Business Idea #6 – Car Repair, Home Improvement Lending via Artisan Contractors

This daily series focuses on business ideas for those looking to launch new ventures in Nigeria (and Africa in general). The short ideas are archived here.

The Problem

Cars break. Homes need improvement. Finding funding to do some of these things is hard in Africa. Largely, you either have the cash or you will be forced to abandon the project. It does not have to be that way.

The Opportunity

There is a clear need to provide lending in some of these areas. The plan will be to make it possible for a fintech to provide on-the-spot financing for repairing cars, home improvements, etc by using a network of the contractors that do the job for end-borrowers. By using these contractors to lend to borrowers, the fintech can reduce default rate since the contractors know the customers better. There is a possibility to deliver great service to customers, and yet profiting at two levels (i.e. both sides) of the deal with no risk of default.

Action Roadmap

A bank will be the lender while the fintech will be the underwriter. If fintech has funding, it can handle the lending itself. It will work with contractors like mechanics and home renovators to deliver services to customers who need loans to fix their cars and homes.

There is aggregation construct here: the fintech is the aggregator with the contractors working for it. For the fintech, the business delivers double-side profits at near-zero default rates. The fintech has to focus on recruiting the contractors while the contractors look for the borrowers. Typically, these are customers that call these contractors for services. The contractors will present the financing options to help the borrowers finance their needs. The contractor will be the executor of the service. I present the full process flow here.

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