Africa’s banking system was built around one assumption: the best borrowers earn regular salaries. But on a continent where most people earn their living in the informal economy, that assumption leaves millions of creditworthy consumers outside the financial system.

Banks are not abandoning the payslip. They are widening the pool of information they use to assess borrowers, drawing on mobile money transactions, telecom activity, point-of-sale (POS) payments and other digital financial footprints to evaluate people who have long been excluded from formal credit.

That wider credit net reflects the reality that Africa’s economies are powered by informal businesses, gig workers, traders and entrepreneurs whose incomes rarely arrive as monthly salaries. 

Traditional underwriting was designed for borrowers with formal employment contracts, bank statements and established credit histories. It struggles to capture how millions of Africans actually earn, spend and manage money.

For lenders, that has created a costly blind spot. Africa faces a $300 billion financing gap for consumers and small businesses. 

Rather than replacing traditional credit assessment, banks are supplementing it with new data sources that provide a fuller picture of a customer’s financial behaviour. The result is an evolution in underwriting that recognises creditworthiness is not limited  to formally employed workers.

“We know there is vibrant economic activity across the continent, but that doesn’t translate into what lenders can underwrite,” Dalumuzi Mhlanga, chief executive officer (CEO) of Notto, an African licensed and regulated alternative credit bureau, told TechCabal on Wednesday. 

“The disconnect lies between how people actually earn incomes, spend and save in the informal sector and how banks process that as part of their underwriting.”

Alternative credit scoring aims to close that gap. 

According to Mhlanga, instead of relying solely on repayment histories and bank records, these models analyse behavioural patterns such as regular deposits into mobile money wallets or bank accounts, recurring bill payments and spending patterns. 

The idea is that consistent financial behaviour can indicate a person’s willingness and ability to repay a loan, even if they have never held a credit card or bank loan.

Notto says it has analysed more than one billion transaction records, built credit scores for more than eight million consumers and generated credit assessments for over five million mobile money users across South Africa, Zambia and Zimbabwe.

The company believes the approach has delivered tangible results. It stated that before its models were introduced, only around 1% to 2% of the five million consumers it assessed had access to formal credit. 

Within about a year of operating, lending expanded almost tenfold while non-performing loans remained below 4%.

“We are not going to introduce risk,” Mhlanga said. “We have been able to identify consumers and small businesses that otherwise wouldn’t have qualified, extend credit to them, but still deliver very low non-performing loans.”

Banks say the industry’s thinking is evolving in the same direction.

“Traditionally, banking has relied on salary as proof of a customer’s ability to repay,” said Nako Bolote, Access Bank’s Group Head of Cross-Border Payments and Remittances, Africa. 

“The problem is that formal employment represents only a small portion of the population. Banks are now looking for ways to serve the informal sector, where we know money is flowing.”

He told TechCabal in an interview on Wednesday that lenders are working with mobile network operators, whose data provides insights into customers’ financial activity that conventional banking records cannot capture.

“Telecom data doesn’t necessarily show salary income, but it does provide visibility into customers’ financial activity and usage patterns,” said Bolote. “Through those partnerships, we are able to better understand customers’ cash flows, even when they’re informal, and extend credit accordingly.”

The same thinking is being applied to small businesses and gig workers. Banks are analysing POS transaction histories to understand business cash flow, while earnings data from digital platforms can help demonstrate the consistency of freelancers’ incomes. 

The objective is not to replace traditional affordability assessments but to complement them with evidence that reflects how people participate in modern economies.

For Bolote, the significance extends beyond technology.

“The people being brought into the formal financial system through these new approaches to credit assessment are exactly the underserved communities we have been trying to reach,” he said. 

“Formal employment isn’t the only legitimate way people earn a living.”

The payslip will remain part of the lending equation. But as banks widen their view of creditworthiness, millions of Africans whose financial lives have existed outside formal banking may finally come into focus.

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