MSMEs are crucial for economic growth globally, including in Nigeria. And for a long time in Africa’s largest economy, they have served as the lifeblood fuelling economic growth and development by creating jobs, reducing poverty, and generating wealth. The International Labour Organisation (ILO) says that MSMEs account for 96 per cent of businesses, 84 per cent of employment, and contribute 48 per cent of Nigeria’s National Gross Domestic Product.
But despite this huge economic importance, MSMEs face a plethora of challenges that hinder their potential to scale. For instance, it’s often difficult for them to access funding to scale from banks and financial institutions.
Oftentimes, they lack the collateral or credit history necessary to meet the requirements set by financial institutions. And sometimes the interest rates are prohibitive. Nigerian banks have loaned less than 1 per cent of their total exposures to MSMEs, resulting in a financing gap exceeding 65.4 trillion Nigerian ($156.1 billion).
It is to end these longstanding problems that Fiducia, a technology-leveraged supply chain financing platform, rolled out the first-of-its-kind solution, with the mission to catalyse the growth of Nigeria’s supply chain financing market to NGN 12 trillion.
Here comes Fiducia
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.
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.
Equitable wealth creation and inclusive growth
At the formal launch of the platform held at the Eko Hotel & Suites, Victoria Island, Lagos last Thursday, Bunmi Lawson the MD/CEO of EDFIN Microfinance Bank Limited, in her opening speech emphasised the need for Nigeria to foster equitable wealth creation as the country enters a hopeful era of growth. And in order to stay competitive and relevant, companies must adapt and embrace innovation in this rapidly changing environment. And that is exactly what Fiducia aims to do.
She further stated that “By leveraging cutting-edge technology and building a community of financiers and suppliers, we offer businesses an opportunity to unlock the true potential of their supply chain. With our services, companies can access immediate funds, improve liquidity, and fuel their growth ambitions, all while mitigating risks and minimizing administrative burdens.”
The International Finance Corporation (IFC) currently estimates the value of Nigeria’s existing supply chain financing sector at around NGN 3 trillion. If the country’s currently excluded SME supply chains could be brought into play, an additional NGN 9 trillion could be unlocked for Nigeria’s economy.
Supply Chain Finance (SCF) is emerging as an effective instrument to reduce financing gaps in developing markets. The current SCF supply meets only about 24% of the potential market. MSMEs are estimated to generate more than half of the SCF opportunity according to the IFC.
Commenting on the launch, the Chief Executive Officer of Fiducia, Imohimi Aig-Imoukhuede, disclosed that Fiducia was a game-changer for smaller businesses and mid-sized corporates, as they historically wasted resources on complex, time-consuming funding application processes that seldom delivered the desired results.
“Fiducia is founded with the express purpose of levelling the playing field for business owners in Africa by unlocking the value of their supply chains. Today, 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.”
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.