SMEs may be the key to financial inclusion in Nigeria

By focusing on sustainability, investment in people and new technology, as well as continued innovation, Zenith Bank has provided a winning strategy which continues to create value for customers, employees and investors


The banking sector in Africa is emerging rather strongly from the impact of the COVID-19 pandemic. However, the fact that the pandemic has significantly altered the face of banking on the continent is without a doubt. Today, the industry is witnessing an acceleration in digital transformation. By all accounts, the survival of the status quo, which is bricks and mortar, is not guaranteed during this reawakening.

While for most banks, COVID-19 activated the need to think differently, for Zenith Bank, this has been the norm. Even before the pandemic, Zenith Bank has always been a technology-driven bank that thrives on innovation. In fact, putting technology and innovation at the heart of its operations was fundamental in ensuring minimal disruptions at the peak of the pandemic when shutdowns and restrictions significantly affected large corporates, small and medium enterprises (SMEs) and retail clients.

The bank has continued to invest immensely in new technologies and digital solutions

Zenith Bank readjusted its strategy to ensure it continued to create value for customers, employees and investors. Part of the measures included activating a robust business continuity plan to ensure that critical systems remained operational, allowing customers to continue carrying out their banking transactions seamlessly. With the pangs of the pandemic becoming less severe, the bank is domesticating some of the key pandemic trends, including customers’ preference for digital channels.

With technology being at the core of Zenith’s business strategy, the bank has continued to invest immensely in new technologies and digital solutions. In the outgone financial year, the bank’s investments in technology grew by 40 percent year-on-year from $49m in 2020 to $68.9m in 2021. These investments have simplified processes like account opening, loan application and complaints resolution. More importantly, the transaction platforms and channels have been reliable, secure and convenient for customers, thus driving the continued patronage of the Zenith brand. This is evident in the bank’s value and volume of electronic transactions, which grew by 73 percent and 69 percent, respectively, year-on-year, in 2021.

The pursuit of growth
Since its inception, Zenith Bank has demonstrated an overwhelming presence in the corporate market. The bank is the preferred financial partner for most businesses operating across various sectors of the Nigerian economy, including oil and gas, power, construction, manufacturing and general commerce. Having maintained leadership in the corporate market segment, the bank has set its focus on the retail market as part of its strategy to expand its customer base and create more diversification.

The bank’s desire to bring about transformation meant exploiting vast opportunities presented by the internet

In the last couple of years, Zenith Bank has been leveraging its success in the corporate segment to achieve significant mileage in the retail segment through its ‘retail take-over’ strategy. The objective is to become the market leader in the retail market. So far, the strategy has led to remarkable growth in customer base and the roll-out of innovative retail banking services.

It’s important to note that digital infrastructure and platforms have been central in enabling the bank to penetrate the retail market. The bank leveraged cutting-edge technology to deliver best-in-class retail products and services that suited the digital demands of retail customers.

Zenith Bank’s pursuit for growth is both outwards and inwards. Outwards, the bank harbours big plans to expand beyond its Nigerian home market and become a force to reckon with on the pan-African front. Zenith Bank has already set its sights on other African markets, beginning with the West Africa sub-region, where its brand is making significant inroads. In the Ghanaian market, which it entered in 2005, the bank already boasts of 38 business offices. As well as Ghana, the bank also has operations in Sierra Leone and Gambia.

Betting big on SMEs
Inwards, Zenith understands the importance of the Nigerian market to its growth ambitions. Apart from implementing the ‘retail take-over’ strategy, the bank is also focusing on SMEs, women-led enterprises and financial inclusion. In Nigeria, the SME sector is massive, considering it contributes 48 percent of the country’s GDP and is a major contributor to employment generation. Despite the sector’s importance, SMEs face challenges, top of which is access to affordable credit. One of the biggest impediments to their access to credit is their inadequate track record.

While this is the reality for SMEs, Zenith Bank sees enormous opportunities in their contribution to employment generation, wealth creation and overall economic growth. SMEs also provide a huge base to deliver value innovation and offer compelling propositions and engagements for business growth.

Consequently, Zenith Bank launched the SME Grow My Business (SME-GMB) product. This innovative product creates a platform for SMEs to better manage their business, become more competitive and get more visibility in the market across the web and digital platforms. The bank is also expanding credit allocation to bridge the gap in access to credit between large corporates and SMEs. On this, the bank rolled out the Zenith SME facility, which has made it possible for many SMEs to obtain loans at single-digit interest rates.

More importantly, Zenith Bank is collaborating with service providers like digital and technology companies in partnerships that focus on addressing the major challenges of SMEs. These partnerships cut across providing SMEs with digital skills and sector-based training, offering solutions and tools that help them find customers, build loyalty, and enable them to access loans more swiftly and earn savings from discounted business expenses.

The problems facing SMEs are closely intertwined with those besetting women entrepreneurs who are highly represented in the SME segment. Their challenges are compounded by the fact that the majority of the financial products and services are gender-neutral and tend not to favour women’s access to finance. Zenith Bank is on a mission to change this narrative.

The bank launched the Z-Woman initiative to improve access to credit for women. The package comes with loans of up to $24,000 at a single-digit interest rate, free digital skills training, and free exhibition stands at Zenith Bank events. In 2020, the bank extended $9.6m in loans under the initiative.

Finance for all
Another area that has become of paramount importance for Zenith Bank is financial inclusion. According to Enhancing Financial Innovation & Access (EFInA), Nigeria’s financial inclusion rate stood at 64 percent in 2020. Notably, Zenith Bank understands that bricks and mortar has largely failed in making it easy for the majority to access financial services, more so those living in rural areas. Apart from the enormous costs involved in setting up and running physical branches, it is a no-brainer that technology has become a better enabler of banking services.

This explains why Zenith Bank has opted to go big on technology and innovations. For the bank, the digital stride has continued to evolve from traditional banking channels to developing innovative digital products and solutions. In essence, digitisation is enabling the bank to reach unbanked populations in every part of the country. Investment in technology is also helping drive financial inclusion, which is critical for the bank’s continuous growth.

The Nigerian economy is going through a season of optimism since exiting one of its deepest recessions

When the bank started operations in 1990, there were no ATMs, no debit or credit cards, and no digital networks. The bank’s desire to bring about transformation meant exploiting vast opportunities presented by the internet. Consequently, the bank invested in a VSAT (very small aperture terminal) satellite, giving customers the power to deposit money in one part of the country and withdraw it in another. This endeared the bank to customers and encouraged many people to access formal financial services.

Today, the introduction of digital financial solutions like unstructured supplementary service data (USSD), mobile apps and the internet has opened the possibilities of near-universal access to financial services. With a mobile telephone, anybody can access financial services even in the remotest parts of the country. With USSD, the unbanked can easily open bank accounts with minimal documentation and carry out banking services.

Champions of innovation
Zenith Bank will continue to make the requisite investments in personnel and infrastructure to maintain the ability to deliver innovative solutions to the market and serve customers more diligently. Over the years, the bank has strongly demonstrated its ability to churn out innovative products and services.

On technology and innovation, the bank has opted to partner with fintechs. In fact, Zenith Bank has been a leading champion of the fintech space in Nigeria. The country is home to many of Africa’s vibrant tech hubs and fintech start-ups. According to a 2020 McKinsey report, Nigeria has over 200 standalone fintech companies. Going by the amount of foreign financing that fintechs have been attracting, the industry is tellingly vibrant. The McKinsey report shows that between 2014 and 2019, Nigeria’s bustling fintech scene raised more than $600m in funding. In 2019, the country attracted $122m, a quarter of the $491.6m raised by African tech start-ups.

Jim Ovia, Chairman and Founder of Zenith Bank
Jim Ovia, Chairman and Founder of Zenith Bank

Unlike in other countries where regulators remain extremely cautious, leading to the stifling of innovation, the Central Bank of Nigeria has been exemplary in embracing new ideas. Part of this has been putting in place frameworks that regulate and spur innovations which help to deepen digital finance. In 2020, the apex bank adopted a creative approach to regulating fintechs using a sandbox and governing framework where products, services and approaches are tested with customers and concerned stakeholders. The ability of the apex bank to be open-minded on financial innovations has seen Nigeria lead the pace in digital currency in Africa with the launch of the eNaira.

The regulator understands the future of money potentially rests in the broad-based adoption of digital currency to meet emerging consumer demands by establishing more direct, transparent and efficient payment systems. In essence, the eNaira opens a new sphere in digital payments by providing simplified, swift and safe transactional opportunities. Overall, it will not only be a game-changer for domestic payments processing but will also be used for foreign exchange transactions and cross-boundary payments.

The vibrancy of Nigeria’s fintech innovation space has seen Zenith Bank develop a sandbox infrastructure that enables it to engage with fintech firms. The sandbox facilitates compatibility and positions the bank in readiness to collaborate with different players in the ecosystem irrespective of their product offerings or needs. Through the sandbox, the bank is able to extend governance and risk management framework to fintechs. It also helps to address risks related to compliance failures and cybercrime.

In addition, the bank also provides funding and banking support that fintechs require to scale. Indeed, Zenith Bank’s continued push to expand its value creation across its business segments comes at an ideal time.

The great recovery
The Nigerian economy is going through a season of optimism. Since exiting one of its deepest recessions occasioned by the COVID-19 pandemic in the last quarter of 2020, the Nigerian economy has continued on a positive trajectory. Data from the National Bureau of Statistics show that GDP grew by an impressive 3.9 percent in the last quarter of 2021, compared to 0.11 percent from the same period in 2020 (see Fig 1).

The economy is projected to continue on a positive trajectory in the immediate and medium-term, with the International Monetary Fund forecasting a 3.4 percent growth in 2022. The Nigerian government is more optimistic, with a 4.2 percent growth projection. Growth is expected to be driven by various initiatives to improve the country’s economic and investment climate. A key focus has been a push to boost investments in infrastructure and improve foreign exchange earnings from non-oil exports. No doubt, the banking industry will benefit from growth in various sectors of the economy, particularly from expanding credit to the private sector. Last year, banking sector credit to the private sector stood at $84bn. With the economic rebound, growth in credit to the private sector is expected to rise exponentially. One area of concern is Nigeria’s overdependence on the oil sector. The risks associated with this overdependence were evident during the peak of the pandemic.

Nigeria, Africa’s top oil producer and exporter, relies on crude sales for about 90 percent of foreign exchange earnings. A contraction of the oil sector due to low oil prices in 2020 was one of the key factors that plunged the country into a recession.

The need for diversification is even more crucial as the fortunes of crude oil are dwindling as the world begins to move away from fossil fuels. For Nigeria, it is also imperative to rediscover the country’s non-oil export potential. This will not be new, considering the country once relied solely on non-oil export earnings. The need to boost local production capacity, create more jobs and achieve overall economic growth calls for diversification of Nigeria’s economic base through the promotion of non-oil exports.

Zenith Bank has already identified the emerging opportunities in stimulating non-oil exports and has developed robust financial products and incentives for operators outside the oil and gas sector. Part of the interventions has been a steady application of the Central Bank of Nigeria’s discounted cash reserve requirement (DCRR) policy to disburse funds to non-oil exporters while significantly investing under the Non-oil Export Stimulation Facility. The bank has also launched an annual non-oil export seminar to deepen the discourse on promoting non-oil export business in the country.

A sustainable future
Having been in existence for three decades, Zenith Bank has grown enormously to become a powerhouse financial institution in Africa. Today, the bank is Nigeria’s largest bank, and it is also one of Africa’s largest financial institutions by tier-one capital. It is also unarguably the most profitable bank in the country. As a forward-thinking institution, the bank is keeping a keen eye on the future and taking action to remain sustainable.

A holistic approach to business has seen Zenith Bank commit to the adoption of responsible practices in its operations while driving progress towards the achievement of the Sustainable Development Goals (SDGs). Consequently, the bank has continued to leverage its commitments under various local and international sustainability frameworks, including the Nigerian Sustainable Banking Principles and the Principles for Responsible Banking of the United Nations Environment Programme Finance Initiative, to align its activities and those of its clients with the tenets of sustainable banking.

The bank has also successfully integrated environmental, social and governance (ESG) considerations into its financing and investing decisions by screening projects. This is in line with its robust E&S framework. Currently, Zenith Bank is able to assess more than 90 percent of all credit transactions for E&S risks.

Putting sustainability at the heart of operations has brought about accolades from both within and without. The bank has received several awards and recognitions as a result of its sustainability performance. These include the Best Corporate Governance ‘Financial Services’ Africa 2021 (Ethical Boardroom), Most Responsible Organisation in Africa, Best Company in Reporting and Transparency, Best Company in Infrastructure Development and Best Company in Promotion of Gender Equality and Women Empowerment.

By all accounts, the awards demonstrate that adopting sustainability as a business strategy combined with a commitment to excellent service delivery and best practices sets a business apart as a market leader. While being proud of its success, the bank cannot afford to rest on its oars. As far as sustainability is concerned, the bank’s winning mentality is to achieve continual improvement, knowing that the sustenance of the business is directly related to the sustained value that it creates for the people, investors, society and all stakeholders.