Kuba Microfinance Bank, one of Nigeria’s leading fintech startups, has incurred a loss of more than N6 billion.
According to the financial report of the bank, it incurred a loss of N868 million in 2020. This indicates that between FY 2020 and 2021, Kuda Bank’s losses increased by more than 600 percent.
Investors King learnt that Non-Performing Loans (NPL) significantly contributed to the loss. The bank’s Non-Performing Loan stood at 69 percent as at the end of 2021 financial year.
A closer analysis of the company’s financial report indicated that its revenue increased by 4,315 percent from N72.6 million in 2020 to N3.2 billion in 2021. However, after every expense had been deducted, the company closed the year at a net loss, with high credit loss and operating expenses contributing the most to the loss.
In the last financial year, Kuda bank extended a lot of bad credit through its overdraft product. This ate into its balance sheet and affected the bank’s profitability.
It could be recalled that in March 2021, Kuda bank piloted its overdraft product with over 2,500 active users. By June, the bank claimed that the product had hit 50,000 users weekly.
At the end of the second quarter of 2021, Kuda bank had disbursed $20 million worth of credit to over 200,000 qualified users, with a 30-day repayment period.
Investors King discovered that a high proportion of the credits were disbursed to unqualified users.
One of the users who goes by the name Frank Joseph disclosed that he was qualified for an overdraft of N20,000 within a few months of using Kuda bank. He wondered why he has not been qualified for any overdraft with a bank he has been using for almost 20 years.
Analysts have advised Kuda bank to revamp its overdraft risk assessment or scrap it totally. However, some experts believed that the total scrapping of the credit facility could do some brand damage to Kuda bank.
It’s worth mentioning that traditional banks generate a big part of their revenue from lending. While Kuda bank’s Nonperforming Loan Ratio stood at 69 percent in 2022, the average ratio in the traditional banking industry dropped to 4.8 percent within the same period.