The informal sector is unable to access funding and other opportunities for growth because of the challenge of accessing funds, the ‘Informal Economy Report 2024’ released by Moniepoint has stated.
The report noted that many programmes and initiatives by development institutions that exist to support businesses of all sizes in the country are not assessed because of a lack of financial inclusion.
It noted: “This lack of access to banking also impacts them in other ways. Many programmes and initiatives from development institutions, including the Nigerian government, exist to support businesses of all sizes in the country.
“However, with most of the businesses in the informal economy invisible, access to them remains constrained. They also do not have the requisite documentation to apply for these grants. This means that although opportunities for them do exist, they are often unable to access them in ways that can help them grow meaningfully.”
Despite the importance of funding to the operations of businesses in the informal sector, many of them cannot obtain external funding, with many seeking loans from family and friends.
“Lack of a financial history also makes it impossible for many of them to access credit from the existing formal systems,” it stated.
The report explained that though many metropolises in the country host automated teller machines (ATMs) and banks, many others are left out.
“Access to banking services has been difficult for businesses in the informal economy, as they often did not have the requirements to be banked traditionally. Building banking and payment services with these businesses in the focus has enabled us to provide them with tools that meet their specific needs.
“Providing banking services for these businesses, in line with existing regulations, can see many of them transition to a more formalised system. This means increased access to systemic benefits that are typically available to their more formalised counterparts,” it said.
Stressing the need for simplifying access to credit, the report said: “Getting credit remains challenging for many businesses, especially those in the informal economy. Without formal banking records or financial history, correctly accessing these businesses has been difficult or impossible for many traditional players. Where they are given credit, they are often not given enough to move the needle for their businesses.”
The report noted that stakeholders’ collaboration is crucial for breaking barriers to the formalisation of businesses.
On how businesses can be formalised with the help of inter-agencies collaboration, it stated: “By partnering with government agencies, we’ve made it easier for businesses to obtain the necessary documentation to become formal. Our ongoing partnership with the Corporate Affairs Commission (CAC) allows business owners to register their business names with the CAC directly on our platform.”
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