Only 10% Of Nigerian Adults Have Access To Formal Credit — Experts

Only about 10 per cent of adult Nigerians have access to formal credit despite strong demand, a situation driven by lack of collateral, informality and absence of credit history.

This was disclosed by executives of Zitra Investments at a media parley briefing marking the company’s sixth anniversary.

At the briefing, the company’s leadership reflected on Zitra Investments’ growth over the past six years, highlighting key milestones, its commitment to financial inclusion and its strategic priorities for the future.

The managing director, Mr Tunde Obadero said the firm’s focus on small businesses stems from their role as the heartbeat of commerce and enterprise in Nigeria, but noted that access to finance remains their biggest constraint.

“Our mission is to deliver banking services targeted at small businesses,” Obadero said.

Co-founder, Zitra Investments, Mr Femi Okuyelu, who provided context on financial inclusion, said while inclusion is now about 79 per cent, 21 million adults remain financially excluded.

“That combined population is equivalent to Finland, Estonia and maybe Denmark. And we have actually contributed our quota into that financial inclusion story,” he said.

On why credit penetration is still low, Okuyelu said, “only 10 per cent of the adult population have access to credit. People who borrow from family and friends, cooperatives, churches. Why they are not able to access formal credit? Number one, they don’t have collateral. Number two, they play in the informal sector which is not organised. And number three, no credit history and credit records.”

He said Zitra’s response has been to create a Social Business model that onboards informal customers, helps them organise their businesses, monitors cash flow and lends against it.

“What we have created will make it easier for them to access credit. We monitor their cash flow and lend against their cash flow because in this environment, lending against collateral is difficult,” he said.

Director, Chief Olaotan Olamuyiwa who recalled that the idea for Zitra was conceived during COVID-19 when the founders decided to start their own firm after working in different organisations, said the journey has been built on relationships and one major investor who believed in the vision.

Speaking on how small businesses struggle with funding, he noted that many SMEs have their own money trapped with clients.

“You see people that want N5 million to stock up, but they have sold products to other businesses and those businesses are owing them in excess of N20 million. They cannot afford N5 million to finance a transaction because their cash is tied,” he said.

He said products like invoice discounting address that gap, stating that “if you have N20 million in invoices due in 60 to 90 days, you can come to us and say, fund this N1 million project and I will pay when my debtor pays.”

According to Zitra Investments , solving credit access will require moving informal businesses from unorganised, collateral-less operations to organised, cash-flow-based lending supported by financial education and joint liability monitoring.