Credit bureau TransUnion believes it is possible to enable as many as 500 million financially excluded Africans to join the formal economy, growing gross domestic product (GDP), through analysing mobile network subscribers' behaviour when they buy data or airtime.
TransUnion Africa − in partnership with MTN and its digital platform business Chenosis − has launched TransUnion Telco Data Score, a credit scoring solution that uses mobile phone call data records to help South Africans with limited or no formal credit history gain access to financial services.
TransUnion CEO Lee Naik told ITWeb at the launch of the telco-powered credit score solution this morning that it has already provided insight into the credit worthiness of 1.9 million out of the 16 million South Africans who currently operate in the informal economy, through what he said was “Africa’s first telco data score”.
Bringing an additional 16 million financially excluded South Africans into the formal economy has the potential to add R173 billion to GDP, Naik said.
There are currently 20 million credit-active South Africans, added Fatgie Adams, head of credit risk solutions at TransUnion.
South Africa’s economy is worth R5.5 trillion and National Treasury expects it to grow at 1.4% this year, despite the economy only gaining 0.1% in the first quarter.
The TransUnion data-driven solution has the potential to enable small, medium and micro enterprises to secure loans because banks will have insight into whether they are credit-worthy, noted Adams.
According to Statistics South Africa, the informal economy provides jobs to 19.5% of all working South Africans. Unemployment in the fourth quarter of last year was at 31.9%.
Naik said that enabling smaller companies in South Africa to join the formal economy will mean they don’t need to approach the high-interest rate loan sharks, often called ‘mashonisa loans’.
Adams explained that the bureau can analyse 146 data markers of prepaid subscribers’ behaviour, which includes elements such as how often people buy data or airtime. Other considerations include how long their phone calls last, which makes it possible to gain insight into their financial security.
The traditional way of measuring credit worthiness through, for example, people opening retail accounts to start building a credit score, doesn’t enable those who transact in cash to take out loans, added Adams. “You aren’t really setting that person up for success.”
TransUnion is currently partnering with MTN, although it sees the potential to expand its telco-powered credit score solution to many more countries in Africa, taking advantage of the continent’s smartphone penetration.
The GSM Association estimated in 2023 that unique mobile subscribers in Africa would grow from 527 million to 751 million by 2030. In 2023, the mobile industry contributed 7%, or $140 million (R2.5 billion), to Africa’s GDP − a figure that will grow to $170 billion (R3 trillion) by 2030, it said.
MTN has 297 million subscribers across Africa and is present in 16 countries. Naik said TransUnion aims to piggyback off this, with a focus on Sub-Saharan Africa. “The real prize is to get the 500 million people who are excluded from the formal financial system participating in the economy.”
According to Naik, the bureau is also engaging with the International Finance Corporation (IFC) to expand financial inclusion in Africa. He explained that the IFC’s research shows there is $1 trillion “stored” in mobile wallets across the globe, of which 70% is held in Africa.
This “store” of money should be visible to the formal financial services industry as it provides insight into a different way of measuring whether people are worthy of credit, Naik said. “The dream is to get to all 54 countries” on the African continent.
MTN is responsible for ensuring the data mining is complaint with the Protection of Personal Information Act. The data transfer solution is powered by APIs to ensure it is securely transferred.
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