By Martin Ekpeke
Mr. Obinna Iwuno, President of the Stakeholders in Blockchain Association of Nigeria (SiBAN), has asserted that blockchain technology holds the key to unlocking the vast potential of Small and Medium Enterprises (SMEs) across Africa.
Speaking at the Security and Exchange Commission (SEC) and Lagos Chamber of Commerce and Industry (LCCI) webinar, “SME Financing in the Nigerian Capital Market,” Iwuno highlighted blockchain’s ability to address critical challenges faced by African SMEs, particularly in accessing financial resources.
The SiBAN President emphasized the pivotal role SMEs play in African economies, notably in job creation. However, he also identified persistent obstacles such as the lack of access to reliable credit reporting tools and verifiable transaction histories.
According to him, this deficiency hinders SMEs’ ability to secure funding. He proposed that blockchain provides a robust solution by offering a secure and transparent platform for establishing digital identities and recording financial transactions.
“One of the challenges that they have faced is access to tools for credit reporting, they do not have those kinds of records and transaction histories. This is where blockchain comes in. With blockchain, we can create a decentralized digital identity that is verifiable and linked. With these digital identities, investors can assess business registration records, tax compliance data, and transaction history instead of relying on paper trails and informal assessments,” Iwuno explained.
Transforming credit assessment with immutability and transparency
Iwuno detailed how blockchain’s inherent immutability and transparency can revolutionize the credit assessment process. By generating tamper-proof records, blockchain enables investors to make data-driven decisions, reducing the risks associated with traditional, often unreliable, methods. He pointed out the potential for blockchain to enhance existing credit scoring models by incorporating alternative data, such as supplier and customer transactions, revenue inflow, and payment behavior.
“All of these things can also be on-chain. They are immutable because that’s one of the core characteristics of blockchain technology. So it is transparent, it is immutable, and then you have this data accessible in real-time,” Iwuno stated.
He further explained how private equity and venture capital firms can leverage blockchain for due diligence and post-investment monitoring, utilizing smart contracts and real-time data for informed decision-making.
Addressing concerns about limited internet access, Iwuno maintained that blockchain-based systems could still be a “game changer” by providing accessible and verifiable records, fostering trust and transparency.
Integrating ESG and Impact Investing
Iwuno also highlighted blockchain’s potential to integrate Environmental, Social, and Governance (ESG) principles and impact investing into SME financing. He emphasized the following key points:
- Transparency: Blockchain allows for real-time tracking of impact metrics, such as job creation, emissions reduction, and gender inclusion, enabling investors to verify the impact of their capital.
- Smart Contracts: Smart contracts can link disbursements to ESG milestones, ensuring accountability and phased funding based on achieved goals. For example, a solar energy company can receive funds in stages as they install systems in underserved communities.
- Tool Development: Building blockchain-based tools for ESG tracking, informal traders, rural SMEs, women-led businesses, education initiatives, and clean energy projects can widen access and promote sustainable outcomes.
“The opportunity is not just to finance SMEs more efficiently but to do so in a way that it is very inclusive and impactful,” Iwuno stated.
He further elaborated on the ability of blockchain to track various aspects of business operations, including employee welfare, labor practices, community engagement, product safety, customer rights, and ethical business practices. These records, stored on the blockchain, are verifiable and immutable, providing transparency and accountability.
Iwuno’s key takeaway is that blockchain can provide a tamper-proof credit history and automate transparent transaction trails, dramatically improving access to credit for SMEs with limited formal records. This, coupled with its ability to enhance ESG integration and impact investing, positions blockchain as a crucial technology for unlocking the vast potential of African SMEs and driving economic growth across the continent.