommend Lidya to businesses that need quick cash and are confident they can repay within the short timeframes.
Who Should Use Lidya?
If you’re a small or medium-sized business owner who has clear records of your transactions and needs quick access to funds, Lidya might be worth considering. But if your profit margins are already slim, or you’re unsure about your ability to repay on time, you might want to think twice.
Lidya is particularly useful for businesses with seasonal demand. For example, if you run a shop that sells festive goods, and you’re sure you’ll make a profit during the holiday season, then taking a short-term loan to stock up might make sense.
Suggestions for Improvement
Lidya has a lot of potential, but there’s room for growth. Here are some things I think they could work on:
Lower Interest Rates: If Lidya can find a way to reduce their rates, they’ll become more accessible to a wider range of businesses.
Flexible Repayment Plans: Not every business has the same cash flow cycle. Offering more flexible repayment options could make a big difference.
Educational Resources: Many small business owners don’t fully understand the implications of taking out a loan. Lidya could provide educational resources to help users make informed decisions.
Human Support: Adding a layer of personalized customer service would go a long way in building trust and addressing unique challenges.
Lidya is like that friend who always shows up when you’re in a tight spot. They might not be perfect, but they’re there when it matters. For African entrepreneurs, especially those tired of the bureaucracy of traditional banks, Lidya offers a lifeline. But as with any financial tool, it’s important to use it wisely.
If you’re considering Lidya, my advice is simple: crunch the numbers. Make sure you understand the terms fully and have a clear plan for repayment. After all, a loan should help your business grow, not bury it in debt.
So, what’s your take? Ever used Lidya or a similar platform? I’d love to hear your stories and opinions.