WHERE ARE THESE 37 MILLION GHOSTPRENEURS IN NIGERIA?
The ongoing revolution in payments, automated credits, and self-service onboarding that have fueled massive growth in digital banking over the last 3 years seems to have largely overlooked the Nigerian Micro, Small and Medium Enterprises (MSME) sector. Forget whatever anyone says, the small business owners have been left behind. Who did they offend?
At a recent event, I touted the numbers from SMEDAN that Nigeria had, as of 2013, 37,067,416 MSMEs, someone almost stoned me with her stiletto (with wicked looking pointies that could be deemed a weapon of personal destruction) because the numbers just didn’t look real.
Or are they Ghostpreneurs?
The numbers didn’t add up for me as well. Where are these companies or micro-enterprises? Finding them is hard. I mean, every bank will tell you that 7% or less of its accounts belong to non-individuals. When you look at NIBSS June 2017 figures, corporate accounts are just 6.5M out of the 98M accounts strewn across 20+ Nigerian banks. And the 98M accounts belong to about 26.5M accounts which average about 3+ accounts per individual. And by the way, over 98% of account holders have accounts with more than one bank.
Something doesn’t add up.
Of course, it was easy to see. Many of the MSMEs run their businesses with their personal accounts, so they are probably not Ghostpreneurs. So Sisi Clara Cake and Thingz, Baba Bisi Furniture Works probably run off their personal accounts with Bank A and B. Would you have thought they love it that way? Maybe not.
Until recently, opening a personal account in Nigeria was one of those rites of passage where you must pull a tooth with rusty pliers, by yourself and without anesthetics. Calling it painful and sadistic would be an exercise in understatement. The good thing is that over the last 2 years, the self-service revolution has extended from digital services to account opening.
At first, banks streamlined their account opening packages, so you won’t have to write GMAT essays just to open your Savings Account and then naturally progressed to opening accounts online. Now, practically all forward-looking banks allow you to open accounts online or via USSD. Unfortunately, what you get is a basic Tier 1 account and to upgrade to a proper account you can live with, a trip to the bank branch is still required. Alat by Wema has done a good job though – you get to open a proper account 100% online, and even your debit card is ferried to your shanty free of charge. I hope others see the light!
However, opening a business account is still an exercise in morbid self-flagellation; no bank seems to get it right. They ask you for all types of documentation, like what tribal mark your dead great grandmother had (you never met her!). They require random documents from fledgling entrepreneurs, who can barely put together their business plans. Many of these documents require pilgrimages to dens of government agencies. Ultimately, unless that account is critical, most entrepreneurs use their personal accounts to run their side gigs.
Think about it, have you ever paid your friend that does small chops as side hustle via her company account?
The lack of ease to open a business account has been a lose-lose-lose for every single stakeholder.
Not having a business account, in the company name, means a small business will never be able to scale. I mean, do you think Shell or Mobil will give you a small supply contract with a personal account? Absolutely not. Furthermore, by the time the small business eke out some semblance of progress and a business account is opened, the company is locked out of valuable business loans because the new account would not have the financial history that has been lost to the founder’s account.
The efforts of different banks, especially Diamond and Fidelity Banks (Disclosure: I worked at Fidelity Bank), would continue to be hampered if the ease of business account opening is not addressed.
The government also loses because taxes are lost when revenues for companies are sunk into individual accounts. The government is also not able to have data to track the performance of MSME initiatives, and they are not able to drive grants to sectors in dire need of one (I dey try myself, I know!)
What the MSMEs need today is a bank, beyond the rhetoric and adverts, which can automate the account opening processes. If an individual does not need to worship at a bank branch to open accounts same should also be extended to MSMEs. A startup should be able to start the process, upload all documentation and have an account opened within minutes or hours at most. There are APIs, tools and other offline services available banks to authenticate almost all documentation required for business account opening. Each director or signatory in the account would also be part of the process and can be validated as well.
I honestly believe this would happen as soon as the market for individual digital payments reaches maturity. However, between now and then, the first banks to streamline this process may have a lockdown on MSME business accounts.
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