Licensed money lenders in Nigeria are calling for stronger regulations and greater technological integration to boost the country’s economic growth. These financial institutions have become crucial in providing credit to underserved segments, particularly Nano, Micro, Small, and Medium Enterprises (NMSMEs) and artisans who often lack access to traditional banking services.
Gbemi Adelekan, President, the Money Lenders Association of Nigeria (MLA), declared that licensed money lenders do not only provide credit facilities to artisans and micro businesses but also to previously financially excluded individuals spread across the country.
He, however, stressed that there have to be consequences for borrowers who have refused to meet their loan commitments. According to him, lenders and borrowers can be better protected if the regulations are comprehensive and better enforced to ensure a good credit structure in the economy.
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“Money Lenders have stepped into the gap using technology and other alternative sources of data to support businesses including Nano businesses without collateral. We, however, need the support of the government in terms of recovery due to our level of risk in supporting NMSMEs.”
Adelekan stated that for Money Lenders in Nigeria to continue to thrive, they must embrace digitalisation, develop risk management strategies, offer flexible repayment terms and build strategic partnership for growth and support.
As of January 2024, personal credit in Nigeria surpassed three trillion Naira (approximately $2.1 billion), significantly contributing to a financial inclusion rate of over 70 percent.
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The Money Lenders Association of Nigeria (MLA) reports a more than 200 percent increase in licensed money lenders, from about 100 in 2022 to nearly 300 in 2024. This growth has been pivotal in expanding personal and NMSME loans, underlining the essential role of these lenders in the economy.
Babatunde Akin-Moses, Managing Director, Sycamore, posited that in recent times, NMSMEs have experienced an uptick in access to funding due to the growth of the FinTech space in Nigeria, especially the lending sector.
He said the growing visibility and increasing relevance of money lenders like KwikPay Credit, Sycamore, P2Vest, and other similar entities, as the go-to for small businesses and individuals who might not meet the credit requirements of traditional financial institutions.
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Akin-Moses, however, stressed that there was still a long way to go in ensuring that these businesses are served equitably, especially because there is still work to be done in creating a credit system that serves both parts of the transaction.
He said to ensure reliability or integrity, stakeholders, lenders, borrowers, and regulators needed to work together to ensure an equitable and favorable process for all players.
The financial expert stated that the next ten years was going to be characterised by economies rebuilding from the inflationary economy, as well as expansion and growth.
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“To do this, he said, there will be a need for capital, and the best capital providers for everyday individuals and small businesses will be money lenders.
“Things will be even more efficient if lenders adopt technology to make things scalable and convenient.
“More structured and clear regulations for all stakeholders, provision of capital at lower rates to lenders, and open communication will serve the lending community well.
“By also incorporating more consequences for credit default into everyday activities like employment, accommodation, travel, etc, there will be fewer cases of default which will encourage more lending,” he said.
