Leading economic and development institutions estimate that micro, small, and medium enterprises (MSMEs) contribute substantially to national Gross Domestic Product (GDP) growth.
The World Bank states that as key drivers of growth and development in emerging economies, for instance, MSMEs in Nigeria contributed about 48% of the national Gross Domestic Product (GDP) in the last five years.
Despite their importance to economic growth, job creation and poverty reduction, however, they are plagued with many challenges, especially access to finance.
Multiple sources including the Central Bank of Nigeria (CBN), National Bureau of Statistics (NBS), and PricewaterhouseCoopers put total commercial banking credit available to Nigerian small businesses at less than one percent. Between December 2021 and May 2022, less than 5% of SMEs reportedly were able to access adequate finance for working capital and business growth/expansion.
The unavailability of credit, coupled with other peculiar challenges faced by MSMEs in Nigeria, has created a financing gap of about N617.3 billion annually.
Supply chain financing model to the rescue
Supply chain financing is a business and financing process whereby suppliers receive timely payment on their invoices through payments facilitated by a financial institution/partner authorized by the buyers to facilitate the transactions by making early payments to the suppliers.
By guaranteeing payment to the selling party rather than directly financing the buying party, financial institutions/partners reduce the risks associated with trade among parties.
Globally, supply chain financing (SCF) is emerging as an effective instrument to reduce financing gaps in developing markets. For Nigeria, supply chain financing can fast-track the growth and sustainability of MSMEs. The International Finance Corporation (IFC) currently estimates the market value of Nigeria’s supply chain financing at about ₦3tn. If the country’s excluded MSMEs supply chains could be onboarded, an additional ₦9tn could be unlocked for Nigeria’s economy.
So, if its knowledge and benefits are promoted, the supply chain financing model can emerge as a strategic pillar of trade and economic diversification for Nigeria.
Enter Fiducia, the digital supply chain financing marketplace
Fiducia, a technology-leveraged supply chain financing platform launched recently in Nigeria, with the mission to catalyze the growth of Nigeria’s supply chain financing market to N12 trillion.
Fiducia is an innovative platform that connects corporate buyers, suppliers, and financiers in a digital marketplace where invoices can be financed and traded.
By leveraging the credit profiles of their corporate buyers, Fiducia provides suppliers access to the lowest-cost financing while preserving the liquidity of corporate buyers. For corporate buyers and suppliers alike, Fiducia strengthens cash flow without materially impacting client on-balance sheet loan profiles. For financiers, Fiducia provides access to a greatly expanded pool of previously overlooked corporates and newly de-risked suppliers seeking financing.
Imohimi Aig-Imoukhuede, Chief Executive Officer of Fiducia, said at the brand unveil in Lagos, that Nigeria’s supply chain financing meets only about 24% of the potential market, while MSMEs are estimated to generate more than half of the SCF opportunity according to the IFC.
- Fiducia is founded with the express purpose of leveling the playing field for business owners in Africa by unlocking the value of their supply chains. Fiducia is successfully driving inclusive GDP growth by broadening financial inclusion – as a wider pool of small and mid-sized businesses enter Africa’s financial markets on the same terms and rates previously only available to large corporates. Fiducia’s financial services and funding partner ecosystem includes many of Africa’s top developmental finance institutions, equally committed to solving Africa’s supply-chain finance challenges,” he stated.
Fiducia, he added, is a game-changer for smaller businesses and mid-sized corporates, as the digital marketplace saves time, offers speed, and convenience and breaks down complex processes that often impact adversely on business efficiency and service delivery.
Aig-Imoukhuede assured partners and stakeholders of the strictest adherence to both Nigerian and global best practices including data privacy and security supported by an effective legal framework in demonstration of commitment to trust as reflected in the company’s name.
According to Stears in a report entitled, ‘Assessing MSMEs and Business Funding in Nigeria’, lack of working capital and access to credits to scale up are top factors that inhibit the growth and expansion of small and mid-sized businesses in most developing countries, including Nigeria,
Fiducia is the latest venture from Trium, a venture builder platform focused on digital technologies that have the potential to fundamentally improve lives. Trium sits within the Coronation ecosystem renowned for providing transformational solutions to Africa’s unique challenges.
