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Nigerians React To N6 Billion Loss Reported By Kuda Bank

By Adedayo Said

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.

@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?” 

Also, Facebook users have taken to social media to express their views on the report.

Fidelity Ozuawala said, “How do they pay their recurrent expenditure with this huge loss. I pray they do better this new year?”

Emmanuel Awobajo wrote, “Those who don’t know about the start-up system will complain or be worried, it’s part of the process, they might even lose more in the coming year cos they’re still growing. It’s part of the growth process you have to make loses at the same time you’re trying to build a sustainable business model.”

Faith Aderonke noted, “They should go back to the drawing board and re-strategize if they want to recoup their loses.”

Kingsley Akpan said, “It gave itself bad PR. It started locking account of users, inviting them and getting the EFCC to arrest them with no proof of fraudulence. That followed with a wave of anti-Kuda campaign by youths on Twitter and Facebook. It would feel it for a long time to come unless it does something drastic to increase it’s PR outlook with youths.”

Joshua Okorie noted, “Tech Cabal you understand there is what is called fallacy of accent: I should expect a startup raising money like Kuda to have many of the funding raised go to into their investing and financing activities in their cash flow and this will hardly match with revenue – thus taking longer to break even. If the difference between revenue and sum of costs of goods sold and operating cost is N6 billion then one should be concerned.”

He added, “Except you’re saying Kuda spent most of its money on ‘current expenses’ e.g. marketing on billboards.

Others have also commented via other social media platforms.

Acidosis said, “kuda will survive. It’s not that deep. I think the bank’s high operating expense came from its aggressive marketing and advertising in 2021. The bank must have achieved its goal (or learnt a lesson); reason they’re unlikely to invest in BBN again.

“At 4,315% increase in revenue in just a year, the bank is somewhat positioned for greatness but I hope this news won’t cause panic withdrawal”

Hedonido said, “kuda houses a ton of my money for day-to-day transactions. They’re in my opinion the best bank right now in terms of functionality and reliability. And I’ve tried lots and lots of banks, traditional and fintech.

“The so-called loss isn’t anything to talk about, when the emphasis is on their massive growth rate as you rightly mentioned.”

tensazangetsu20 noted, “Entrepreneurship is not that glamorous and the fact that you can code doesn’t mean you would be a great entrepreneur. There’s a lot to know like sales, marketing, assembling a team. You also need funds to push your product into the hands of end users. kuda has lost over 6 billion naira and most of that money was on advertising. Someone who struggled to save a laptop where do you want him to get the funds to build a product, launch, get users and scale.”

What you 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. 

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