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Opportunities For FinTechs To Explore Among Low-Income Local Traders In Nigeria

Emmanuel Nnaemeka
  Local traders found in major and minor markets in the 36 states and the federal capital territory of Nigeria are largely underserved, and this is in so many ways an opportunity for FinTechs to explore. Conversely, most FinTechs are focused on elite SMEs, leaving the millions of local traders and businesspeople at the grassroots to their peril. Most of these local traders lack the necessary financial literacy to boost their income or increase their business size. In addition, most of these traders often fall for several financial scams. 
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In another development, several bottlenecks are affecting the free flow of accessing credit facilities from traditional banks by these local traders. Therefore, most local traders find themselves isolated from the whole financial inclusion process. On the other hand, traditional banks do not have the luxury of time and flexibility to reach out to these low and mid-income traders. Whereas FinTechs tend to be more agile, yet possess the flexibility to reach the unbanked and the underserved. Furthermore, there are so many advantages to serving local businesses as most of their locations are fixed, legally registered with the government, and enjoy consistent transactions daily. In this article, I itemized and discussed what seems to be like the 6 leading financial challenges for local traders, yet an opportunity for FinTechs. The problem of accessing loans to beef up their businesses has been a prevailing challenge for local traders. Existing traditional banks often focus on big businesses and neglect small and medium businesses, because they do not find them creditworthy. Furthermore, existing microfinance banks lack the financial muscle, technology, and talent to cater to the financial needs of these local traders. It is on this note that FinTech can bridge the gap and play the role of “challenger microfinance bank” by providing financial services to low-income clients, including consumers and the self-employed, who traditionally lack access to banking and related services. Another opportunity for FinTechs to explore is to make low-income traders execute transactions through digital and electronic devices. This is when a trader’s store can be a point of sale (POS) and a place where customers can execute the payment for goods or services, and where sales taxes may become payable. FinTechs can provide local traders with POS devices, and these transactions may occur in person or online, with receipts generated either in print or electronically. Cloud-based POS systems are becoming increasingly popular among merchants, and can be made common through the instrumentality of FinTechs who are more agile, yet flexible in their operation. 
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This type of financial transaction is known locally as Esusu or Isusu among Nigerians. It is a form of rotating savings and credit association, a type of informal savings club arrangement between a small group of people who take turns by “throwing hand”, as the partners call it. It is very common among Nigerians, especially among low-income households and businesses. Unfortunately, according to Wikipedia, scammers have set up pyramid schemes that imitate or pretend to be Esusu. However, contrary to traditional Esusu (in which participants only receive the money they put in without profit), these schemes promise a profit. Further, these schemes promise rewards for recruiting more people to the Esusu, in effect making it a pyramid scheme. These sham Esusu scams (also known as “blessing loom” or “gifting circle.”) have increased during the 2020 COVID pandemic, and are often targeted at unsuspecting low-income traders who lack financial literacy. On this note, FinTech with its legitimacy, blockchain and digital facilities can help traders be more financially secured. I, therefore, suggest that FinTechs consider incorporating this Club Rotation Savings and Credit into their operations. Insurance is another opportunity for FinTech to explore among low and mid-income traders who are often victims of property loss, either through fire outbreaks, flooding, theft, vandalism and so on. For clarity, FinTech can offer Insurance services as a way to manage the risks with local businesses. When these traders buy insurance, they have purchased protection against unexpected financial losses, which in many ways benefit both parties. The insurance company pays you or someone you choose if something bad happens to you. The best form of insurance for this demographics is Property Insurance. By providing property insurance, it will cover equipment, signage, inventory, and furniture in the event of a fire, storm or theft. However, it might not cover mass-destruction events like floods and earthquakes. Therefore, FinTechs can provide a separate policy.  Featured image source: Africa-Europe Innovation Partnership
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