For millions of Nigerian entrepreneurs, the question, Do you have collateral?” has traditionally marked the end of any conversation about obtaining a business loan.
Requirements for assets such as land titles, vehicles or property have made access to credit from conventional banks difficult for many small and medium-sized enterprises (SMEs). However, the rise of financial technology firms and data-driven lending models is changing the landscape.
As capital remains the lifeblood of businesses—from roadside food vendors to large corporations—new lending solutions are providing opportunities for entrepreneurs who lack traditional collateral.
According to the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), SMEs account for about 96 per cent of businesses in Nigeria and contribute nearly half of the country’s Gross Domestic Product (GDP).
Despite their importance, financing remains a major challenge.
Data from the World Bank shows that more than 40 per cent of Nigerian SMEs identify lack of access to credit as one of the biggest barriers to business growth, largely because many lenders still demand collateral.
The growing use of digital payments and financial technology platforms is creating alternative ways for lenders to assess borrowers.
Every bill payment, airtime purchase, Point of Sale (POS) transaction and bank transfer leaves behind a digital footprint that helps build a financial profile.
Microfinance institutions and digital lenders now rely on bank inflows, Bank Verification Number (BVN) data, repayment history and transaction patterns when evaluating loan applications.
Borrowers with a strong repayment record are often rewarded with larger loan amounts and better lending conditions.
Chief Executive Officer of Regxta, a microfinance institution focused on underserved communities, Bello Rukayat, said transaction records are helping lenders make decisions based on evidence rather than assumptions.
According to her, digital data provides insights into business performance, cash flow and revenue patterns, allowing lenders to determine a customer’s creditworthiness.
This is the core of what is now called data-informed lending, using a borrower’s transaction history as a substitute for the collateral they do not have, she said.
Rukayat explained that digital lenders assess factors such as the frequency of account inflows, consistency of transactions and previous repayment records.
Digital records allow us to analyse daily, weekly and monthly transaction patterns. We can identify peak sales periods, revenue consistency, expense behaviour and even customer concentration risks, she added.
The National Identification Number (NIN) is also playing a key role in reducing fraud and improving access to credit by linking borrowers to verified identities.
Credit bureaus such as CRC Credit Bureau and First Central have also strengthened the system by maintaining repayment records that can be accessed by financial institutions with customer consent.
This growing database allows lenders to make informed decisions while helping borrowers establish credible financial histories.
Small business owners seeking collateral-free loans now have several options available.
Microfinance banks such as LAPO, Accion and Regxta offer loans based on cash flow and repayment history rather than physical assets.
Similarly, digital lending platforms including Carbon, FairMoney and Moniepoint provide quick loans using BVN verification and transaction records, with approvals often completed within minutes
Despite the progress made by digital lenders, many Nigerian businesses still operate largely with cash and have little or no digital transaction history.
Reports indicate that about 26 per cent of Nigerian adults remain financially excluded and lack access to formal financial services such as savings, payments and credit.
According to Rukayat, individuals without verified identities or transaction records are considered higher-risk borrowers, even when their businesses are profitable.
Our response in this case is to onboard such customers physically, educate them on digital tools and gradually build their transaction history before introducing credit. It is a slower path, but it exists, she explained.
Experts say Nigerian entrepreneurs can improve their chances of obtaining loans without collateral by embracing digital payment channels and maintaining a good repayment record.
As technology continues to reshape the financial sector, transaction history is becoming just as important as physical collateral, opening new opportunities for millions of SMEs seeking access to funding.
