Uber, a popular ride-hailing phone app, is helping people in poverty obtain what is usually out of reach: a car. Drivers, like Michael Muturi in the Kenyan capital of Nairobi, have a chance to buy a new car through a bank loan program that uses data from Uber to assess risk. Muturi is one of many drivers who will be able to obtain car loans in Africa, changing the way people affected by poverty finance their cars around the globe.
“I felt like I won a jackpot,” exclaimed Muturi, after receiving an Uber message in June telling him his profile was good enough to apply for a car loan. “With my own car I will be able to afford a good house, take my kids to a good school, and save for the future.”
Kenya’s Sidian Bank has approved over 10 car loans for experienced Uber drivers using a model Uber hopes to expand across Africa, where poor customer data limits lending.
Uber’s mission is very different than that of car companies: the app wants more Ubers on the road by any means necessary, and the newer the car, the better.
Getting car loans in Africa is a major challenge for people and small business owners. Few people have bank accounts or a credit score to go with them so lenders can assess risk.The first credit rating bureau opened in Kenya in 2010. A lack of credit history is one of the reasons why just 4.4 percent of the 45 million population have a personal bank loan.
“Sidian’s financing is focused more on the applicant’s proven Uber experience than on his or her credit history,” says the bank CEO.
Uber’s app is a way for Uber drivers to obtain this data. The app registers customer satisfaction and provides the bank with information it needs to decide whether to offer Uber drivers relatively cheap loans to buy their own cars. To obtain a car loan from Sidian Bank, a driver must accumulate at least 500 trips with Uber and have an average passenger rating score of at least 4.6 points out of five.
Uber created Xchange Leasing last year as wholly-owned Uber subsidiary. For a $250 deposit, drivers in the United States can lease a new midsize or economy car. The car can be returned at any time with two weeks’ notice, and the customer just loses the deposit with no further obligations.
Similar to the ride-sharing business, auto financing also requires country-specific solutions. Uber started Lion City Rentals in Singapore, a subsidiary rental company, while in countries such as Kenya, India, and China it is mostly working with third parties like Sidian Bank.
By the end of 2016, Uber expects that the vehicle solutions programs will have provided 100,000 cars globally.
Uber is just one of many apps that are helping people improve their lives in poverty by making it easier for people to obtain car loans in Africa.
– Alexis Pierce