In Nigeria, Financial Inclusion Starts with Local Currency

A loan and financial advice from IFC client LAPO helped Lilian Egbune expand her store. © LAPO Microfinance Bank

Lilian Egbune cheerfully welcomes all of the customers who step into her small shop in a suburb of Lagos, Nigeria. Her brightly colored ethnic textiles, draped around displays, alongside the unique handmade jewelry, have been attracting more and more shoppers.

It’s a welcome change of pace. Although Egbune’s business is successful now, she struggled for years to build it—often coming perilously close to bankruptcy. Throughout each challenge, she tried to remain determined and hopeful, even when large banks refused her loan applications because she had no collateral.

After she was referred to LAPO Microfinance Bank, her difficulties started to diminish—and the earnings from the shop increased. “LAPO’s loan and financial literacy support helped my business to expand,” Egbune said. “I was able to pay for a bigger shop in a busy area and now I have more customers and my business is growing.”

LAPO Microfinance Bank is one of six Nigerian microfinance institutions that IFC supports.  Our backing allows them to reach more small business owners, who in turn create jobs and drive local and national economic growth.  These six institutions serve more than 2.6 million borrowers, allowing them to save money, invest further in their businesses, and expand their enterprise.


Promoting Financial Inclusion Across Africa

One of the best ways to increase access to finance for low income individuals is through microfinance institutions. IFC’s support for these institutions with strong track records and client-friendly products allows them to reach entrepreneurs with promising ideas, whether the business is in a high-traffic urban location or a remote area with a pressing need for goods and services. For Nigeria, financial inclusion at both levels will create more jobs and a healthier economy.

IFC’s six microfinance clients have a robust portfolio of over $450 million in loans to small businesses and microbusinesses. The microfinance banks in Nigeria with best-in-class operations—like LAPO Microfinance Bank—have maintained non-performing loans at a relatively low level. As a result, many bank customers, such as Lilian Egbune, have maintained and even grown their revenues.

LAPO Microfinance Bank and others like it demonstrate that certain segments of the economy are resilient.  Even many of those at the base of the pyramid have been able to withstand the macroeconomic shocks that have forced larger, more established, and traditionally run businesses to scale back their operations.


Loans in Local Currencies

The need for increased access to financial products is great, not only in Africa but across the globe. The World Bank estimates that more than half of the planet’s total adult population does not use formal financial services. Cost, distance, and bureaucracy prevent these businesses from receiving formal financial services.

But 200 million enterprises in developing economies face financing constraints that could be solved in part by establishing access to transactions, payments, savings, credit, and insurance. Many development finance institutions have provided funding to local microfinance institutions to help them reach more clients, but borrowing in dollars or euros can pose an exchange risk for institutions earning in African currencies. That’s why IFC has a longstanding tradition of offering loans in local currencies—another way of making clients comfortable.

The approach worked for Egbune. “In 2015, inflation set in with the falling Naira value and prices started rising sharply,” she said. “I was worried about borrowing rates increasing, but LAPO kept their rates at very affordable levels, and I have managed to grow my business despite the economic crises.”

IFC was the first development finance institution to seek and receive Central Bank of Nigeria’s approval to execute long-term Naira swaps on the back of loans. IFC local-currency financing helped cushion the effect of foreign exchange volatility for the microfinance institutions in its portfolio. It fostered an understanding of foreign exchange risk among these institutions, and inspired other lenders to provide local currency funding.

To learn more about IFC’s work in microfinance, visit

Published in April 2017


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