Microlending in Nigeria

Almost everyone would agree on the definition of a loan if you were to ask them about it: a loan is simply money or financial assets given to a person in need of funds in exchange for a pledge to repay at a specified time. This is fundamental knowledge.

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If you searched deeper, you'd find that the vast majority of people are aware that obtaining a loan is not a straightforward process; no one lends money without a guarantee, which is why collaterals exist. In addition, the process of obtaining a loan can be complicated. This is due to the fact that nobody wants to lend to someone who cannot meet their repayment obligations.

However, not everyone can afford to provide collateral or even satisfy all the standard loan application requirements. This does not imply that there are no loans for this class in Nigeria. Microlending therefore enters into play.

What is microlending?

Microlending, also known as microcredit, refers to small loans provided to individuals (often without collateral) for the purpose of launching small businesses. Consider Mr. A, a retailer of domestic goods who needs to restock his store. As a sole proprietor, he lacks the collateral required to secure a loan. His poor financial standing and lack of collateral do not inherently meet the criteria. Mr. A can, however, obtain the funds he needs to carry out his plans through microlending.

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Microlending is typically focused on the growth of small enterprises, as opposed to the conventional goal of profiting from loan interest. Where conventional loans seek to generate a profit from the interest they collect. In addition to eradicating poverty, microlending provides the opportunity for businesses to thrive and develop through loans. Occasionally, some microlending facilities offer options for business coaching for these sole proprietors.

What is microfinance?

Microlending is a component of Microfinance, a much larger concept. Microfinance is an umbrella term that encompasses loans, savings, insurance, transfer services, and other financial products targeted at people with deficient economic status. . As indicated previously, these loans and other financial products are typically provided without collateral.

What is a Microfinance institution?

Every loan has an  facilitator. Microfinance is facilitated by microfinance institutions and individuals who provide microlending services.

How can you access microlending in Nigeria?

In Nigeria, microlending institutions are ubiquitous. With'microfinance institutions' being one of the most prevalent. Additionally, there are peer-to-peer lending groups that facilitate microlending. Also, over the past few years, the federal government-sponsored microlending service Trader Moni in Nigeria has acquired traction and grown in popularity among small traders.

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The loans typically have low interest rates, and the only requirements are a valid reason for the loan and a suitable repayment plan. Microlending is the most expedient method to obtain small loans.

Conclusion

Microloans in Nigeria are swiftly expanding to traditional banks. This is due to the fact that microlending has proven profitable over time. The Central Bank of Nigeria threw its complete support behind microlending in Nigeria in order to assist the country in achieving its objective of financial inclusion.