The Central Bank of Nigeria (CBN), has released a data that indicates that 95.66% of bank loans in 2024 originated from microfinance banks.

The data captured loans transactions in September 2024, and it showed the great influence of microfinance banks on individuals and small businesses.

Out of a total of 6,537 debtors across all credit types, Microfinance banks lended to an impressive 6,253 people.

This is a sharp decline from the 6,573 loans recorded for MFBs the previous month and a bigger decline Year-on-Year from 8500 recorded in September 2023.

The rise in the popularity of digital loan apps may also be contributing to the reduced market share of traditional DMBs.

In September 2024, the total number of debtors across all creditor types was 6,537, a decrease from 6,916 in August 2024 and 9,071 in September 2023.

This shows a 28% year-on-year decline, reflecting the effects of rising borrowing costs and a more restricted credit market.

The year-on-year decline in debts may not be unconnected with the rising interest rates.

The CBN Governor Yemi Cardoso consistently raised interest rates in 2024, closing the year with interest rate of 27.5%.

The Monetary Policy Committee (MPC) has explained that the consecutive hikes are aimed at curbing the rising inflation rate, but inflation does not seem affected by the increase so far, as headline inflation closed the year at 34.80%.

This increase made loans more expensive and could have discouraged borrowings at individual and corporate levels, leading to a drop in borrowings from financial institutions.

There are suggestions that the rise in the popularity of digital loan apps may also be contributing to the reduced market share of traditional DMBs. These apps offer their loan services quickly and without any hassles or collateral.

In spite of the high interest rates and sometimes unethical recovery practices, they continue to attract borrowers.