Nigeria’s demographic profile presents a great opportunity for economic transformation and innovation. The financial sector plays a critical role in harnessing these opportunities by creating accessible and demand-oriented financial products for the adult population of 100 million, including the estimated 37 million individual entrepreneurs and the 37 million financially excluded (EFinA, 2019). Financial services that contribute to income growth and employment creation lay the foundation towards a better and more sustainable future.
Historically, microfinance banks in Nigeria replicated the typical processes of commercial banks. Instead of adopting genuine microfinance operating processes and lending methodologies, Esusu lending with ultra-short loan durations, low amounts and daily collection emerged as the predominant income-generating activity of most MFBs in Nigeria. As a result, the social and economic impact of the microfinance industry in the country has remained very limited.
Under the Pro-Poor Growth and Promotion of Employment in Nigerian Programme – SEDIN, AFC partnered with more than 15 microfinance banks to support their organizational development and product innovation. Over the project duration from September 2018 to February 2020, more than 1,300 directors, managers and operational staff were trained on increasing the efficiency of lending operations, loan recovery and portfolio management.
Three new loan product lines were introduced:
1. Business+ : Fixed Assets Finance for Urban MSMEs
2. Agro+ : Agricultural Mechanisation Loan
3. Opportunity+ : Financing Start-Ups
Combined, more than 1,100 loans were disbursed to local businesses and unemployed youth at a total volume of more than NGN 280 million (EUR 847,000 or USD 932,000 at the time of project closure) in 2019 alone with excellent repayment results. For the Agro+ loan product, tools were developed and relationships established with local equipment suppliers. Overall, the 15 partner microfinance banks grew their loan portfolios by 20.14% and number of borrowers by 20.19% in 2019.
The fact that new, demand-oriented products were implemented in a very short timeframe speaks to the capacity of the sector to innovate. There is a very good potential to build on these experiences and set new standards for the microfinance industry by providing financial capital for existing and newly founded MSMEs. In order to activate this potential, it is imperative to continue supporting the transformation of the sector, especially during these unprecedented times, through adopting resilient practices and developing financial products that address the needs of target groups.
Learn more about the newly introduced products: