Imagine this: you're a superhero, but instead of a cape, you wear a crisp suit and your kryptonite is bad debt. You're a lender in the dynamic Nigerian market, and the stakes are high. Every loan decision is a tightrope walk between empowering dreams and safeguarding your bottom line. But fear not, intrepid lenders! Just like any good superhero, you need intel, and that intel comes in the form of key metrics.

Now, most blogs will drone on about the usual suspects: loan-to-deposit ratio, non-performing loans (NPLs), and the like. But we're not here for the basic training montage. We're diving deep into the unsung heroes, the metrics that lurk in the shadows, whispering valuable insights that can make your lending decisions sing.

Metric 1: The Delinquency Whisperer - Days Sales Outstanding (DSO)

Forget NPLs, DSO is your early-warning system. It tracks how long, on average, it takes borrowers to repay. A rising DSO is like a low hum in the engine of a 1985 Beetles car, a sign of potential trouble brewing. According to a recent Central Bank of Nigeria report, the average DSO for SMEs in Nigeria is 45 days. But here's the kicker: that's just the average. Dive deeper into specific segments, industries, or loan types, and you might find pockets of borrowers teetering on the edge of delinquency. By tracking DSO and understanding its variations, you can intervene early, offer support, and prevent defaults before they become dragons you have to slay.

Metric 2: The Cash Flow Chameleon - Debt Service Coverage Ratio (DSCR)

DSCR is like an X-ray for a borrower's financial health. It shows how easily they can handle their debt obligations. A DSCR above is generally considered healthy, but that's just the bare minimum. Look for DSCR variations across loan types or income brackets. For instance, a microloan borrower might have a lower DSCR than a corporate borrower, but that doesn't necessarily mean they're riskier. Understanding these nuances allows you to tailor your lending decisions and avoid one-size-fits-all approaches. Remember, not all heroes wear capes; some wear financial spreadsheets.

Metric 3: The Portfolio Profiler - Concentration Risk

Imagine putting all your eggs in one basket. That's concentration risk, and it's a recipe for disaster. Track the distribution of your loan portfolio across industries, loan sizes, and borrower types. A portfolio heavily concentrated in one sector is vulnerable to external shocks. Remember the oil price crash of 2014? Yeah, not a good look for lenders with oil-dependent borrowers. By diversifying your portfolio, you spread the risk and become a more resilient lender, able to weather the inevitable storms of the Nigerian market.

Metric 4: The Customer Crusader - Net Promoter Score (NPS)

Forget just tracking loan performance; track borrower sentiment! NPS measures customer loyalty and advocacy. A high NPS score means your borrowers are raving fans, spreading the word about your awesomeness. According to a 2022 PWC report, the average NPS for financial services in Nigeria is 32. But you can be the Iron Man of lending, soaring above the average. Actively track NPS, gather borrower feedback, and use it to continuously improve your lending experience. Remember, happy borrowers are loyal borrowers, and loyal borrowers are your secret weapon.

Metric 5: The Growth Guru - Customer Acquisition Cost (CAC)

Acquiring new customers is like fueling your superhero engine. But how much fuel are you burning? Track your CAC, the cost of acquiring each new borrower. A skyrocketing CAC is a sign your marketing might be missing the mark. Analyze your acquisition channels, experiment with different strategies, and target the right audience. Remember, attracting the right borrowers is just as important as keeping the existing ones happy. Be a magnet for the right kind of borrowers, and your loan portfolio will grow like a well-watered garden.

Read more here on how to successfully scale your lending business: https://hashnode.com/post/clei08w9300070aml2pae58r7

Conclusion:

In conclusion, tracking the right metrics is essential for any lender in Nigeria. By going beyond the usual suspects and focusing on the five unsung heroes we've discussed, you can gain valuable insights, make better lending decisions, and ultimately, become a superhero in the Nigerian lending landscape. Remember, with great power comes great responsibility, and for lenders, that responsibility starts with using the right data to fuel your success. Go forth, track wisely, and lend fearlessly!