Last week, Connect Nigeria undertook a survey of Nigerians to determine what their preferred funding sources were. Our aim was to find out what the current trends are with people who are seeking financial assistance to start up or run their businesses.
In specific terms, the questionnaire requested that poll correspondents tell what three funding sources they have used or tried to access over time. We asked them to choose from these six common alternatives: banks, personal income, family and friends, online lending platform, angel investors, and venture capitalists.
Results from the survey show that the public thinks there are more funding options they could choose from. But it also reveals that certain long-standing sources remain just as relevant today as they’ve ever been.
So, where are Nigerians likely to get their loans from these days? Here’s a summary of what we found out.
1. We’re Still Big On Leveraging Our Savings
About 85% of respondents said they’ve either funded their businesses with savings from personal income or intend to utilize savings they’ve built up from other sources. That’s a big majority, the highest we recorded for any of the options provided.
There are a number of reasons why this might be the case. First, it’s not always certain that we’ll get the support we need from the other sources. In the end, we can only be sure about what we have earned and kept in our bank accounts. This by itself indicates that there’s a long way to go on our journey to realizing a financial system that truly works for everyone.
In a nutshell, bootstrapping continues to reign supreme.
2. Family and Friends are a Second Best Bet
The 71% of surveyed persons who get their financial assistance from family and friends would probably give similar reasons for choosing them over formal lending institutions as they do for preferring personal savings over all other sources.
The story that emerges from these figures is that we’re seeking safe and certain means of powering our enterprises, and finding them more readily available to our own informal relationships. Or we might read this as a sign that there’s a real lack of awareness on the part of a lot of Nigerians about what help they could get from the banks, angel investors, or online lending platforms.
3. Banks Aren’t the First Stop for People Who Want Funding
Less than half of our respondents say they have gotten a loan from banks or want to do so.
We might chalk this up to the high-interest rates charged by them. But there’s probably more going on with the results we obtained here. Whatever the causal factors may be, it appears that the reputation of local commercial banks as very risk-averse institutions has gone before them: the number of people who would consider them a proper funding source hasn’t grown nearly as much as they would want.
4. The Angels Are Gaining a Following
Interestingly, 57% of people claimed that they’ve at least thought about courting the support of angel investors. The idea of getting funded by investors who want a share of one’s profit as a reward has obviously gained traction in the past few years.
5. Online Lending Platforms May Be Underutilized
The least accessed funding alternative was online lending platforms, with under 15% of responses favoring it. For all the talk that’s gone on about the growth of fintech in Nigeria, it’s clear that only a small fraction of the country’s population know what’s possible with online loan application centres. We might actually be losing out on a lot of opportunities on this front.