by Sithembile Bopela
While banks have traditionally been the distributors of credit products - the focus has historically been on the formal economy with strict terms (amounts, loan periods, repayment schedules) attached. In the last few years, however, a growing market of tech-led disruptors have scaled the distribution of micro and nano loans that are typically smaller, more quickly disbursed, and digitally accessible - targeting underserved populations.
Micro finance solutions have been available for several years, but nano lending is a relatively new concept. The key difference between nano finance and microfinance lies in their target audience and approach:
Nano lending typically includes ultra small, short tenor, fully-digital loans, often as little as $5 and typically repayable within seven to 30 days, delivered through a mobile channel. The product is designed to satisfy immediate liquidity needs for consumers and micro merchants who may be outside the reach of formal credit. Unlike traditional microfinance, which is usually intermediated by bank branches and credit officers, nano loans are originated and repaid on mobile devices and are priced to reflect higher risk, shorter duration, as well as automated "anytime, anywhere" servicing. In practice, these loans are embedded in everyday mobile experiences such as topping up airtime, completing a wallet payment, or bridging a point of sale (POS) shortfall.
There are two building blocks that make nano lending possible at scale. The first is the mobile money and telecoms "rail"— this encompasses the mobile network USSD menus and wallet apps tied to agent networks. The second is alternative credit data, which includes behavioural signals from customers' prepaid recharges, peer to peer transfer activity, wallet flows and mobile phone usage. This data is then transformed into credit scores by automated algorithms and machine learning systems, which enable instant paperless lending decisions.
How it works in the wild
Most deployments follow a multi-partnership model. For example, a mobile money operator — often a subsidiary of a telecommunication company (telcos) like MTN Momo or Vodapay, will control the channel and customer relationship; a licensed bank or non bank financial institution will act as the lender of record and provide funding; then a specialist "lendtech" partner intermediates, by conducting real time scoring, decisioning, disbursements and collections via software mechanisms that communicate with the two other parties. In advanced models, the technology provider also underwrites the first loss risk through bank guarantees, creating stronger alignment across the ecosystem while sparing the mobile network operator (MNO) from credit exposure.
The advent of nano lending
The rise of nano lending in Sub-Saharan Africa (SSA) traces back to two significant industry shifts. First, the rise of mobile money from the late 2000s, proliferated in East Africa by M-Pesa, created an account and a ledger for millions of individuals without bank relationships. Second, the post 2010 data and cloud storage boom made it feasible to run high-frequency scoring models on telecom and wallet analytics. According to the World Bank's Global Findex, SSA has become the only region where mobile money accounts have eclipsed bank accounts since 2022.
The product itself matured in phases though, from airtime and data advances which proved customer behaviour and repayment patterns; to wallet overdrafts and cash nano loans; and more recently, merchant float lending, buy now pay later (BNPL) and small ticket SME working capital offers.
Where inclusion matters most
TThe immediate beneficiaries of the advancement in nano lending have been low income consumers and micro enterprises facing volatile cashflows. In SSA, only 41% of adults are financially resilient, as per a stress test that measures the adult population's ability to raise 5% of gross national income (GNI) per capita within 30 days. As such, access to instant liquidity can help reduce household and small business vulnerability to economic shocks. This is especially pertinent as formal borrowing remains limited while digital rails have continued to improve credit reach and convenience.
The broader socio-economic benefit is inclusion at scale. Mobile money is now a mainstream financial access point for both nano lenders and borrowers alike. In 2024, global mobile money platforms processed ~108 billion transactions worth $1.68 trillion, with Africa handling about 65% of global value, roughly $1.1 trillion. SSA also accounts for more than half of all active mobile money accounts, and it is this density that makes the region the natural epicentre of nano lending.
Regulation supports long-term sustainable growth
Wallet first markets with dense agent networks are well positioned for the industry's next leg of growth. For instance, Ghana, Uganda and Côte d'Ivoire each combine high mobile money penetration with improving data connectivity and supportive central bank regimes. These markets show an increasing share of advanced wallet services (including savings and insurance), offering fertile ground for nano credit and overdrafts. Due to the costs associated with unsecured instantaneous credit, however, without appropriate regulatory oversight, these growth markets could run the risk of breeding digital loan sharks, with excessive interest rates, further worsening economic vulnerability. For reference, fees on micro short-term loans can translate into double-digit annualised interest rates (~36% compared to ~20% for bank loans, on aggregate) and in the triple-digits in unregulated settings.
Sustainable advancement in large underbanked populations, therefore, hinges on regulatory finesse to tighten digital lending rules without stifling innovation and growth. In Kenya, the central bank published its Digital Credit Providers (DCP) Regulation in 2022, creating mandatory licensing for DCPs, tightening data privacy, pricing disclosure, and collection practices. As of September 2025, 153 DCPs were licensed out of 700 applications received, evidence of ongoing formalisation to "squeeze out" non-compliant and potentially exploitative practices. In Nigeria, the Federal Competition and Consumer Protection Commission's (FCCPC) interim 2022 framework and 2025 Digital Online Lending Regulations have brought in requisite registration, banned pre authorised lending and aggressive marketing practices, and imposed penalties for non compliance, in that way resetting market conduct, at a national scale. In South Africa, digital lending is governed under traditional credit law— the National Credit Act (NCA), with a specific focus on consumer protection against predatory lending and unfair collection practices. This is overlaid with data-specific compliance under Protection of Personal Information (POPI) and the Financial Intelligence Centre Act (FICA), but regulation remains less prescriptive on tech-specific rules, which may be a blind-spot for digital-specific risks such as algorithmic bias given the rise of model-based scoring.
In Asia, economies like Pakistan have demonstrated how firm but supportive regulation can curtail rogue apps and uplift more licensed, embedded lenders. The Securities & Exchange Commission of Pakistan (SECP) maintains a whitelist of approved nano lending apps (including JazzCash) and has recently streamlined enrolment while enforcing cybersecurity and disclosure, conditions that spur more compliant, scaled partnerships rather than "fly by night" operators.
Collaboration wins the race
Lendtech infrastructure enablers such as Optasia, JUMO, Simbrella, Tech Mahindra's YABX, Blu Label's Airvantage, and Kuunda among others, provide the rails that allow banks and telcos to launch credit without the economic and administrative burden of scoring, decisioning, and orchestration. On the other hand, distribution owners such as MTN's MoMo ecosystem, Vodacom/ Safaricom's M Pesa and Airtel Money are established gatekeepers to wallet users and merchant tills as their platforms determine which embedded lenders and banks get access to the end user.
Far from being disintermediated, many banks see nano credit as an on ramp to mass market deposit gathering and SME banking. In certain cases, regulation limits telco lending, for example Nigeria's payment service bank (PSB) regime which prohibits fintechs and telcos from granting loans. Here, bank owned apps and agency networks step in with small, scored loans, and sometimes white labelling third party decision instruments. The net effect is convergence between banktech and fintech, with the most pragmatic institutions establishing partnerships rather than building from scratch. For banks, nano lending provides important data exhaust— background data produced as a byproduct of online and digital activities. A reliable stream of high frequency mobile money repayments creates a credit history for customers that can be monetised, responsibly, through graduation into higher sum and longer duration products.
A pragmatic approach
Studies by CGAP.org found that households with access to mobile credit were 6-percentage points (ppts) less likely to skip meals or essential purchases after a financial shock compared to those without access. Between 2013 and 2023, in major mobile money markets, a 10ppt increase in mobile money adoption had a corresponding 0.6% to 1.0% increase in GDP. The economic benefit is clear.
However, no inclusion story is risk free and nano lending is not a silver bullet for socio-economic redevelopment; but it can be a pragmatic "for-profit" solution to a very specific problem for mid-to-low-income consumers— bridging today's cash gap quickly, safely and with dignity. Consumer protection, therefore, remains paramount as the unmanaged convenience of instant credit can invite predatory lending activity and over borrowing, in turn exacerbating household strain, particularly where financial literacy is low. More so, transparent pricing and disciplined collections must be non negotiable, to protect the rights and interests of vulnerable income groups. Policymakers therefore need to balance these risks to find the sweet-spot regime that is pro innovation on data and partnerships and pro consumer on transparency and recourse.
Disclaimer: The information contained herein are for the purposes of general guidance on matters of interest and is not intended to be legal, tax, or financial advice. All information and rates mentioned are current at the date of publication.
