Economy
Emerging Markets and Debt Recovery: What Creditors Should Know
Expanding into emerging markets offers businesses new revenue streams, access to growing consumer bases, and competitive advantages. However, it also presents heightened financial risks, especially when it comes to debt recovery. While these markets provide growth potential, they often come with legal, cultural, and operational complexities that make recovering overdue payments more difficult compared to established economies.
Inconsistent legal frameworks, political instability, fluctuating currencies, and a lack of transparency in credit information are just some of the barriers creditors face. Understanding these risks and developing a tailored approach to credit control is essential for protecting financial interests when operating in regions such as Latin America, Southeast Asia, Africa, and parts of Eastern Europe.
Understanding the Risk Landscape
Emerging markets are attractive because they offer opportunities for businesses to scale quickly. But these markets are also more vulnerable to economic shocks, regulatory changes, and enforcement challenges. Legal systems in many of these countries are underdeveloped or biased toward domestic businesses, making cross-border debt collection a slow and uncertain process.
Creditors must also deal with limited availability of reliable financial data. Many businesses in emerging markets operate with minimal disclosure, making it difficult to assess creditworthiness accurately. Traditional credit reporting agencies may not have sufficient coverage or updated records, forcing creditors to rely on informal references or local partnerships.
Legal Barriers to Enforcement
Enforcing debt collection in emerging markets is complicated by jurisdictional differences. Many countries require foreign creditors to re-litigate their claims locally, even if a judgment has already been secured in the creditor’s home country. Recognition of foreign judgments is not guaranteed unless supported by bilateral or multilateral treaties, which are often lacking or ineffective.
Even when legal action is possible, local courts may be slow, inefficient, or influenced by corruption. Navigating these systems requires specialized knowledge of local laws, court procedures, and enforcement mechanisms.
Currency and Payment Risks
Another critical factor is currency risk. Emerging markets frequently experience currency fluctuations and inflation, making it harder for debtors to pay in stable currencies like the US dollar or Euro. Some governments impose capital controls that limit the ability to transfer funds abroad, trapping foreign creditors in long delays or forcing them to accept payment in devalued local currencies.
To mitigate these risks, creditors often price contracts in stable currencies and include currency adjustment clauses to protect against volatility. However, even well-drafted contracts can be difficult to enforce if local laws favor domestic businesses over foreign suppliers.
Cultural and Commercial Practice Differences
Debt collection strategies that work in developed economies may not be suitable for emerging markets. Business practices in these regions often rely on personal relationships, trust-building, and informal negotiation rather than strict contractual enforcement. Aggressive collection tactics can damage relationships and reputations, making future business difficult.
Successful creditors typically adopt a relationship-based approach, working through local intermediaries or partners who understand the cultural context and can negotiate payment terms effectively without escalating disputes too quickly.
Strategic Risk Management Approaches
Mitigating debt recovery risks starts with preventative measures. Comprehensive due diligence, including background checks, financial reviews, and credit assessments, should be standard practice. Contract terms should be clear, specifying jurisdiction, governing law, payment currency, and dispute resolution methods such as arbitration.
Credit insurance and trade finance solutions can offer additional protection, especially for large or high-risk deals. These financial products help transfer risk away from the creditor and ensure partial recovery even in the event of default.
Monitoring client behavior throughout the relationship is equally important. Early warning signs—such as delayed payments, changing order patterns, or communication breakdowns—should trigger internal reviews and proactive collection efforts before the situation deteriorates further.
Leveraging Local Expertise
Working with local debt collection agencies or law firms is often the most practical way to navigate complex recovery processes in emerging markets. These partners have the local knowledge and networks necessary to apply the right pressure, negotiate settlements, and enforce claims through appropriate legal channels.
While local partners come with added costs, their expertise often increases the likelihood of successful recovery and reduces the risk of missteps that could harm the business relationship or lead to legal complications.
Emerging markets present a compelling opportunity for business growth, but creditors must approach them with caution and a well-defined risk management strategy. Debt recovery in these regions is rarely straightforward, and success depends on understanding local legal systems, currency risks, and cultural practices.
By adopting a proactive approach that combines thorough due diligence, strong contract management, and local expertise, businesses can protect their financial interests while continuing to benefit from the opportunities these markets offer.
For businesses seeking professional support in navigating these challenges, partnering with an experienced international debt collection agency like cisdrs.com can provide the legal and operational expertise needed to recover debts effectively across diverse and complex markets.
By Adedapo Adesanya
The World Bank has approved a $500 million facility for Nigeria to expand longer-term lending to small and medium sized businesses.
Approved under the Fostering Inclusive Finance for MSMEs in Nigeria (FINCLUDE) project, the package comprises a $400 million International Bank for Reconstruction and Development (IBRD) loan and a $100 million International Development Association (IDA) credit. Both IBRD and IDA are members of the World Bank Group.
The scheme will be implemented by the Development Bank of Nigeria (DBN), with credit guarantees provided through DBN’s subsidiary, Impact Credit Guarantee Limited (ICGL).
FINCLUDE is designed to address constraints faced by micro, small, and medium enterprises (MSMEs) in Nigeria which despite accounting for most businesses and nearly half of gross domestic product (GDP) face long-standing barriers to formal finance.
Fewer than one in 20 MSMEs have access to bank credit; loans are often short-term and costly; and collateral requirements exclude many viable firms. Women-led enterprises, which make up a substantial portion of MSMEs, are disproportionately affected, facing higher rejection rates and limited tailored products. Agribusinesses, central to food security and rural livelihoods, similarly struggle to obtain more extended‑tenor financing for equipment, processing, storage, and logistics.
However, FINCLUDE seeks to address these constraints by expanding access to affordable, longer-term finance and tailored solutions for segments with the most significant development impact.
Speaking on this, the World Bank Country Director for Nigeria, Mr Mathew Verghis, said, “FINCLUDE is about jobs, opportunity, and inclusion. By expanding access to finance for viable MSMEs—particularly women-led firms and agribusinesses—Nigeria can accelerate growth and deliver tangible benefits across communities nationwide.
“The project will make it easier for deserving small businesses to get the finance they need to grow and hire workers. With better support for lenders that practice inclusive finance and fairer, longer-term loans for entrepreneurs, we are backing the people who power Nigeria’s economy—especially women and those in agriculture.”
The FINCLUDE project will help to mobilise private investment and expand access to and usage of inclusive, innovative financial products for MSMEs nationwide.
Through DBN, the operation will strengthen the capacity of banks, including microfinance banks and non-bank financial institutions such as financial technologies (fintechs), to provide larger loans with more reasonable repayment periods, and—through ICGL—will scale partial credit guarantees so that lenders can extend credit to businesses they might otherwise consider too risky.
Targeted technical assistance will modernise loan appraisal by leveraging AI-enabled digital platforms to accelerate decision-making, improve data quality, strengthen impact measurement, and build capacity for both MSMEs and participating financial institutions.
According to the World Bank, a strong emphasis on inclusion will ensure that women-led businesses and agribusinesses benefit from these improvements.
Also commenting, Task Team Leader for FINCLUDE, Mrs Hadija Kamayo, said, “FINCLUDE will help to mobilize approximately $1.89 billion in private capital, expand debt financing to 250,000 MSMEs—including at least 150,000 women-led businesses and 100,000 agribusinesses—and issue up to $800 million in guarantees to catalyse lending.
“By extending the average maturity of MSME loans to about three years, it will help firms invest in equipment, factories, staff, and productivity, translating finance into jobs and growth.”
By Dipo Olowookere
The local stock market firmed up by 1.13 per cent on Friday as appetite for Nigerian stocks remained strong.
Investors reacted well to the 2026 budget presentation of President Bola Tinubu to the National Assembly yesterday, especially because of the more realistic crude oil benchmark of $64 per barrel compared with the ambitious $75 per barrel for 2025. This year, prices have been between $60 and $65 per barrel.
Business Post observed profit-taking in the commodity and energy sectors as they respectively shed 0.14 per cent and 0.03 per cent.
But, bargain-hunting in the others sustained the positive run, with the consumer goods index up by 3.82 per cent.
Further, the industrial goods space appreciated by 1.46 per cent, the banking counter improved by 0.08 per cent, and the insurance industry gained 0.04 per cent.
As a result, the All-Share Index (ASI) increased by 1,694.33 points to 152,057.38 points from 150,363.05 points and the market capitalisation chalked up N1.080 trillion to finish at N96.937 trillion compared with Thursday’s closing value of N95.857 trillion.
A total of 34 shares ended on the advancers’ chart, while 24 were on the laggards’ log, representing a positive market breadth index and bullish investor sentiment.
Austin Laz gained 10.00 per cent to close at N2.42, Union Dicon also jumped 10.00 per cent to N6.60, Tantalizers increased by 9.80 per cent to N2.69, Aluminium Extrusion improved by 9.78 per cent to N12.35, and Champion Breweries grew by 9.71 per cent to N16.95.
Conversely, Sovereign Trust Insurance dipped by 7.42 per cent to N3.87, Royal Exchange lost 6.84 per cent to trade at N1.77, Omatek slipped by 6.84 per cent to N1.09, Eunisell depreciated by 5.88 per cent to N80.00, and Eterna dropped 5.63 per cent to close at N28.50.
Yesterday, traders transacted 1.5 billion units worth N21.8 billion in 25,667 deals compared with the 839.8 million units sold for N32.8 billion in 23,211 deals in the preceding session, showing a surge in the trading volume by 76.61 per cent, an uptick in the number of deals by 10.58 per cent, and a shrink in the trading value by 33.54 per cent.
By Adedapo Adesanya
Three stocks stretched the bearish run of the NASD Over-the-Counter (OTC) Securities Exchange by 1.21 per cent on Friday, December 19, with the market capitalisation giving up N26.01 billion to close at N2.121 billion compared with the N2.147 trillion it ended a day earlier, and the NASD Unlisted Security Index (NSI) dropping 43.47 points to 3,546.41 points from 3,589.88 points.
The trio of FrieslandCampina Wamco Nigeria Plc, Central Securities Clearing System (CSCS) Plc, and NASD Plc overpowered the gains printed by four other securities.
FrieslandCampina Wamco Nigeria Plc lost N6.00 to sell at N54.00 per unit versus N60.00 per unit, NASD Plc shrank by N3.50 to N58.50 per share from N55.00 per share, and CSCS Plc depleted by N2.91 to N33.87 per unit from N36.78 per unit.
On the flip side, Air Liquide Plc gained N1.01 to close at N13.00 per share versus N11.99 per share, Golden Capital Plc appreciated by 70 Kobo to N7.68 per unit from N6.98 per unit, Geo-Fluids Plc added 39 Kobo to sell at N5.50 per share versus N5.11 per share, and IPWA Plc rose by 8 Kobo to 85 Kobo per unit from 77 Kobo per unit.
During the trading day, market participants traded 1.9 million securities versus the previous day’s 30.5 million securities showing a decline of 49.3 per cent. The value of trades went down by 64.3 per cent to N80.3 million from N225.1 million, but the number of deals jumped by 32.1 per cent to 37 deals from 28 deals.
Infrastructure Credit Guarantee Company (InfraCredit) Plc finished the session as the most active stock by value on a year-to-date basis with 5.8 billion units valued at N16.4 billion, followed by Okitipupa Plc with 178.9 million units transacted for N9.5 billion, and MRS Oil Plc with 36.1 million units traded for N4.9 billion.
The most active stock by volume on a year-to-date basis was still InfraCredit Plc with 5.8 billion units worth N16.4 billion, trailed by Industrial and General Insurance (IGI) Plc with 1.2 billion units sold for N420.7 million, and Impresit Bakolori Plc with 536.9 million units traded for N524.9 million.
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