Fintech Adoption and Startup Financing in Nigeria: Evidence from Entrepreneurial Finance.

Abstract

This paper aims to explore how the adoption of fintech and the financing of startups affect small and medium enterprises (SMEs) in Nigeria between 2009 and 2024. The analysis is done using Dynamic Ordinary Least Squares (DOLS) and Fully Modified Least Squares (FMOLS), which examine the long-run association between digital financial services and SME credit access. The results indicate that the impact of mobile payments (MPAY) on SME financing is strong and positive, which indicates that the use of digital payment systems enhances the management of money among SMEs and facilitate their financial operations in general. Conversely, web transfers (WAP) are negatively related to SME credit, suggesting that the use of digital transactions can lower the use of traditional borrowing. The impact of inflation (INF) on SME financing is also negative, that is, an increase in prices leads to the increased difficulty in getting credit by SMEs. Interest rates (INT), on the other hand, are not significantly affected in the long-run in the model. The FMOLS findings are generally consistent with these results but with weaker effects with mobile payments, indicating that even though FinTech is positively associated with financial efficiency, its direct influence on formal credit access is not quite significant when other statistical controls are taken into consideration. In general, it can be concluded that FinTech in Nigeria is transforming the way SMEs manage their finances more than it is widening their access to formal credit. It underscores the necessity to simplify fintech platforms and make them more accessible. Additionally, there should be greater regulatory support by governments and other concerned bodies to instill confidence in digital financial services.