Omolabake Fasogbon
For millions of Nigerian small business owners, the question, “Do you have collateral?” has long been the end of the loan conversation.
The demand for collateral (an asset pledged as security in case the borrower defaults), such as a land title, car, or property in the borrower’s name, has made access to credit from traditional banks seem like a mirage.
Yet, capital remains the lifeblood of business, from the food vendor on the street to the tycoon who owns a business conglomerate.
According to the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), small and medium enterprises (SMEs) make up about 96 per cent of Nigerian businesses and contribute nearly half of the country’s Gross Domestic Product (GDP), but financing remains their major hurdle.
The World Bank estimates that more than 40 per cent of Nigerian SMEs cite lack of credit as a major constraint to growth, as most formal lenders still require collateral.
This reality, however, is beginning to shift, especially with fintechs springing up.
Every digital transaction now leaves behind a financial trail. Through bill payments, airtime purchases, POS receipts on the phone and other digital activities, one is unknowingly building a financial profile which lenders, particularly microfinance institutions and digital lending platforms, use for lending decisions.
They now use bank inflows, BVN verification, repayment history and mobile transaction patterns as the new collateral. Borrowers who repay consistently are rewarded with higher loan limits and better terms.
Chief Executive of Regxta, a microfinance lender serving underserved communities, Bello Rukayat, disclosed that digital payment records help lenders make decisions based on evidence rather than assumptions.
She reiterated that transaction data provides insight into business performance, revenue patterns and cash-flow stability, making it easier to assess creditworthiness.
“This is the core of what is now called data-informed lending -using a borrower’s transaction history as a substitute for the collateral they do not have.”
In reviewing loan applications, Rukayat said digital lenders examine several signals, including how regularly money comes into a borrower’s account, consistency of transaction volumes, and repayment history where the borrower has previously accessed credit.
“Digital records allow us to analyse daily, weekly and monthly transaction patterns. We can identify peak sales periods, revenue consistency, expense behaviour and even customer concentration risks,” she added.
The National Identification Number (NIN) is also becoming central, tying borrowers to a verifiable identity and reducing fraud. Credit bureaus such as CRC Credit Bureau and First Central further strengthen the system by recording repayment data from banks and loan apps, creating a trail that future lenders can access with consent.
Hence, SME owners seeking loans without collateral now have several options to tap into.
Microfinance banks such as Lapo, Accion and Regxta lend to businesses without property, basing assessments on cash flow and repayment character. Digital platforms including Carbon, Fair Money and Moniepoint approve loans using BVN and transaction history, often within minutes.
Challenges, however, remain. Many businesses still operate largely in cash and leave little or no digital record behind.
According to reports, approximately 26 per cent of Nigerian adults are financially excluded, with no access to useful, relevant and affordable formal financial services such as payments and savings.
“For this category without a verifiable transaction history or a confirmed identity, they are perceived as higher risk, even when their businesses are viable.
“Our response in this case is to onboard such customers physically, educate them on digital tools and gradually build their transaction history before introducing credit. It is a slower path, but it exists,” she stated.
For Nigerian SMEs, therefore, the message is that their transaction history now matters as much as collateral. Consistent use of digital payment channels and timely loan repayment are simple pathways to accessing credit.