While the Nigerian economy has been able to drastically increase the population of banking customers who transact business through the banking system, thereby enabling most payments for goods and services to pass through a central channel, we still battle with the heavy disadvantages of a cash-based economy.>>>CONTINUE FULL READING HERE....CONTINUE READING THE ARTICLE FROM THE SOURCE
In comparison with a cash-driven system, a good credit system is essential to the economic development of every nation. As of 2020, Nigeria recorded about 39 million micro, small and medium-sized companies (MSMEs) in the country, with a significant contribution of about 48 to Nigeria’s GDP, economic growth and job creation.
One main factor entrepreneurs have reiterated as an impediment to business success or growth is funding. While this is real for many businesses, recent business reports have proven the existence of a stronger factor that can make or mar any business. The payment security and credit system in the business world. The successful execution of this area will be a major booster to the business world, particularly that of SMEs>>>CONTINUE FULL READING HERE
Furthermore, an effective credit system in a country is a catalyst to fostering investment, innovation, and entrepreneurship.A common saying that “business thrives when friends and family pay” can be extended to “business thrives when everyone who buys pays as at when due”.
MSMEs constantly deal with end-users and other businesses. Selling is fun and encouraging, however, when a sale ends up with unpaid invoices and incessant unfulfilled promises to clear the debts, the business, though a fast seller, becomes fast on the track to being cash-trapped or bankrupt.
Small and Medium-sized enterprises (SMEs) in Nigeria face challenges in obtaining credit terms due to the lack of a system for validating the creditworthiness of other businesses. This results in many buyers exploiting gaps in the system, acquiring goods with poor payment integrity despite promises made for a specified payment date. This situation is often beyond their capabilities, as they lack verifiable facts to make informed decisions about extending credit terms.
The Nigerian business world faces underdevelopment, inequality, and missed opportunities due to a poor credit system. Access to data is a significant restriction on industry growth.
In developed countries, individuals have credit profiles, which can assess their creditworthiness and access to loans or assets. Debt is often encouraged to prove creditworthiness for large loans. Proper data availability allows stakeholders in the banking and business sectors to assess risk levels and creditworthiness of individuals they engage with. A central credit assessment portal is also needed for business owners to check and input data on financial integrity.
It is pitiful because as the trend continues without any repercussions, more business vendors are normalising the situation hereby tripling the potential of the supplying businesses. When payments are not made, the supplier is adversely affected immediately and the buying business is adversely affected in the long run. Causing an overall negative impact on business growth and economic development.
Payment effectiveness and processes are becoming increasingly insecure, causing businesses to struggle to distribute products to partnered outlets, malls, supermarkets, and online vendors. These products are sold in bulk on a credit basis, expected to yield returns when payment is made. However, many vendors withhold payments without recourse to sellers, leading to delayed payments for weeks, months, and even years. This accumulation of delayed payments causes significant damages to small and medium-sized businesses, including cash flow issues, financial obligations, inability to restock adequately, increased risks of bad debts, and operational inefficiencies.>>>CONTINUE FULL READING HERE
