Nigerians react to N6 billion loss reported by Kuda Bank

Nigerians have reacted to the N6 billion loss recorded in 2021 by Kuda Microfinance Bank, which amounted to more than 7x the N868 million loss it reported in 2020.

Many have criticized the firm for its “bank for the free” strategy to win customers, which goes without charges for transfer within the bank. The strategy also means 25 free transfers to other banks every month with extra free transfers to other banks costing N10 each.

To enable the bank grow its revenue and tilt towards profitability, there are a whole lot of suggestions around changing its strategy.

 

What Nigerians are saying

 @Afolabij1 said, “On Kuda’s financial status (FY21), the bank is doing 3bn revenue while running at 6bn loss (Naira). High spending, high defaulting on overdrafts, and expensive marketing among others contributed to this performance. The bank will have to cut costs, correct its overdraft ratio, and further grow its revenues as it looks to be profitable, going forward.” 

 

 

@ErnieFemiOwen said, “This Kuda Bank madness just goes to validate my point! Product managers with banking experience are very essential to any Startup. We see beyond the product set up Why on God’s green earth will I permit free transfers? I’d rather improve your transfer experience than reduce cost.”

 

 

@IAtalkspace noted, “It was always fairly accurate to say Kuda Bank would lose money in the near term for 3 reasons: one, it’s been competing based on pricing while spending a lot on brand awareness/marketing; two, its debit card failure rate is high, customers say; three, relatively slow to fully rollout” 

 

 

@Carnage4Life said, “Kuda, a Nigerian neo bank, lost of ₦6,092,554,866 ($14,214,681) in 2021. A lot of this was driven by bad loans as their default rate was 69% compared to 4.8% for traditional banks. Cheap credit is a great growth tactic but a horrible business model.”

 

 

@Titoipinmoye Wrote, “At the end of the day, Kuda is not a commercial bank. My question is what problem are they really solving?” 

 

 

What Nigerians should know

• Kuda Bank reported revenue of N3.2 billion in 2021 up from N72.6 million reported in the same period in 2020.
• The 44x rise in revenue in just one year is a result of the aggressive growth and market penetration the bank has deployed during the year as it focused on increasing its loan book.
• In July, the bank in a mail to customers said it will start charging N50 on all deposits of N10,000 or more made into customers’ Kuda accounts in line with the federal government’s stamp duty act.
• It stated that the development would be applicable to deposits on electronic transfers, money added to accounts with a debit card, as well as cash deposits made into account at any of its partner banks.
• Meanwhile, it stressed that it gains nothing from the N50 charges as everything would be remitted to the government’s pocket.