70% of entrepreneurs sustain business with personal funds

A recent survey has revealed that friends and family are the primary funding sources for Nigerian businesses without access to loans in the informal economy.

The Informal Economy 2024 survey report by Moniepoint highlighted that about 70 percent of entrepreneurs get credit from their family and friends to sustain their business, 15 percent use loan platforms and 12 percent prefer traditional banks.

“For many of these business owners, loans help with restocking, expansion, and keeping the business afloat in unfavourable times but these businesses are not as lenient with their retail customers,” the report said.

According to the International Finance Corporation (IFC) 65 million businesses (40%) of formal micro, small and medium enterprises (MSMEs) in developing countries, have an unmet financing need of $5.2 trillion annually.

The report says in the informal economy, where businesses often face bleak odds, access to credit remains crucial. Credit for these businesses includes Buy Now and Pay Later (BNPL) offerings to their customers, providing goods and services for repayment later but business owners do not extend these to their customers due to previous bad experiences.

Commenting on the impact of MSMEs in Nigeria, Doris Uzoka-Anite, former minister of Industry, Trade and Investment said “Micro, Small, and Medium Enterprises (MSMEs) are the lifeblood of Nigeria’s economy, driving job creation, rural industrialisation, and innovation.

“Their significance extends across various sectors, contributing to national development but these enterprises face numerous challenges, including limited access to finance, high production costs, and regulatory complexities.”

She noted that despite these obstacles, the Federal Government, under President Bola Ahmed Tinubu’s leadership, has demonstrated unwavering commitment to fostering MSME growth.

“The Federal Ministry of Industry, Trade, and Investment (FMITI) remains focused on improving ease of doing business, policy development, increasing access to financing and global markets, driving investments, and boosting job creation,” She said.