Fintechs can close SME funding gap – Monibac CEO

Despite the rapid growth of fintech in Nigeria, access to credit remains a challenge for many small businesses and individuals without formal financial histories. Chief Executive Officer of Monibac, Makua Eyisi, tells JUSTICE OKAMGBA how digital lending platforms, partnerships, and alternative credit scoring can help bridge the gap

What are the major challenges to financial inclusion in Nigeria, particularly in rural areas?

One of the biggest challenges to financial inclusion in Nigeria, particularly in rural areas, is the lack of infrastructure. Many remote communities still struggle with basic amenities such as electricity, internet connectivity, and access to banking services.

Without these foundational services, it becomes difficult for people to access digital financial products or even basic banking services. Even where mobile phones are available, poor network coverage limits what people can do with their devices.

Another significant barrier is low financial literacy. Many people in rural areas have little knowledge of how financial products work, which makes them hesitant to engage with banks or fintech platforms. There is also a widespread lack of trust in formal financial institutions, especially among those who have relied on informal savings groups or cash-based systems for years.

Income levels in rural areas also play a role. Many people live on daily incomes and do not see the need to open bank accounts or use digital wallets. Without consistent income, the idea of saving or accessing loans feels out of reach.

Addressing these challenges requires a combination of infrastructure development, targeted financial literacy programmes, and products that cater for the realities of low-income earners.

How can fintech help address the credit gap for SMEs in Nigeria?

Fintech has the potential to unlock access to credit for small and medium-sized enterprises in ways that traditional banks cannot. One of the primary ways is through digital lending platforms that simplify the loan application process.

Unlike traditional banks that require collateral and extensive paperwork, fintech platforms use technology to assess creditworthiness quickly and disburse loans within hours.

Fintech companies are leveraging alternative data such as mobile money transactions, utility bill payments, and purchase histories to evaluate borrowers.

This approach makes it possible to extend credit to businesses that may not have formal financial records but demonstrate consistent cash flow through digital transactions. By using data points like airtime purchases or regular savings habits, fintech platforms can create credit scores for previously excluded businesses.

Another way fintechs are addressing the credit gap is by offering smaller, short-term loans that are more accessible to SMEs. Many small businesses need quick access to funds for working capital, inventory purchases, or emergency expenses.

Digital lending platforms can meet this demand by offering flexible loan amounts with repayment terms suited to the business’s cash flow.

Partnerships between fintech companies and payment service providers can also streamline the loan application process. For example, integrating loan applications directly into mobile money wallets or point-of-sale systems can make it easier for small businesses to apply for credit while they carry out their daily transactions.

What role should technology play in improving access to loans for Nigerians?

Technology is a game-changer when it comes to improving access to loans for Nigerians, particularly for underserved populations. One of the most important roles technology plays is in automating the loan application and approval process. Digital lending platforms can assess applications in real-time, making it possible to disburse loans within minutes rather than days or weeks.

Artificial intelligence and machine learning are also helping fintech companies build more accurate credit scoring models. By analysing a wide range of data points, including social media activity, payment patterns, and location data, these algorithms can predict creditworthiness even for customers without formal financial histories. This approach allows lenders to offer loans to people who would otherwise be excluded by traditional credit assessment methods.

Mobile technology is another critical factor. With mobile penetration increasing across Nigeria, mobile apps and USSD codes make it easier for people to apply for loans, check balances, and make repayments without visiting a physical branch. This convenience is particularly important in rural areas where bank branches are scarce.

Blockchain technology also holds promise for the future of digital lending. By creating transparent, tamper-proof records of loan agreements and repayment histories, blockchain can improve trust between lenders and borrowers while making it easier for individuals to build credit histories that are recognised across different financial institutions.

How can fintech companies build trust among Nigerians, especially in rural areas?

Building trust is one of the biggest hurdles for fintech companies, especially in rural communities where people are often sceptical of formal financial systems. One effective approach is to partner with trusted community leaders such as religious figures, traditional rulers, and local cooperatives. When financial products are introduced through familiar faces, people are more likely to adopt them.

Agent banking models also help bridge the trust gap. Deploying local agents who serve as the face of the fintech company in their communities helps create a sense of familiarity. These agents not only process transactions but also offer guidance on how to use digital financial services.

Transparency is another key factor. Fintech companies must clearly communicate the terms and conditions of their products, including interest rates, fees, and repayment schedules. Hidden charges or unclear terms can quickly erode trust.

Customer education is equally important. Regular financial literacy sessions delivered in local languages can help people understand how digital financial products work and how they can benefit from them. When people feel empowered with knowledge, they are more likely to embrace new technologies.

Providing consistent, reliable service is perhaps the most powerful way to build trust. If users experience seamless transactions, timely loan disbursements, and quick dispute resolution, word will spread within the community, encouraging more people to adopt the service.

What do you think about the regulatory environment for fintech in Nigeria?

Nigeria’s fintech sector has experienced significant growth in recent years, thanks in part to regulatory frameworks that encourage innovation. The Central Bank of Nigeria has introduced several policies to promote digital financial services, including the Payment Service Banks framework and the National Financial Inclusion Strategy. These initiatives have opened up opportunities for fintech companies to serve previously excluded populations.

However, the regulatory environment still presents some challenges. One of the biggest issues is the lack of harmonisation between different regulatory bodies. Fintech companies often have to navigate multiple regulations from the CBN, the Nigerian Deposit Insurance Corporation, the Securities and Exchange Commission, and the Nigeria Data Protection Bureau. This can create confusion and slow down innovation.

The high cost of obtaining licenses is another hurdle. For smaller fintech startups, the fees associated with obtaining payment licenses or microfinance licenses can be prohibitive. Introducing a tiered licensing system with lower fees for early-stage startups could encourage more players to enter the market.

Data privacy and cybersecurity regulations are also becoming increasingly important as more financial services move online. Striking the right balance between consumer protection and innovation will be crucial for the future of the sector.

How can Nigeria address the high rate of loan defaults in the fintech space?

Tackling loan defaults requires a combination of better risk assessment, borrower education, and stronger enforcement mechanisms. Expanding credit bureau coverage is one of the most effective ways to reduce defaults. When borrowers know that their repayment behaviour will affect their future access to credit, they are more likely to prioritise loan repayments.

Fintech companies should also invest in credit education, helping borrowers understand how loans work and the importance of timely repayment. Many defaults happen not because borrowers lack the ability to repay, but because they don’t fully understand the terms of the loan or the consequences of default.

Community-based lending models can also help improve repayment rates. By organising borrowers into small groups where members guarantee each other’s loans, fintech companies can leverage social pressure to encourage timely repayments.

Flexible repayment options tailored to the borrower’s cash flow patterns can also make a big difference. Weekly or daily repayment schedules for traders with daily income streams are often more effective than rigid monthly payments.

What’s your view on the role of partnerships in scaling financial services in underserved regions?

Partnerships are essential for scaling financial services in underserved regions. No single organisation can address all the barriers to financial inclusion on its own. By collaborating with telecom companies, fintech platforms can leverage mobile networks to reach customers in remote areas.

Partnerships with agent banking networks help bring financial services closer to communities. Through strategic alliances, fintech companies can deploy thousands of agents who act as touchpoints for digital financial services.

Collaboration with NGOs and government agencies can also play a vital role in delivering financial literacy programmes. When fintech companies work with community organisations, they can gain better insights into the needs of the population and design products that meet those needs.

Partnerships with large payment platforms like Paga or OPay can also help fintech companies expand their reach quickly without having to build extensive infrastructure from scratch.

How do you think fintech can contribute to Nigeria’s economic development?

Fintech is a powerful driver of economic development in Nigeria. By providing access to credit, savings, and payment solutions, fintech platforms help small businesses grow, create jobs, and improve livelihoods.

Digital lending platforms empower small businesses with the capital they need to expand operations, purchase inventory, or cover short-term expenses. These loans can have a ripple effect, creating more jobs and boosting local economies.

Fintech also plays a critical role in driving financial inclusion, which is directly linked to poverty reduction. When people have access to savings accounts, insurance, and credit, they are better equipped to weather financial shocks and invest in income-generating activities.

Moreover, fintech platforms that promote savings and investment help build a culture of financial discipline. This cultural shift can have long-term benefits for economic stability and wealth creation.