SympliFi partnerships in Nigeria accelerate affordable MSME financing

Nigeria has the largest number of informal micro, small and medium-sized enterprises (MSMEs) in sub-Saharan Africa, with 41.5 million MSMEs, most of them being micro entrepreneurs (Nigerian National Bureau of Statistics, 2017). These businesses play a vital role in the Nigerian economy, but they face significant challenges in accessing formal credit. Only 11.4% of them have some form of formal credit, while 45% rely on borrowing from friends and family to finance their operations. This limits their potential to sustain their business and grow their income.

Meanwhile, there is a large amount of capital flowing from developed countries to individuals in their home country through high-cost remittances. In 2022, 280 million immigrants globally sent $831 billion in remittances back to their home country. For Nigeria the amount was a staggering $21 billion, the highest in sub-Saharan Africa. The UN estimates that 15-25% of these annual remittances are used for long term needs such as housing, business and income generating activities. However, these recipients are still financially excluded, unable to save and build financial security, and remain dependent on remittances.

The solution: Cross border digital collateral

SympliFi was launched in 2021 with a mission to create economic opportunity and accelerate financial inclusion for the millions of underbanked MSMEs in emerging markets. SympliFi’s first solution was a pioneer mobile app designed to enable Nigerian and Senegalese diaspora in the UK and EU to digitally guarantee a low interest loan from microfinance banks in Nigeria or Senegal for their unbanked friends and family in the MSME sector. The process is fully digital and takes seconds. The borrower gets instant access to credit from local microfinance banks to use for productive purposes, and the guarantor earns cash rewards for helping without sending money.

The partnerships: Integrating with local lenders and fintechs

With the support from SCBF, SympliFi has established new partnerships in Nigeria to fully integrate SympliFi’s digital collateral solution into their lending processes. During the project, SympliFi has worked on creating seamless customer journeys and improving customer awareness of the solution, its benefits and responsible borrowing. SympliFi partnered with microfinance institutions such as Kredi Bank, Grooming Microfinance Bank and Veend – leading fintech in Nigeria.

With Veend,  SympliFi launched a first-of-its-kind credit card that enables Nigerian diaspora to support friends and family back home build their credit profile responsibly. The Veend card, powered by SympliFi’s digital collateral solution, provides instant access to low-interest, short-term loans on-demand, anytime the borrower needs cash. The process for the guarantor (Nigerian diaspora) is completed in seconds on the SympliFi app and the card is mailed to the borrower (friend or family) in Nigeria free of charge. Borrowers can use the card to buy goods for their business or for life emergencies or to bridge them until their next salary. As they use the card and repay on time, they start qualifying for higher credit limits on their own.

The impact: Increased access to credit, business growth, and wellbeing

Early in 2023, SympliFi’s partner CGAP, commissioned 60 Decibels, to conduct a survey on SympliFi borrowers in Nigeria to better understand the impact. Following are some findings and highlights from the survey:

  • SympliFi’s mobile solution increased access to credit: 78% of borrowers surveyed accessed financial services for the first time and 91% said they could not find a good alternative.
  • SympliFi is helping people grow their business and creating economic opportunity: 82% reported that the money they earned from their businesses increased because of SympliFi’s solution.
  • SympliFi’s mobile solution is contributing to improved wellbeing: 75% of borrowers reported improved quality of life.

The digital collateral has proven to be an effective solution to leverage the power of technology and community to support underbanked MSMEs in Nigeria. The solution has a wide range of applications and potential to spur new product innovation in the financial services industry, not just in Nigeria but globally.

Key takeaways and next steps

Though SympliFi’s digital collateral solution proved effective, executing the product required connecting three stakeholders – guarantor, borrower and lender – which was often challenging and inefficient. To streamline transactions, SympliFi built additional tech tools enabling lenders to automate parts of the loan origination process. However, in both Nigeria and Senegal lenders’ manual workflows still caused bottlenecks, making the user experience cumbersome and limiting scalability.

Seeking a more seamless process, SympliFi experimented serving as the lender in Nigeria and Kenya, eliminating banks and enabling end-to-end transactions within their tech ecosystem. In an independent survey, SympliFi found that working capital to purchase inventory provided the highest added-value for borrowers. They experienced an increase in business income and overall wellbeing.

With this insight, SympliFi began piloting inventory financing themselves. Similar to ‘buy now, pay later’, SympliFi purchases inventory for the borrower, who repays ‘later’ within 7 days after selling the goods. This lending model carries lower risk for SympliFi as the lender and also for the potential guarantor, as no cash is disbursed, and the funds are used for verified revenue generating purposes. It also aligns with SympliFi’s original digital collateral product and can be executed digitally.

As the pilot continues, SympliFi envisions incorporating the digital collateral solution in the transaction process as a credit enhancement solution, enabling small shop owners to access inventory financing with the help of family in the diaspora. As a result, SympliIFi expects a seamless user experience with transactions completed in seconds as they will be conducted entirely within the SympliFi ecosystem. In addition, as the lender, SympliFi can utilize data to instantly qualify borrowers, better manage risk and improve transparency.

The informal retail sector represents an estimated $850 billion industry in Africa and remains largely underserved by banks – an ideal use case for SympliFi’s digital collateral solution with potential for significant value creation. Our next blog exploring SympliFi’s growth in sub-Saharan Africa will focus on their work in digitizing supply chain financing in Rwanda and Kenya.

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