Access to formal finance remains a challenge in Nigeria

Only six per cent of women in Nigeria have access to credit despite access to finance in Nigeria progressing from 56 per cent in 2023 to 64 per cent in 2024, a global non-profit group, Women’s World Banking, has said.

The information was contained in the group’s Digital Credit Activation Toolkit, which was launched last month in Lagos, South-west Nigeria.

Access to formal finance remains a challenge in Nigeria, going by the data available.

Formal finance is capital sourced from banks and other formal financial intermediaries while informal finance is capital sourced from relatives and private lenders.

The Digital Credit Activation Toolkit, according to Women’s World Banking, is to help financial service providers provide credit offerings with a specific focus on driving financial inclusion for low-income women.

The group said with the toolkits, financial institutions in Nigeria can provide digital credits to “75 per cent of underbanked women.”

“Our mission is to create a world where all women have access to the financial tools they need to achieve their goals, said Ade Ashaye, the group’s regional head for Africa.

“The toolkit comprises three key phases: Assess, Adapt, and Roll Out. Each phase provides actionable insights and guidelines to financial institutions looking to enhance their digital credit offerings.

“Under our current 10-year strategy (2017 – 2027), we’ve helped provide 37 million women in emerging markets – targeting 100 million by 2027 – access and use of financial products and services that are transforming women’s lives, households, businesses and communities, and driving inclusive growth globally,” the group said.

According to the group, women in Nigeria are valuable but there are significant barriers, particularly relating to access to credit by women micro-entrepreneurs.

It said there are 23 million women entrepreneurs operating in the micro-business segment, and that women-owned businesses comprise 41 per cent of total Small-and Medium-Sized Enterprises (MSMEs).

According to the group, there is a gender gap in favour of men to the tune of over $158 billion.

Barriers to accessing credit for women micro-entrepreneurs in Nigeria

Women, the group said, typically face higher constraints than men in obtaining loans, particularly because of lack of physical collateral, which results in less favourable financial terms as higher interest rates, shorter loan duration and smaller loans when compared to men.

“On the supply side, women’s lower ownership of valuable assets, lower income and high job informality constrain access to finance by limiting the ability for women to satisfy requirements to obtain a loan (e.g., collateral or a steady income).”

Women’s World Banking also lists limited awareness of credit products by financial service providers (FSPs), low level of trust and risk averseness toward FSPs digital loan offerings and low business skills, and financial literacy as barriers to accessing credit by women.

Africa women, world largest in launching own business

Besides Nigeria, women in Africa and other parts of the world are also disadvantaged in access to credit when compared with men, the group said citing World Bank’s 2021 Global Findex database.

Women constitute almost half of the world population but “only 28 per cent of women aged over 15 year accessed credit from a financial institution, compared to 31 per cent of men,” it said.

“A closer look at MSMEs reveals that formal women-owned enterprises (W-MSMEs) comprise 23 per cent of MSMEs and account for 32 per cent of the MSME finance gap.

“This number excludes millions of informal/unregistered microenterprises– hence the actual finance gap is significantly larger.”

According to Women’s World Banking, women in Africa have the world’s highest rate of women launching their own business.