Meeting the needs of Nigerian agri-SMEs with The Alternative Bank
Small Foundation is pleased to announce a new partnership with The Alternative Bank (‘AltBank’) to explore an alternative approach to agri-SME lending.
Across sub-Saharan Africa, agri-SMEs struggle to access affordable, timely, and appropriate credit from local financial institutions to finance working capital and business expansion needs. This can be attributed to several factors including excessive collateral requirements, high interest rates, and limited financial products that match their business cycles.
In Nigeria, agri-SMEs in particular struggle to access appropriate finance from local banks. In 2023 only about 5% of private sector loans went to agriculture, while the sector constitutes 20% of Nigeria’s GDP. Local banks often deem agri-SMEs too risky and offer standard term loans that don’t fit their needs.
The Alternative Bank, a non-interest subsidiary of Sterling Financial Holding Company, is licensed by the Central Bank of Nigeria, guided by Sharia finance principles and operates under the guidance of an Advisory Committee. Since its establishment in January 2014 and full banking license in July 2023, the bank has been at the forefront of providing innovative and ethical financial solutions to meet the diverse needs of its customers. AltBank has introduced a new Murabaha financing product (a contract of sale between the bank and its customers for the sale of goods at a price plus an agreed profit margin for the bank), targeting agri-SMEs. With this innovative product, SMEs will provide a 20% security deposit and repay the financing through sales proceeds with a transparent markup.
AltBank has become a leading non-interest bank in Nigeria and is committed to growing its portfolio of agri-SMEs. The new loan product will provide AltBank with a deeper understanding of agri-SMEs, enabling refinement of the product offering to lend at scale. Small Foundation is excited to learn alongside AltBank on how to take more risks while maintaining profitability within the agri-SME market segment.
Yetunde Mide-Ogunsanwo, Group Head of Commercial Banking at The Alternative Bank, emphasized the bank’s focus on creating wealth through this initiative: “At AltBank, our purpose is to create sustainable wealth by empowering businesses that drive economic growth. This partnership with Small Foundation aligns with our mission to provide ethical and tailored financing solutions that enable agri-SMEs to thrive. By addressing the specific needs of these businesses, particularly in rural areas, we are not only providing access to capital but also fostering long-term wealth creation that contributes to the overall economic development of Nigeria.”
“The collaboration with Small Foundation marks a significant step in this journey. As we work together to take more calculated risks while maintaining profitability, we are excited to see the long-term impact on agri-SMEs. By experimenting with new products that better address the needs of rural and agri-SMEs, we believe this partnership will catalyze economic growth, drive job creation, and improve agricultural ecosystems,” Yetunde added.
Andrew Tarazid-Tarawali, Investment Manager at Small Foundation, said of the announcement “Small Foundation is excited to partner with the AltBank, one of Nigeria’s most innovative financial institutions. The AltBank has displayed strong commitment to the SME sector in Nigeria and flexibility to co-create with Small Foundation a product structure to help rural SMEs overcome key hurdles that prevent them from accessing credit. We believe experimenting with new products that better address the needs of rural and agri-SMEs can help catalyse rural economies and improve livelihoods.”
