The Digital Divide in Lending: How Technology Shapes Credit Access in Nigeria
June 17, 2025, 10:41 pm
Location: United States, District of Columbia, Washington
Employees: 1001-5000
In Nigeria, the quest for loans often feels like a marathon. Many run, but few reach the finish line. The landscape of lending is evolving, driven by technology and data. Yet, a chasm remains between traditional banks and fintechs, creating a complex web of credit access.
Take Mubarak Umar, a supplier agent in Ibadan. He dreams of opening an electronics store. His steady income of ₦200,000 ($126) monthly should qualify him for a loan. But when he approaches his bank, GTBank, he is met with disappointment. They offer him only ₦120,000, a fraction of what he needs. Frustrated, he turns to fintech apps like PalmPay and Opay, only to receive paltry offers of ₦23,000 and ₦8,000. It’s a familiar story for many Nigerians.
Every day, countless individuals seek loans, hoping to bridge the gap between their aspirations and financial realities. But the decision on how much they can borrow is increasingly dictated by algorithms rather than human judgment. This shift is reshaping the lending landscape.
Traditional banks rely on structured income verification and credit history. They prefer corporate clients and salary earners with established banking relationships. This cautious approach often sidelines micro, small, and medium enterprises (MSMEs) and informal sector workers. In 2023, FirstBank allocated a staggering 94% of its ₦6.6 trillion loan portfolio to corporate borrowers. UBA and Access Bank followed suit, with similar patterns. The numbers tell a stark story: banks are hesitant to lend to individuals, fearing defaults and liquidity issues.
On the other hand, fintechs like PalmPay and OPay adopt a different strategy. They analyze a borrower’s digital footprint, scanning app usage and even contact lists. This behavior-based approach allows them to offer loans to those who might be overlooked by traditional banks. Yet, this convenience comes at a cost. Interest rates can be steep, and loan limits are often modest, especially for first-time borrowers.
The algorithms used by fintechs are dynamic. They assess risk based on real-time data, meaning a borrower’s credit limit can fluctuate. For instance, if a borrower has an overdue loan, their access to new credit may be severely restricted. This creates a cycle of dependency and frustration. The same borrower might find themselves with a loan limit of ₦1,000 after a missed payment, despite a history of timely repayments.
Moreover, the methods of debt recovery have evolved. In the past, borrowers faced aggressive tactics, including harassment and threats. However, many fintechs are shifting towards automated recovery systems. These systems send reminders and notifications, reducing the stigma associated with borrowing. Yet, they still rely on algorithms that can trigger punitive measures for late payments.
The digital divide in lending raises critical questions about access and equity. While fintechs have made strides in reaching underserved populations, they still operate within a framework that often excludes the most vulnerable. Rural dwellers, for instance, face significant barriers. Without formal banking relationships or digital footprints, they are left in the shadows of the financial system.
Experts argue for a more inclusive approach. A tech model that incorporates informal players is essential. By developing credit scoring systems that account for unique circumstances, lenders can tap into a vast market of potential borrowers. Collaboration between banks and fintechs could pave the way for innovative solutions that bridge the gap.
The economic implications are profound. Discriminatory access to loans stifles growth for MSMEs and informal workers. These groups are vital for job creation and economic development. Without adequate financing, their potential remains untapped, hindering the nation’s progress.
KERA, a Senegalese e-health startup, recently secured $10 million from the International Finance Corporation (IFC). This investment highlights the growing recognition of the need for innovative solutions in underserved markets. KERA’s AI-powered platform aims to connect patients with healthcare providers while digitizing medical data. This model could serve as a blueprint for financial services, demonstrating the power of technology to drive inclusion.
As Nigeria navigates its lending landscape, the interplay between traditional banks and fintechs will shape the future. The challenge lies in finding a balance between risk management and accessibility. The goal should be to create a financial ecosystem that empowers all individuals, regardless of their background.
In conclusion, the journey toward equitable lending in Nigeria is ongoing. Technology holds the key to unlocking new opportunities, but it must be harnessed responsibly. By prioritizing inclusivity and collaboration, the financial sector can transform lives and drive economic growth. The marathon continues, but with the right strategies, more runners can cross the finish line.
Take Mubarak Umar, a supplier agent in Ibadan. He dreams of opening an electronics store. His steady income of ₦200,000 ($126) monthly should qualify him for a loan. But when he approaches his bank, GTBank, he is met with disappointment. They offer him only ₦120,000, a fraction of what he needs. Frustrated, he turns to fintech apps like PalmPay and Opay, only to receive paltry offers of ₦23,000 and ₦8,000. It’s a familiar story for many Nigerians.
Every day, countless individuals seek loans, hoping to bridge the gap between their aspirations and financial realities. But the decision on how much they can borrow is increasingly dictated by algorithms rather than human judgment. This shift is reshaping the lending landscape.
Traditional banks rely on structured income verification and credit history. They prefer corporate clients and salary earners with established banking relationships. This cautious approach often sidelines micro, small, and medium enterprises (MSMEs) and informal sector workers. In 2023, FirstBank allocated a staggering 94% of its ₦6.6 trillion loan portfolio to corporate borrowers. UBA and Access Bank followed suit, with similar patterns. The numbers tell a stark story: banks are hesitant to lend to individuals, fearing defaults and liquidity issues.
On the other hand, fintechs like PalmPay and OPay adopt a different strategy. They analyze a borrower’s digital footprint, scanning app usage and even contact lists. This behavior-based approach allows them to offer loans to those who might be overlooked by traditional banks. Yet, this convenience comes at a cost. Interest rates can be steep, and loan limits are often modest, especially for first-time borrowers.
The algorithms used by fintechs are dynamic. They assess risk based on real-time data, meaning a borrower’s credit limit can fluctuate. For instance, if a borrower has an overdue loan, their access to new credit may be severely restricted. This creates a cycle of dependency and frustration. The same borrower might find themselves with a loan limit of ₦1,000 after a missed payment, despite a history of timely repayments.
Moreover, the methods of debt recovery have evolved. In the past, borrowers faced aggressive tactics, including harassment and threats. However, many fintechs are shifting towards automated recovery systems. These systems send reminders and notifications, reducing the stigma associated with borrowing. Yet, they still rely on algorithms that can trigger punitive measures for late payments.
The digital divide in lending raises critical questions about access and equity. While fintechs have made strides in reaching underserved populations, they still operate within a framework that often excludes the most vulnerable. Rural dwellers, for instance, face significant barriers. Without formal banking relationships or digital footprints, they are left in the shadows of the financial system.
Experts argue for a more inclusive approach. A tech model that incorporates informal players is essential. By developing credit scoring systems that account for unique circumstances, lenders can tap into a vast market of potential borrowers. Collaboration between banks and fintechs could pave the way for innovative solutions that bridge the gap.
The economic implications are profound. Discriminatory access to loans stifles growth for MSMEs and informal workers. These groups are vital for job creation and economic development. Without adequate financing, their potential remains untapped, hindering the nation’s progress.
KERA, a Senegalese e-health startup, recently secured $10 million from the International Finance Corporation (IFC). This investment highlights the growing recognition of the need for innovative solutions in underserved markets. KERA’s AI-powered platform aims to connect patients with healthcare providers while digitizing medical data. This model could serve as a blueprint for financial services, demonstrating the power of technology to drive inclusion.
As Nigeria navigates its lending landscape, the interplay between traditional banks and fintechs will shape the future. The challenge lies in finding a balance between risk management and accessibility. The goal should be to create a financial ecosystem that empowers all individuals, regardless of their background.
In conclusion, the journey toward equitable lending in Nigeria is ongoing. Technology holds the key to unlocking new opportunities, but it must be harnessed responsibly. By prioritizing inclusivity and collaboration, the financial sector can transform lives and drive economic growth. The marathon continues, but with the right strategies, more runners can cross the finish line.