Nigerian woman standing in front of her shop

The increased digitization of financial services and technological advances are enabling new types of providers – fintechs, with the potential to overcome traditional barriers to financing MSEs. Among others, they are able to lower the costs of acquiring and servicing customers, improve accuracy of credit assessments and lower credit risks, provide more tailored products and services, improve customer experience, disintermediate traditional value chains by directly connecting investors with borrowers, and enable rapid scaling and replication. CGAP surveyed the landscape of fintech providers in five emerging markets including India, Indonesia, Kenya, Nigeria and Peru, and identified four business models with high potential to serve underserved and excluded MSEs - data driven finance, marketplace finance, digital banking, and embedded finance. To test the potential of these models, CGAP has also forged learning partnerships with five innovative fintech providers from across the world to pilot digital credit products for MSEs.


Reading Deck

Nearly 500 million micro and small enterprises (MSEs) are estimated to be operating around the world. Access to credit and other financial services is critical to the growth and sustainability of these businesses, and consequentially to the low-income and vulnerable populations which rely on MSEs for their livelihoods. Yet despite decades of efforts and some notable successes in expanding MSE finance, the credit gap remains an estimated 4.9 trillion U.S. dollars.

Kenya has seen an explosion of fintechs and nano credit providers, but they have yet to meaningfully serve MSEs in the country. We explain how fintechs could have a wider reach and distinct value proposition for MSEs in Kenya beyond digital credit.

Findings from our recent research suggest BNPL is becoming a significant lending mechanism for Nigerians – especially for micro, small and medium enterprises and self-employed individuals who would not otherwise have access to credit.