Nigerian Bank Cuts Bad Loans to 1% With Slower Lending

In Nigeria's fast-paced digital lending world, Nombank is winning by deliberately moving slower than everyone else.

The microfinance bank, which launched in December 2024, refuses to approve loans in minutes like its competitors. Instead, it takes 24 to 48 hours to make credit decisions, often sending account officers to physically visit businesses before handing over money. The unconventional approach is delivering remarkable results.

Nombank has kept its non-performing loan ratio below 1%, meaning fewer than one in every 100 loans falls into default. That's eight times better than the Nigerian banking industry average of 8%, which the Central Bank reported has climbed above the safe threshold of 5%.

The secret lies in what happens before anyone applies for a loan. Nombank only lends to merchants already using its parent company's payment terminals for at least three months. Those months of transaction data reveal how money flows through each business, showing daily patterns, seasonal fluctuations, and cash flow stability.

"We want to give loans that will truly come back," Seun Osunkeye, Nombank's managing director, explained. "Most importantly, we are interested in businesses growing, merchants growing, and everyone being happy."

The bank caps loans at roughly 20% of a merchant's monthly payment volume, typically between 36 and 1,088 dollars per customer. Most loans last just seven days to one month, designed to help small retailers restock inventory or cover short-term operating needs.

The verification process includes checking that merchants are still operating and maintaining regular customer contact. Nombank initially tried instant lending but discovered that payment data alone missed crucial details about whether businesses would actually repay.

"Everyone is selling automated, quick loans, but that relationship is very important," Osunkeye said. "Character is very important."

The Ripple Effect

The strategy has already moved serious money while protecting both lenders and borrowers. In April, Nombank and partner Globus Bank announced their 18-month lending program had disbursed 15.45 million dollars to Nigerian businesses while maintaining that sub-1% default rate.

As Nombank's parent platform has grown from processing 5 million dollars daily in May 2024 to 181 million dollars by May 2025, more merchants qualify for these carefully vetted loans. The rising payment volume means richer transaction histories and better risk assessment for future lending.

The approach challenges the assumption that speed always wins in fintech, showing that taking time to truly know your borrowers can create better outcomes for everyone involved.