Risk factors limiting access to formal financing: Perceptions from artisanal and small-scale mining (ASM) operators in Nigeria

Abstract

This paper reflects critically on why individuals engaged in artisanal and small-scale mining (ASM) struggle to obtain formal loans. Several studies have concentrated on the perceptions of formal lenders on the risks associated with providing loans to this group of miners. It is argued in this paper that understanding more about the limiting factors from the perspectives of ASM operators will provide better guidance when formal lenders scrutinise the requirements for issuing loans to this group of borrowers. In this study, face-to-face interviews were conducted with senior management officers at the Nigeria Bank of Industry (BOI) and a selected number of miners within the study area. The findings indicate that the inability of ASM operators to prove the feasibility of their operations, lack of knowledge of efficient ore reserve estimation methods, as well as lack of physical collateral are amongst the factors that make them unfavourable clients to formal lenders. The paper recommends that government considers strengthening miners’ organisations and cooperatives as a way of enhancing the access of ASM operators to formal finance.