David Adeleke, co-founder/CEO at Zeeh Africa has said fintech companies can bridge the credit gap in Nigeria using open banking technology that is backed by Artificial Intelligence (AI).
According to Adeleke, the country can leverage open banking data to create accurate and comprehensive credit scoring models, enabling a broader population to access financial services and ultimately addressing the credit gap.
“Zeeh Africa was born out of the pressing need to address the hurdles faced by many Africans in obtaining loans, securing credit, and managing their financial health,” he said.
He said with a mission to empower individuals and entrepreneurs, the company envisions a future where financial access is equitable for all, regardless of their socioeconomic background or credit history.
“Zeeh, like other fintechs in Africa, faces challenges when using AI and open banking for credit solutions. These include ensuring data privacy, navigating regional regulations, addressing algorithmic bias, and maintaining efficiency as they scale,” he added.
Adeleke, who is also the co-founder at Zeeh noted that the company tackles these issues through robust cybersecurity, compliance efforts, transparency, and strategic partnerships to enhance their credit services.
The credit gap in Africa represents the challenge of many individuals not having access to formal credit due to a lack of traditional financial history, thereby empowering fintech companies to address this gap.
In Africa where access to formal credit remains a challenge for millions and the credit gap deepens to a staggering $360 billion, open banking plays a pivotal role in bridging this gap by allowing fintech companies to access alternative data sources, such as utility payments and mobile phone usage, to assess creditworthiness more inclusively.
By analysing data from various sources, including bank transactions, utility payments, and even social media activity, AI algorithms can create more comprehensive and real-time credit profiles for potential borrowers.
This allows fintechs to make more informed lending decisions and extend credit to individuals and businesses that may have previously been deemed too risky by traditional banks.
A report titled ‘Market Bite Nigeria’, said although lending to the sector has grown by 42 percent to about N590 billion post-Covid, it is still not sufficient enough for Micro Small Medium Enterprises (MSMEs), whose major problem is access to finance.
“While commercial banks lend to larger firms, smaller-scale businesses generally struggle to access formal financing; there are many reasons for this, including the government’s crowding out of the private sector, a weak debt resolution and loan recovery framework, an underutilised and underdeveloped financial infrastructure,’’ it said.
There are well-tested fintech solutions for almost all facets of small business financing. Fintech-enabled P2P lending and equity crowdfunding are proving effective for the long-term financing needs of SMEs.
Several e-platforms have emerged that can finance trade, merchants, invoices, and supply chains. According to the World Economic Forum, data availability, regulatory support, investor capital, and financial literacy are key enabling factors, whereas unmitigated retail investor exposure, bad credit misses, and limited regulations remain the top risks.
According to the Small and Medium Enterprises Development Agency of Nigeria, there are approximately 39.6 million MSMEs that create about 84 percent of jobs and contribute significantly to economic activities.
Hence, there is an urgent need for capacity development and business support services targeted at these smaller enterprises. In cities where capacity development support is available, MSMEs are often hindered by fees to access these services.