Toyin Adeniji is an executive director at Nigeria’s Bank of Industry and a financial services professional with over 28 years of experience in international development, financial inclusion, strategy & business development, microfinance, gender finance, and small and medium enterprise development. In this interview with Chiamaka Ozulumba, she explains how access to government and private sector interventions like Government Enterprise and Empowerment Programme N-Power, the school feeding programme, National Conditional Cash Transfer, and more recently, the National Poverty Reduction with Growth Strategy can be provided to the informal sector
What types of businesses make up the informal sector and what are the identifying characteristics of informality?
The informal sector is typically made up of micro-enterprises and very small businesses. They form part of the SMEs, that’s Small and Medium Enterprises. Informal businesses are those that have a sole entrepreneur or a sole person running a business.
In some cases, it will have two to three persons working with them. They experience turnover below a certain amount, and this varies from country to country, from jurisdiction to jurisdiction.
In Nigeria specifically, informal businesses are businesses you see in the markets, running from home or the corner of the streets. They are not usually also documented on the corporate government database. They did not go through the CAC, or through any formal registrations that companies require. As such, they may also not be directly liable for formal government taxes.
Despite the fact that the informal sector makes huge contributions to living outcomes, the economy, and overall GDP of the nation, it is still being associated with poverty, weak social and economic conditions amongst other bleak descriptors. What are the government and other critical stakeholders’ responsibilities to substantially deliver solutions that drive sustainable productivity for the sector?
The informal sector needs an ecosystem that will allow them to thrive. The role of the government is to ensure that they provide this ecosystem, and within the ecosystem, you can now begin to point at various issues that have to be dealt with.
Access to funding is very important for the viability of any enterprise no matter what size it is. Access to markets is very important. When they have goods, they have to be able to get their goods to the market and the market has to be able to function for them to be able to exchange goods for money and to make it viable.
Access to information is also very important. There has to be information and a deliberate attempt to teach financial literacy. There have to be deliberate attempts to onboard them on the financial platforms. I also would like to introduce access to technology.
With the proliferation of mobile phones and smartphones, a lot of people have access to the internet, making access to technology a very critical component of the ecosystem that will make these enterprises thrive.
We find that many micro-businesses operating in the informal sector remain poor and struggle to break even or even scale their businesses. What might be the cause of this phenomenon and how can they be alleviated?
I think the ecosystem in which all businesses operate is a tough one. Either you are a small business, a micro-enterprise, or a large enterprise because the large businesses also need the small ones to survive. It’s really about being able to survive or manage your way through the toughness of that environment.
Despite this fact, I think the government comes into play here. How do we begin to create that ecosystem that will allow these enterprises to thrive? Money or funding is one part of it. Everybody says, ‘cash is king’, we need money to survive but money is just one bit of it. Financial literacy in Nigeria, if I can take a guess, is less than 50 percent. This proves that we need to teach them financial literacy skills and how to apply these skills to their business.
We also have to bring these conversations to the table. We cannot skirt around the issues and hope that things will get better. It is a tough environment. However, there has to be action and action-proof steps that the ecosystem has to bring up and deliver. There has to be a deliberate attempt to make sure that the interventions and policies that surround this ecosystem help these enterprises to thrive.
What is the future of work in Africa’s informal sector and specifically in Nigeria? How do you see current trends evolving and what roles will skills development, technology, and data play in making the sector more productive?
Well I think in some ways, the questions you asked nearly summarised some of the things I previously said in terms of what roles these things play. We’re in an era of technology, and there are more conversations around big data and artificial intelligence. There are also conversations on how to use technology to drive these results and I think that is where we are now.
By data, I’m referring to insights from activities these businesses carry out. For example, when people have bank accounts, the way they run those accounts is captured and there is a database that can be mined and used to develop algorithms that help make funding of these micro enterprises easier. The mined data can be used to discover who is good for data, and who is not.
Today we have BVN, NIN, and data gathered together. By capturing all these data in the mega database, it can be used to work in what we call digital finance. It can be mined, and used to ensure that these groups are not left out. Data is key. You can’t have the technology and not have data, there has to be a meeting of the two.
What would you say can be done to further reduce the risks of the informal sector getting into being part of this intervention? Secondly, how do we ensure they understand the benefits of what’s being offered?
Information. For example, at the bank of industry all through the pandemic, we have continued and I would nearly say we’ve done better in supporting our portfolio of beneficiaries and have continued to engage them.
Specifically, interest rates were reduced, loan repayment tenants were made longer. We introduced flexibility; some loans were restructured, the moratorium was made to be bigger. As I speak, we continue to look at new ways and new products that will help close that gap.
One of the things that’s also very important is bringing the beneficiaries to the table. It’s one thing for me to say we can do this, but more important is how do we bring the beneficiaries and their voice to the table? Because that is the only way that we can make sure the products we develop are useful and can also impact their lives.
