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FairMoney's Revenue Growth: A Testament to Fintech's Evolution
In an impressive leap, FairMoney, a Nigerian consumer-focused lending fintech, recorded a remarkable gross revenue of ₦121.9 billion in 2024, marking a significant 62% increase from the previous year. This surge is predominantly attributed to the company’s strategic pivot towards deposit-led lending. By funding over 55% of its loans through customer deposits, FairMoney has successfully reduced its historical reliance on external borrowings, which plummeted from over 80% in 2020 to less than 10% in 2024.
Why Customer Deposits Matter in Fintech
This shift to a deposit-focused model not only enhances FairMoney’s financial stability but also improves profit margins. By cutting down on costs associated with borrowing from commercial sources, FairMoney can offer its customers more competitive rates, ensuring they receive attractive returns, an essential factor in the current high-inflation environment.
Revenue Breakdown: Loans and Non-interest Income
The company's revenue is driven primarily by interest on loans issued, which increased by 57% to ₦116 billion. Despite a rise in operating expenses amounting to ₦41 billion, FairMoney's profit margin improved from just 1% in 2023 to 6.5% in 2024. This demonstrates the power of effective resource management and strategic funding structures in enhancing profitability.
Navigating Challenges: Impairments and Loan Provisions
FairMoney's journey has not been without hurdles. The fintech experienced a 30% rise in impairments on loans and other assets, leading to an impairment ratio of 45.7%. However, this figure may be viewed differently due to FairMoney’s accounting methods, which classify loans as impaired until repayment. Through proactive measures in risk assessment and customer profiling, the company aims to improve its assessment models, showcasing a commitment to ethical lending practices.
The Future of FairMoney and the Broader Fintech Landscape
As digital transformation continues to reshape the African financial landscape, FairMoney's growth serves as an important indicator for other startups and investors in the fintech sector. The blend of customer deposits with innovative product offerings may well inspire a new wave of deposit-led models across the continent, signifying a shift towards more sustainable and responsible lending practices.
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