By Shahebaz Khan, Senior Vice-President, Head of New Payment Flows for CEMEA   

The onset of digitization has had a profound, some might say democratizing, effect on the world’s business, commerce, and payments landscape. Presented with a raft of new e-services, solutions, and functions – which were once out of reach to all but the largest companies – today Small and Medium-sized Enterprises (SMEs) have the potential to offer their products to a customer-centric marketplace that has surpassed local consumers in both scale and reach. 

Digitization has the exciting capability to upskill and uplift any business, regardless of size or specialism. However, reaching the potential offered by digitization remains heavily dependent on addressing the diverse challenges those companies facing without ready access to the economic norms of the digital world and its various financial solutions. 

In today’s rapidly evolving digital landscape, Visa has commissioned the SME Megatrends report, aimed at providing issuing banks with critical insights to tailor their offerings to SMEs in Sub-Saharan Africa, with a focus on Nigeria. The report provides a crucial roadmap for issuing banks to unlock substantial SME growth opportunities.

Offering a comprehensive analysis of Nigeria’s SME landscape, the report highlights various challenges and growth opportunities, giving issuing banks a strategic tool by which they can gain a deeper understanding of the SME sector and effectively tailor their products, services, and support sales mechanisms. This targeted approach ensures that banks can engage more effectively with SMEs, offering solutions that directly address their unique challenges and aspirations.

Nigeria stands as a dynamic hub of commerce, innovation, and entrepreneurship, boasting a staggering 39 million SMEs that fuel 48% of its GDP . SMEs form 97% of Nigeria’s entrepreneurial landscape and employ over 60 million people, a significant segment of the nation’s workforce.

The advent of digitization has ushered in a new era, marked by the rise of e-commerce and digital payments, rapidly displacing traditional cash transactions. Presently, more than 1.4 million SMEs in Nigeria embrace digital payments through e-wallets, swiftly adapting to meet heightened consumer demand catalyzed by e-wallet platforms’ robust customer acquisition endeavors. These digital payment channels empower SMEs to diversify revenue streams, enhance operational efficiency, and align with evolving consumer preferences, underscoring the pivotal role of banks in this ecosystem.

For banks seeking to tap into Nigeria’s thriving SME landscape, a myriad of opportunities exists to broaden their reach and entice clients. These opportunities encompass streamlining the onboarding and e-KYC processes for new customers, tailoring products to SME size and needs to enhance ease and accessibility and providing digital advertising support to facilitate market expansion. 

However, despite Nigeria’s vibrant Fintech and digital banking ecosystem, the SME sector remains significantly underserved, with a $150 billion financing gap. Issues such as high fees and minimum account balances deter SMEs from seeking formal banking arrangements, with only 28% currently holding bank accounts and a mere 33% accessing banking services. This underscores the need for banks to offer tailored and open SME banking services to overcome hurdles such as a lack of credit history – another major hindrance to SMEs’ growth. 

Moreover, facilitating access to credit assumes paramount importance, given that financing remains a critical bottleneck hindering SME advancement in Nigeria. While nearly half (48%) of SMEs benefit from financing, a third encounter obstacles in accessing formal financing from banks. Consequently, many resort to personal loans and informal credit channels, bypassing structured, transparent, and dependable bank-provided SME financing facilities.

Banks poised to cultivate enduring, trust-based alliances with SMEs stand to reap the rewards of Nigeria’s burgeoning SME economy. By embracing proactive, inclusive, and sustainable strategies, banks can expedite growth and fortify competitiveness in a market increasingly inclined toward digital innovations. The Visa report underscores the indispensable role of digitization in reshaping Nigeria’s SME landscape, emphasizing the pivotal contribution of issuing banks in propelling a new era of economic prosperity and laying the groundwork for a more affluent and equitable future.

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