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There are eight challenges that we need to tackle to break the barrier in access to finance for MSMEs in Nigeria. These barriers are as follows:Digital identity is the foundation stack in the financial system on which the payment, credit and other stacks in the financial system are built. It implies that efforts to create an inclusive payment or financial system for MSMEs will be constrained by the reach, pervasiveness and inclusion of Nigeria’s formal digital identity system.
2. Accessible and affordable merchant collection solutions that can scale and reach millions of MSMEs Such offline digital payments would be the precursor of their online payment collections, as they get comfortable with digital technologies and extend their businesses online. Digital payment collections also improve the formalisation and business efficiency of the small merchants, enabling them to accesstool, like inventory and working capital management, as they scale up, while providing the digital payment and cash flow data to access credit.
Also, the USSD pricing per session charge of 20 seconds at N6.98, plus a minimum of N10 per payment transfer, implies a USSD payment cost of about N17 at the minimum. This would be very expensive for millions of nano-enterprises and MSMEs and those who might want to pay them very small or micro-payments.
Prevailing alternative credit scoring models in the market seem to assume the worst of the borrower and tend to use the riskiest borrower to price for risk and interest rate. It tends to penalise the good borrower, who has to pay the risk price or high interest rate of the worst borrower. It creates dis-incentives for the patronage of credit by the good borrower, and potentially limits the growth of the alternative digital credit market in the long run.
8. Deliberate and coordinated stacked digital public infrastructure from identity, payments to lending: