The Power of Purpose-Driven Lending in Emerging Economies
In many developing countries, lending is often seen as just numbers—credit scores, collateral, and interest rates. But in places like Nigeria, lending needs to go beyond that. When it’s done right, it can change lives, uplift communities, and help grow the economy. But when it’s done wrong, it keeps people stuck, left out, in debt, and unable to move forward.
That’s why purpose-driven lending matters. It’s not just a fancy term. It’s a way of thinking and one we need to start using now.
From Chasing Profit to Creating Impact
Traditional lending models tend to focus on short-term financial gain. If you can pay back, you get funded. If you can’t, you’re shut out. The result? A financing gap that affects over 70% of MSMEs across emerging markets, according to the International Finance Corporation (IFC).
Purpose-driven lending asks deeper questions. What is this funding really for? What impact will it have—not just on the business, but on jobs, local resilience, and generational wealth?
Consider Kinara Capital in India. Instead of relying on traditional collateral, they use data and alternative credit scoring to finance small women-led businesses. The result? High repayment rates and significant community impact.
This isn’t charity. It’s smart finance with a broader lens.
Proximity Builds Trust
Lending shouldn’t follow a template. It must be context-aware.
Microfinance institutions that understand the communities they serve, linguistically, culturally, and economically, tend to build better portfolios. In Mexico, Verqor bypassed credit scores entirely and instead looked at trade patterns between farmers and buyers. Their loan recovery rate stands at over 98%.
In Nigeria, we’ve seen similar results when microfinance is rooted in trust. In local markets across Lagos, Oyo, and Kaduna, agents who live in the community often have better repayment outcomes than digital-first models disconnected from real life.
Proximity isn’t just physical, it’s relational. And in emerging economies, that’s everything.
Finance + Tools = Real Growth
A loan is not enough. Many MSMEs need more than just capital, they need structure, training, and access to tools that make their businesses resilient.
Research by the Nigerian Economic Summit Group shows that when loans are bundled with financial literacy or operational support, MSME success rates improve significantly. Apollo Agriculture in Kenya is a leading example, offering not just financing to smallholder farmers, but also inputs, weather insurance, and training. All are coordinated via mobile money.
This is what we mean by lending with purpose - Funding tied to real growth, not just survival.
Technology as an Enabler—Not a Shortcut
Digital lending platforms are booming. In Nigeria, players like Kuda, FCMB’s Flexi Loan, and Carbon have simplified access to loans for thousands. But tech isn’t automatically inclusive. Algorithms can exclude people faster than humans ever did, unless they’re built with empathy and designed for inclusion.
Purpose-driven tech lending combines speed with fairness. It ensures transparency, fair terms, human support, and accessible repayment structures.
We must stop celebrating speed alone. Simplicity without substance is dangerous.
Policy Must Create Room for Purpose
Even the best lenders can’t do it alone. We need ecosystems that support purpose-driven finance, through policy, guarantees, and smart regulation.
The Development Bank of Nigeria disbursed over ₦787 billion to nearly 500,000 MSMEs in 2023 alone. This shows what happens when public funding backs strategic lenders. But we need more of this; more support for blended finance, credit guarantees, and a regulatory environment that rewards impact, not just volume.
World Bank and IFC initiatives across Africa are pushing for this. Nigeria must do the same, consistently.
Purpose Is the Future
In a country where over 40 million MSMEs hold the key to reducing unemployment and growing local GDP, how we lend matters.
Purpose-driven lending is not a side initiative. It’s the blueprint.
Let’s fund with intention. Let’s design products that grow people, not just balance sheets. And let’s build a financial system that reflects the real values of progress: inclusion, trust, growth, and dignity.
If you're a lender, ask yourself, what’s the long-term impact of every naira you lend? If you're an entrepreneur, choose financial partners who understand your journey. And if you're a policymaker, build frameworks that make purpose the standard, not the exception.
That’s how we build economies that last. From the ground up, with purpose at the core.