Deepening access to capital for Nigerian MSMEs during a pandemic

While Nigeria has, so far, seemingly been spared the public health onslaught created by COVID-19, the country has not escaped the urgent economic crisis created by the pandemic. Worse, hardest hit have been the micro, small, and medium enterprises (MSMEs), whose operations are largely traditional and dependent on physical contact with their consumers and partners.

Over 40 million MSMEs exist in Nigeria, employing over 80 percent of the country’s population and contributing about 50 percent of the country’s GDP. Now, the biggest threat to the survival of these businesses central to the economy lies in their physical approach to interacting and transacting, which has left them unprepared to take advantage of the opportunities offered by digitization as well as vulnerable to the lockdowns and distancing measures intended to stave off the health crisis.

Financial exclusion—especially among micro-entrepreneurs in the informal sector— was a national concern even before COVID-19 made in-person interactions hazardous. To address this issue, prior to the pandemic (as far back as 2017, in fact), large-scale microcredit interventions such as the Government Enterprise and Empowerment Program—in which the Bank of Industry (BOI) participates—have been targeting four economic segments—market traders, artisans, youth, and farmers—for increased financial inclusion. Technology has been key: By leveraging the power of data, biometrics, and mobile wallet systems, and with an extensive network of over 17,000 agents, BOI has been able to identify, target, and deliver micro-credit to over 2.4 million MSMEs across Nigeria. Remarkably, over 52 percent of the beneficiaries are female. In the process, the bank has onboarded an additional 500,000 beneficiaries onto the formal financial system—essentially using technology to break the barrier of access to finance and financial services for underserved demographics.

At the onset of the pandemic, our bank’s immediate objective was to ensure business continuity by deepening our MSME activities through the provision of innovative lending solutions to new customers. Through our microcredit platform, BOI’s agent network—spread across the country—operate as proxies enabling beneficiaries to efficiently interact with technology and have their businesses captured and digitized in records. These agents, equipped with smartphones loaded with the bank’s data-driven applications, engage informal entrepreneurs by capturing their Know-Your-Customer details, profiling their business, tracking transaction histories, and monitoring income and spending patterns—thus providing financial solutions tailor-made to boost financial literacy, improve credit worthiness, and support their micro-businesses with funds, especially during these difficult times.

These efforts are just the beginning of a long journey of large-scale digitization, driven by big data and continually improved algorithms, to deliver tailor-made interventions to MSMEs across the length and breadth of Nigeria.