By Chinwendu Obienyi
FinancE has been described as the lifeblood of transactions and commerce.
With the understanding that money makes the world go round, technology certainly makes it spin faster.
However, MSMEs- a sector representing 96 per cent of businesses in Nigeria, are sometimes not at the frontline in terms of consideration for credit facilities.
Historically, the skepticism by financial institutions, the inability of the MSMEs to get their ducks in a row, or most times, a combination of both are among the reasons why financing remains a missing link in the growth of businesses.
According to the SMEDAN/NBS 2020 Survey, the Nigerian economy has about 39.7 million MSMEs, but the sector has not been able to deliver on its potential owing to several challenges.
Some stakeholders have said that if well nurtured and structured appropriately, the Nigerian MSME sector has the potential to create jobs, increase productivity and income, and reduce poverty.
But the key elephant in the room for MSMEs has been access to finance. This has proved the biggest factor inhibiting the sector’s capacity from making significant contributions and playing the expected and vibrant role in the economic growth of the country.
Despite the proliferation of credit providers in Nigeria – both regulated and non-regulated, the financing gap for MSMEs in Nigeria still persists. According to a 2022 report from Enhancing Financial Innovation & Access (EFInA), the factors responsible for the financing gap include; Lack of credit history & rating, inability to meet up with collateral requirements, manual/rigid credit reporting system, and lack of proximity to financial service access points.
These aforementioned factors mean that the financing gap experienced by MSMEs has delayed the actualisation of the huge potential making the economic and social impacts of the economic crisis more severe and long-lasting.
It is also clear that there is a root cause for this situation and that is the fact that Nigeria is yet to create an effective digital ecosystem which is much needed to lay the foundation for innovation – the cornerstone for a revolution in much talked about financial inclusion.
Delivering a keynote address titled “Technology as an enabler for driving access to finance for MSMEs in Nigeria” during a recent stakeholder session, Chief Economist at the Development Bank of Nigeria, Joseph Nnanna, said, Nigeria is yet to tap into new and main technology innovations that are having the biggest impact on the financial services sector.
According to Nnanna, policy options that address the challenges MSMEs face and promote a more conducive environment for facilitating MSME access to finance through digital technologies should be considered.
He said, “These options should be considered across core areas which includes developing a strong digital infrastructure base, promoting a literate, informed public with privacy protection and cyber risk management as well as building open and competitive markets, in which partnerships are encouraged, to accelerate responsible innovation”.
For his part, the Co-Founder, Opay Nigeria, Olu Akamu, said there is a need for the incoming administration to eke out ways to expand digital infrastructure for disbursing government intervention funds to include Fintechs as they have created more digital footprints in the informal MSME sector.
He also added that there should be regulations enforcing the digitisation of disbursements of intervention funds for the informal sector.
“The government should look at building a robust digital identity infrastructure by accelerating the harmonisation of various digital ID systems and expanding access to the infrastructure required for ID registration.
While the success of linking markets depends on the issue of a centralised ID system, access to information about the MSMEs sector should be accessible to a wide range of providers.
Regulations administering open banking in Nigeria should be implemented and strategically coordinated such that it facilitates MSMEs’ access to a variety of formal financial services”, Akamu said.