Moniepoint grapples with N7bn in non-performing loans after aggressive SME lending push

Moniepoint Microfinance Bank is facing growing scrutiny after non-performing loans at the lender climbed to about N7 billion, highlighting risks tied to its rapid expansion in small business financing.

The microfinance bank, which operates under a national licence from the Central Bank of Nigeria, emerged as one of the most prominent lenders to small and medium-sized enterprises (SMEs) in 2025. It disbursed more than one trillion naira in credit to businesses such as provision stores, supermarkets, and building materials traders.

Moniepoint’s expansion came at a time when traditional commercial banks were retreating from SME lending due to rising credit risks, elevated interest rates, and tighter regulatory conditions. Its intervention helped bridge a significant financing gap for small businesses across Nigeria.

Industry data reflects this broader cautious stance among lenders. Total private sector credit declined to 75.8 trillion naira by the end of 2025, compared with 78 trillion naira recorded a year earlier.

However, analysts say the surge in Moniepoint’s loan book is now testing its risk management framework, as rising defaults underscore the challenges of scaling credit quickly in a volatile economic environment.

The development raises questions about the sustainability of the bank’s high-growth strategy and the broader risks within Nigeria’s SME lending landscape.

Yet two high profile cases have raised serious questions about the sustainability of this aggressive lending model. In January 2025, Moniepoint approved a five billion naira working capital facility to Alerzo Limited, a prominent B2B e-commerce platform, with repayment scheduled over 18 months. By December 2025, the outstanding balance had reached 4.38 billion naira, with interest still mounting. Moniepoint moved quickly, obtaining a Mareva injunction from the Federal High Court in Lagos that froze Alerzo accounts and assets nationwide. The borrower is reportedly selling parts of its delivery fleet, including buses and motorcycles, to raise funds.

Around the same time, Moniepoint pursued a similar court order against Retail Supermarkets Limited, operators of the ShopRite franchise in Nigeria, over a 2.4 billion naira unpaid working capital loan. ShopRite stores across the country eventually shut down amid empty shelves and operational collapse. These defaults stand out because Moniepoint normally structures its core SME loans for 12 to 24 weeks, with automated daily or weekly repayments tied directly to transaction data from its payment platform. Extending an 18 month tenor to large corporate style borrowers exposed a clear mismatch.

Was granting such long repayment periods a sound financial decision? In Nigeria’s economy, marked by volatile fuel prices, persistent inflation and razor thin margins for many distributors and retailers, the answer leans toward no. The decision looks risky at best. Moniepoint relied heavily on its internal payment data, which captures real time cash flow from over 80 percent of in person transactions processed through its network. This approach drove average business growth of 36 percent for borrowers who kept up repayments. However, it missed broader risks such as external debts routed through other banks, founder personal withdrawals or sudden cost spikes. For creditors and managers at Moniepoint, approving these facilities without stronger collateral, tighter covenants or ongoing stress testing appears shortsighted. The rapid slide into default within roughly 12 months suggests inadequate due diligence on borrower resilience.

The Central Bank of Nigeria has not stepped in directly on these specific cases. They remain private commercial disputes handled through the courts rather than systemic threats requiring regulatory intervention. Moniepoint holds licences and faces routine audits like other players, but the regulator has focused instead on broader tools. In March 2026, the CBN directed all banks to bar large ticket obligors with recorded non performing loans from fresh credit, letters of credit or guarantees. It also demands capital restoration plans from institutions with lingering forbearance exposures. These measures aim to enforce discipline without picking individual fights.

Such incidents echo the painful history of legacy commercial banks. The most recent and stark example is Heritage Bank. In June 2024, the CBN revoked its licence after non performing loans ballooned to around 90 percent of its roughly 700 billion naira active portfolio. Years of poor due diligence, insider lending and weak recovery left the bank technically insolvent, with liabilities exceeding assets. The Nigeria Deposit Insurance Corporation took over liquidation. Depositors have received partial payouts totalling 70.9 billion naira so far, including a second tranche of 24.3 billion naira in early 2026 paid at just 5.2 kobo per naira for amounts above the five million naira insured limit. Earlier crises followed similar patterns. In the 2009 recapitalisation wave, several institutions collapsed or merged after bad loans eroded capital, forcing government bailouts and massive provisioning hits.

Banks and fintech lenders alike have deployed several recovery mechanisms over the years. The Global Standing Instruction, introduced in 2020, lets creditors sweep unpaid amounts directly from a defaulter’s accounts across any participating bank. The Credit Risk Management System flags serial borrowers before new facilities are approved. Courts provide Mareva orders and asset freezes, as Moniepoint used successfully. The Asset Management Corporation of Nigeria buys toxic loans to clean balance sheets. Prudential guidelines force heavy provisioning once loans turn substandard, while stress tests and single obligor limits curb overexposure.

These tools have delivered mixed results. Industry non performing loan ratios have hovered near or above the five percent threshold in recent years, prompting the latest CBN crackdowns. Court actions secure assets quickly but actual cash recovery drags through lengthy litigation and discounted sales. For Moniepoint, the freezes on Alerzo and ShopRite accounts mark an effective first step in protecting its position, yet converting frozen funds into full repayment will test execution. Traditional banks fared worse in the Heritage case, where decades of accumulated bad debts left little for depositors beyond token dividends.

Are these loan terms sustainable for the long run? Moniepoint’s short term, data linked products work well for micro and small enterprises that repay from daily sales. The 18 month facilities to bigger players stretch the model too far in an environment where cash flows can evaporate overnight. They remain accessible today for growth oriented businesses, but only if paired with hybrid security, real time external data sharing and swift intervention triggers. Without these upgrades, repeated defaults could erode lender capital and tighten credit further for the very SMEs the sector needs to support.

From a business and security standpoint, these episodes highlight vulnerabilities in Nigeria’s financial architecture. Fintechs like Moniepoint have stepped up where legacy banks retreated, powering informal economy growth. Yet when large loans sour, they risk undermining credit culture and depositor confidence, especially as more fintechs gain full banking licences. The CBN’s tightening regulations, from service bans on chronic defaulters to mandatory restoration plans, provide a necessary backstop. Effective recovery demands relentless execution, whether through sweeps, courts or asset sales.

Moniepoint’s cases do not spell the immediate end for legacy banks. Heritage Bank’s collapse already delivered that lesson in 2024. Instead, they serve as a timely alert. In a high risk economy, lending must balance ambition with iron discipline. Shorter tenors, deeper risk assessment and faster enforcement will determine whether Nigeria’s credit expansion strengthens the system or repeats past mistakes. The stakes extend beyond balance sheets to the stability of businesses, jobs and household savings that depend on a resilient financial sector.