Banks & Fintechs Join Forces to Plug Africa’s $100 Billion SME Credit Gap

Africa is currently facing a significant challenge in financing its small and medium-sized enterprises (SMEs). The continent is experiencing a $100 billion credit shortfall for SMEs, a gap that is restricting business growth, job creation, and overall economic development. According to BusinessDay, this persistent funding gap continues to limit the potential of millions of small businesses across African markets.

The Causes of the Credit Gap

Several factors have contributed to this financing problem:

Traditional banking barriers: Many SMEs do not meet banks’ requirements for collateral, audited financial statements, or formal credit histories.

High administrative costs: Processing small loans is costly and time-consuming, making lending to SMEs less profitable for banks.

Fragmented data and weak risk assessment: With no centralized or alternative credit database in many African countries, it becomes difficult to accurately assess SME risk, especially for informal businesses.

Partnerships as a Solution

Instead of competing with fintech companies, many African banks are now forming strategic partnerships with fintech innovators to co-develop SME-friendly financial products. These partnerships combine banks’ access to capital with fintechs’ digital efficiency and customer-focused technology.

Examples of Collaboration

Kenya: Citi, Visa, and Cellulant launched Citi Optimised Pay, a supply-chain finance platform that enables corporate buyers to instantly pay SME suppliers using commercial cards through Cellulant’s payment infrastructure.

Egypt: Buy-Now-Pay-Later (BNPL) platform valU partnered with Banque Misr to broaden access to flexible consumer and SME credit solutions.

Nigeria: Banks such as Ecobank and FCMB are leveraging fintech partnerships to improve SME onboarding, credit scoring, and digital lending efficiency.

Technology Driving the Change

According to The Guardian Nigeria, emerging financial technologies are becoming central to solving Africa’s SME credit challenges. Key innovations include:

AI-powered credit scoring: AI analyzes alternative data — such as mobile usage and transaction histories — to determine creditworthiness for SMEs with little or no traditional documentation.

Open banking frameworks: These frameworks give fintechs access to richer financial data, helping them build more accurate lending models.

Digital payment infrastructure: Platforms like Moniepoint and Cellulant make loans and payments more accessible and faster for small businesses across Africa.

Remaining Challenges

Despite progress, several issues still hinder SME financing on the continent:

Regulatory inconsistencies: Varying laws across countries often slow down digital lending solutions.

Data privacy concerns: SMEs may worry about how and where their financial data is stored and used.

Infrastructure gaps: Rural areas still lack strong digital and financial infrastructure, limiting fintech reach.

READ MORE ON HOW Nigeria Steps Up: Government Backs $64 Million Ventures Platform Fund to Boost Startups

 Economic Impact

Closing the SME credit gap would create massive economic benefits:

Job creation: SMEs employ a large portion of Africa’s workforce, so improved access to finance directly supports employment growth.

Boost in digital innovation: Bank-fintech partnerships accelerate the development and deployment of digital financial products.

Financial inclusion: More SMEs gaining access to modern financial services contributes to a stronger, more inclusive African economy.