Moniepoint guides SMEs as it processes 72 million cards monthly

…Will formalise 30m SMEs in five years

Microfinance and fintech firm Moniepoint MFB has identified four areas where it suggests that SMEs should improve to scale their businesses and remain stable in these difficult times. It is willing to lead the charge.

Moniepoint enrolled two million businesses in five years (2019-2024) through intensive research and continuous interrogation of the data it gathered. Tosin Eniolorunda, CEO of Moniepoint MFB, said, “To us, the informal economy represents an opportunity to make the kind of impact that people can feel daily regardless of their income level or social status.”

Eniolorunda added, “By quantifying the informal economy’s impacts and nuances, we can better shape policies and programs to empower and uplift the entrepreneurs driving it forward. Their success is inextricably linked to Nigeria’s continued growth and development.”

What are the key learnings and Moniepoint’s route to success for itself and small-scale businesses?

Local presence. Moniepoint has grown by being available where its customers do their business. It has provided them access to banking systems, enabling them to enter the national financial system and database. Many SMEs, thus enrolled, can now seek and access credit.

Easier access to banking services that allowed SMEs to transition to more formalised systems.
The report observed that “Banking systems provide leverage for many formalised businesses, from payment collection to the ability to perform business transactions at a larger scale. Many of the businesses in the informal economy previously were locked out of these banking systems, so they have been unable to benefit from the advantages that come with being included.

Without a bank account, for example, they are limited to transactions with only people they can physically interact with. This lack of access to banking also impacts them in other ways. Many programs and initiatives from development institutions, including the Nigerian government, exist to support businesses of all sizes in the country. However, with most of the businesses in the informal economy invisible, access to them remains constrained. They also need the requisite documentation to apply for these grants. This means that although opportunities exist, they often cannot access them in ways that can help them grow meaningfully.”

Read also: Family businesses will remain key to Nigeria’s economic, cultural identity – Moniepoint

Formalisation. Building banking and payment services with these businesses in the focus has enabled us to provide them with tools that meet their specific needs. In line with existing regulations, providing banking services for these businesses can see many transitions to a more formalised system. This means increased access to systemic benefits typically available to their more formalised counterparts.

Access to credit. Through insights into the financial history of SMES, Moneipoint says it developed a credit assessment system built for them. It can thus provide credit that matches their needs and gives them a better chance at success.

Collaboration with relevant government and private agencies.

Moniepoint states: “By partnering with government agencies, we’ve made it easier for businesses to obtain the necessary documentation to become formal. Our ongoing partnership with the Corporate Affairs Commission (CAC) allows business owners to register their business names with the CAC directly on our platform. We’ve also collaborated with the Federal Inland Revenue Service (FIRS) to enable these businesses to quickly obtain their Tax Identification Number. Collaborations like this will formalise about 30 million businesses in the next five years.”

The counsel comes through Moniepoint’s The Informal Economy Report 2024. Highlights of the report include the following:

N9b (Nine Billion Naira) is available to SMEs as single-digit interest loans.

SMEs contribute about 37 per cent of GDP in emerging markets.

Experts use various terms for the economy of SMEs, including “underground,” cash-in-hand, and shadow economy.

“By transaction value in Naira, Retail and general Trade, alongside Food and drinks, accounted for over half of Nigeria’s informal economy at 53.6%”. The constituents are neighbourhood shops, restaurants, supermarkets, and those that sell daily necessities.

Characteristics of Nigerian SMES as identified by Moniepoint include:

Average monthly income of less than N250000.
Owners are predominantly aged 25-34 years.
Unemployment is a primary trigger for stepping out.

Eighty-nine (89) per cent pay some form of taxes.
Retail and general trade predominate.
The lifespan of the businesses is usually under five years.

Seventy per cent of SMEs borrow money.
They spend their incomes on feeding and family expenses.

Half of the business owners multitask.
Women own 37.1 per cent of SMEs, and men own 62.9 per cent.

Nigerian SMEs are located in the South-South 19.9%; North-Central 16.8%; South-West 15.6%; South-East 13.2%; North-West 12.8%; North-East 6.6%.

Moniepoint MFB prepared the report with the Ministry of Industry, Trade, and Investments and the Small and Medium Enterprises Development Agency (SMEDAN).

Charles Odili, SMEDAN’s CEO, affirmed that “small businesses are the engine of the Nigerian economy, and the informal sector serves as the piston that provides momentum.” He added, “The numbers support this reality, as reaffirmed by this report. Most of Nigeria’s approximately 40 million small businesses reside in the informal sector. They are all around us, from the unregistered beauty shop that began with a simple stool under a tree for customers to sit while the stylist worked her magic to the fruit store that grew from a wheelbarrow.”

Industry, Trade and Investment Minister Mrs Doris Uzoka-Anite itemised a long list of measures the Federal Government has implemented to ensure better access to finance for MSMEs. They include

An N200 Billion Presidential Palliative Programme offers grants to nano businesses and low-interest loans to MSMEs.

State Enterprise and Empowerment Program (SEEP) provides affordable credit to micro-enterprises.

Rural Area Programme on Investment for Development (RAPID) supporting MSMEs in disadvantaged areas.

One Local Government One Product (OLOP) program offering grants and interest-free loans.
The “GROW NIGERIAN” initiative accelerates economic growth for key sector SMEs.

Fund management

Access to and management of finances is critical to small businesses.

Seventy per cent of MSMEs said they had accessed credit. “According to the International Finance Corporation (IFC), 65 million businesses, the report notes that formal micro, small, and medium enterprises (MSMEs) in developing countries have an unmet financing need of $5.2 trillion annually. “In the informal economy, where businesses often face bleak odds, access to credit remains crucial. 70.1% of these businesses say they have accessed some form of credit.”

But where can SMEs source credit? “When businesses in the informal economy do get access to loans, their primary sources are from friends and family (70.7%). Other sources are from loan platforms (15.1%) and traditional banks (12.2%).”

What about payments? The data shows a paradox. ‘While various digital payment collection methods exist for business owners in the informal economy, Moniepoint’s data shows that card payments are the most common way (80.2%) for these businesses to receive in-person payments.”

Enterprise Development Agency of Nigeria