Banks unwilling to lend to SMEs due to lack of identity & operational info – Dayo Ademola, EFInA
Dearth of sufficient background and transaction information has been highlighted as one of several reasons traditional banks refuse to provide loan facility to owners of Small and Medium Enterprises (SMEs), in Nigeria. At a Fintech Summit organised by First Bank of Nigeria recently, Dayo Ademola, the Head of Innovation, Enhancing Financial Innovation & Access (EFInA), said most SMEs are not properly captured in the national database, beside having sparse digital transaction record. According to her that impede trust. It also makes it difficult for lenders to measure creditworthiness.
Creditworthiness is the level to which a person or company is adjudged suitable to payback after receiving loan facility. Several mechanisms have been put in place to track the inflow and outflow of money within an organisation to measure how much such establishment is worth. This is used to qualify organisations and private individuals applying for loan facility.
Speaking on the shortage of data to qualify entrepreneurs for loan, Dayo Ademola said, “There is not yet a uniform identity. The two key boxes that can unlock our future are identity and data. When Nigeria is able to conquer these two issues, then the future is guaranteed.”
She added, “Startups do not employ the services of professionals in structuring their business model. Regulations should provide information to these startups in the process of incorporation to serve as a guide,”
As more people are captured in the bank verification processes, digital technology can be used to identify people, and track every transaction involving any business or private individuals to qualify them for credit by traditional banks and Fintech-based financiers.
However, SMEs owners would do well to keep accurate data on all their transactions. In engaging with bank management for possible loan facility, that would come handy, and help measure the creditworthiness of applicants – based on turnover and expenditures.