Lenders target small businesses with digital credit

Banks and specialised lenders are pushing further into small-business credit, using transaction data and digital scoring to make underwriting decisions that were previously uneconomic at small ticket sizes.

For years, the constraint was cost rather than demand. Assessing a loan of a few million naira carried almost the same fixed cost as assessing one many times larger, which made small businesses difficult to serve profitably.

Pricing under scrutiny

The new models compress that cost, but they also concentrate risk. Because the loans are typically short-dated and unsecured, annualised rates remain high, and regulators are watching how clearly those costs are disclosed to borrowers.

Lenders argue that transparency, not a lower headline rate, is the immediate priority. Cleaner disclosure lets businesses compare offers and choose facilities that match their cash cycles.

The test will come during the next downturn, when loss rates on unsecured small-business lending are likely to rise for the first time since the products were launched.