FairMoney, a Nigerian consumer-focused lending fintech, has reported a significant 62% growth in gross revenue to ₦121.9 billion in 2024, according to its unaudited financial report. The company's profit after tax also rose to ₦5 billion from ₦780 million in 2023.

The growth is attributed to FairMoney's shift towards relying on customer deposits for its lending operations. For the first time since the company began accepting deposits in 2021, customer deposits funded more than 80% of its loan book. This marks a significant shift from 2020, when borrowings accounted for over 80% of its loan book. The company's deposits grew from ₦2.9 billion in 2021 to ₦72.9 billion in 2024.

FairMoney attributes its strong growth in customer deposits to its growing customer base, increased customer loyalty and trust, innovative products, and competitive offerings. The company believes in offering customers attractive rates that provide them with positive real returns, especially in the current high inflationary macroenvironment.

The shift to customer deposits has also led to a reduction in costs for FairMoney, as it no longer needs to rely on borrowings from other sources, such as commercial papers, to loan its customers money. This has improved the company's margins, allowing it to increase its profitability and margins in 2024.

FairMoney generates most of its revenue from interest on loans issued to customers, which rose by 57% to ₦116 billion in 2024. As revenue grew, the fintech also improved its profit margin, increasing from 1% in 2023 to 4.79% in 2024.

However, FairMoney's operating expenses remain high, with a cost-to-income ratio of 78:100. The company's interest expense was ₦10 billion, a slight increase from 2023's ₦8.3 billion. Additionally, impairments on loans and other assets rose by 30% to ₦59.4 billion in 2024, pushing FairMoney's non-performing loan (NPL) ratio to a staggering 86.8% of its ₦68.4 billion loan book.

FairMoney's accounting approach, which treats every loan as impaired until it's repaid, inflates its NPL ratio. However, the company believes that its performance shows a positive trend with significant improvement in the impairment-to-revenue ratio as it continues to enhance its risk assessment models and leverage data to refine its underwriting processes.

Despite the challenges, FairMoney's net interest margin stands at 64.72%, a seemingly healthy level for a lending business. However, this margin relies heavily on high-yield loans with steep interest rates, often around 10% monthly. While this strategy drives short-term profitability, it also heightens credit risk, as reflected in impairments exceeding 85% of gross loans.

FairMoney's assets grew by 55% year-on-year to ₦99 billion, mainly driven by a ₦30.4 billion increase in its loan book in 2024. However, its cash on hand fell by ₦2 billion to ₦8.1 billion, while prepayments (loans paid before due) rose sharply from ₦1.3 billion to ₦9.3 billion.

In conclusion, FairMoney's consumer lending business has strong growth potential, but it faces credit risks. While its rapid growth and high asset yields are notable, its long-term sustainability depends on improving underwriting, risk management, and cost efficiency.