A quiet but consequential shift is underway in how financial institutions across Nigeria and the broader African continent assess small businesses for credit. Rather than relying on physical collateral and audited financial statements, which have historically excluded the majority of SMEs from formal lending, a growing number of banks and fintech lenders are turning to real-time transaction data, payment flows, and digital business activity to make faster and more accurate lending decisions.
Read also: Nigeria’s job gap puts pressure on SMEs to absorb a growing workforce
Cash flow as the new collateral
The traditional model of SME lending in Nigeria has long been built around assets. Businesses that could not produce land titles, equipment valuations, or audited accounts were effectively shut out, regardless of how consistently they traded or how reliably they managed their cash. That model is changing.
Nomba, a Nigerian fintech, recently disclosed the results of an 18-month loan programme with Globus Bank that saw it disburse ₦21.3 billion to businesses across retail, wholesale, hospitality, and professional services. Rather than assessing businesses on historical financials, Nomba evaluated creditworthiness based on real-time payment flows it could already observe directly through its platform. The result was a non-performing loan ratio of below one per cent — a figure that challenges the assumption that SME lending in Nigeria is inherently too risky.
Consistent cash flow is becoming the new collateral. For the millions of Nigerian SMEs that trade actively but lack the documentation banks have traditionally demanded, this shift is not a technical detail — it is the difference between being bankable and being locked out entirely.
Read also: BAS Finance surpasses N20bn in SME loan disbursements across Nigeria
How digital lending is scaling access
Nigeria’s digital lenders disbursed $865 million in loans in 2025, according to the CBN’s Fintech Report 2026, with annualised transaction growth exceeding 45 per cent since 2022. These platforms now account for over 35 per cent of all fintech firms in the country and have extended credit to more than 50 million adults who previously had little or no access to formal financing.
Across the continent, the trend is accelerating. The Backbase Banking Predictions 2026 report identifies the transformation of SME banking as one of the most significant forces reshaping African financial services. Direct integrations with digital merchant networks now give lenders granular visibility into daily operations, allowing algorithms to assess risk and allocate capital in seconds, bypassing the slow, paperwork-heavy processes that once defined the sector.
Read also: Fintech firm puts N20bn into Nigerian SMEs in under a year
The risks that come with the opportunity
The shift to data-driven lending is not without challenges. Debt recovery remains a significant vulnerability in Nigeria’s credit environment, where weak enforcement mechanisms mean that default rates can erode lender returns even when underwriting models appear sound. Regulatory frameworks for digital lending are also still developing, with consumer protection and data privacy concerns yet to be fully addressed.
Opening credit access to previously excluded SMEs is an important step forward. Making that access sustainable will require equally robust frameworks around recovery, transparency, and responsible lending.
For Nigerian small businesses, however, the direction of travel is encouraging. A lending system that can assess a business based on what it actually does, rather than what it owns, is one that could finally begin to close the financing gap that has constrained SME growth for decades.
