By Winston Osuchukwu | Founder & CEO, Mathesis Analytics
Nigeria has made significant progress in its drive for financial inclusion, with 73% of adults now formally included, according to EFInA’s 2026 Access to Financial Services survey. Much of that progress has come from the widespread adoption of digital wallets and payment agents, which have brought millions of low-income individuals and micro-entrepreneurs into the formal financial system.
Yet for most of them, owning an account has not translated into credit access. While the share of adults borrowing from banks and other licensed lenders rose from 6% to 10% between 2023 and 2026, the vast majority remain unserved. Much of the problem lies in how traditional lending works: it relies on collateral, payslips and audited financial histories – requirements tailored to salaried workers and formal corporations. The daily operations of informal businesses are invisible to these legacy frameworks, and the data that could reveal them is spread across several wallets, bank accounts and cash transactions, so no single institution sees the whole business. Many of these operators have the capacity to repay – lenders simply cannot see it yet.
Why Exclusion Compounds
Credit inaccessibility creates a compounding disadvantage that restricts small businesses’ ability to grow.
Without access to working capital, small-scale operators are unable to take advantage of rising demand. They can only buy as much stock or materials as their cash on hand allows, so each week’s earnings limit how much they can buy the next. Growth, where it comes at all, is slow.
Take a market trader: In the weeks leading up to the festive season or school resumption, demand rises, but the trader has no affordable way to fund the extra inventory to meet customer needs. A short-term loan bridges that gap. When the additional stock sells, the proceeds cover the repayment and the profit is reinvested in the business – allowing the trader to carry more stock and starting a growth cycle that scales over time. Without credit, the trader can only expand with what they save from daily takings, and the business struggles to grow beyond its current size.
Similarly, a tailor unable to finance a second machine is limited by what one person can produce. When demand increases, this rigid capacity limit forces them to turn away orders – handing that revenue over to competitors. Without the funds to purchase another machine and absorb that extra work, the business cannot scale and will ultimately struggle to survive.
Unable to access institutional credit, these individuals are forced to find capital elsewhere. Savings groups, like Ajo, provide mutual support, but their capital is limited and payouts follow rigid schedules and don’t satisfy urgent needs. When immediate liquidity is needed, merchants are driven to informal moneylenders whose high interest rates can wipe out whatever profit margins remain. Instead of using the debt as leverage to scale, the merchant is trapped servicing expensive loans – stagnating their growth.
When the largest segment of the economy stays informal and undercapitalised, economic growth is capped. The result is a shallow tax base and an unrealised multiplier effect – impeding the job creation that drives economic expansion.
Digital Lending as an Entry Point
Digital lending leverages alternative credit pathways for the individuals, SMEs and micro-enterprises, locked out of the formal credit system. Instead of demanding audited financials and physical collateral, lenders can evaluate creditworthiness through verifiable transaction histories. Daily payment flows across mobile wallets, agency banking networks, and utility bills generate a transactional footprint that credit-decisioning models can analyse for revenue consistency and real-time cash flow, allowing lenders to accurately assess repayment capacity.
Credit on these terms benefits the borrower in two ways:
Deeper Credit Inclusion: For many, it is their first loan from a formal institution. Each loan repaid gives the lender direct evidence of repayment behaviour, which justifies higher limits and lower pricing as the relationship matures. At the portfolio level, this data enables lenders to price risk more precisely and lower interest rates for new applicants. As credit becomes more affordable, it naturally attracts a wider customer base, creating a self-reinforcing loop where positive repayment behaviour drives down rates to a sustainable level.
Increased Productivity: Accessible working capital lets informal enterprises scale their operations. With modestly priced credit, a market trader can purchase inventory in bulk to lower unit costs, while a tailor can finance an upgraded machine or hire an extra hand. This injection of liquidity gives them the immediate runway to take on more demand and increase daily turnover.
A Double Impact on the Economy
The true potential of digital lending lies in its ability to deliver these outcomes simultaneously. By lowering the traditional barriers, digital lenders give many account holders their first meaningful access to formal credit – capitalising and driving the growth of the micro-enterprises and SMEs that form the backbone of the economy.
This double impact is critical for macroeconomic growth. When millions of informal operators are given the capital to upgrade from basic survival to active expansion, the effects extend far beyond their individual businesses. Job creation is accelerated at the community level, national productivity rises, and capital is deployed to the segments of the market that create the strongest multiplier effect across the economy.
