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On May 17, 2023, the Law Faculty of Central University hosted visiting Commercial Law professor, Dr Vincenzo Bavoso, from the University of Manchester. Faculty members were treated to an interactive discourse on “The Quest for Access to Finance: Between the Promises of P2P Lending and the Tradition of Susu”.
Dr Bavoso reiterated that the crises of banking that exploded after 2008 had made access to finance and financial inclusion increasingly significant issues.
This means that it has become harder for banks to lend to the real economy. In the wake of this, FinTech solutions like Peer to Peer Lending (P2P) have become popular across the United Kingdom, the United States and China. In P2P Lending, a borrower and lender are connected by means of an app.
However, P2P lending is not without its challenges. Some of which include the greater credit risk involved in this scheme, which remains outside the scope of traditional regulatory backstops.
Research conducted primarily in Germany and Finland has shown that access to external sources of finance is one of the major sources of success for small and medium-scale enterprises. Further research has proved that SMEs are the drivers of entrepreneurial and economic development. They thrive in countries with a large number of local and cooperative banks, because of the element of relationship banking.
In the midst of the worldwide upheaval, Dr Bavoso views the traditional money-saving scheme Susu, (originally from Ghana but currently in the Caribbean and other African communities in the diaspora) as holding some answers. According to him, Susu provides tailor-made solutions for locals in different communities. He however bemoaned the interference of microfinance institutions (non-bank financial institutions) with the process.
He suggested that, in order to improve upon this indigenous method of money collection, an app could be developed that would help the collector keep better accounts of monies received and given. The scheme could also be linked to a regulator, for example, a Central Bank, to ensure that the interests of members were protected.
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