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Bumpy road to financial inclusion

Bumpy road to financial inclusion

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The Federal Government’s plan to narrow the 80 per cent gap of those financially excluded by next year may remain wishful thinking if challenges such as data privacy, security, lack of transparency as well as limited financial education and literacy, are not tackled, reports LUCAS AJANAKU.

During  the first quarter (Q1) of last year, the Central Bank of Nigeria (CBN) identified that, to reach the goal of 80 per cent inclusion by 2020, an additional 7.6 million adult Nigerians would need to be financially included.

Factors such as illiteracy, security challenges and slow penetration of financial services in rural areas had slowed the pace of inclusion.

General Manager of Mobile Financial Services at MTN Nigeria, Usoro Usoro, said by the end of the year, Enhancing Financial Innovation and Access’s (EFInA) biennial results illustrated that the progress made towards this goal had been modest, with only an additional 3.5 million individuals included between 2016 and last year.

As the nation draws closer to the 2020 target for financial inclusion, he said it was imperative to look at the developments that brought about some progress – albeit limited and provided a strong indication of what to expect from the various industry players, as well as the most suitable next steps to help realise the goal.

According to Usoro, the establishment of agent networks served as proxy channels for banks, to enhance their reach of marginalised communities. Yet, despite having up to 10,000 agents in 2017, the impact of this reach was yet to be felt, as most of these agents delivered their services in semi-urban or urban areas. The slow growth of this initiative led to the launch of the Shared Agent Network Expansion Fund (SANEF) Initiative – it was designed to introduce an extra 500,000 agents by 2020, to cater to an additional 60 million Nigerians in rural and underdeveloped areas.

According to him, with the limited time, there was some skepticism about how quickly the agents could be trained, on-boarded, licensed and begin to operate, especially as the process of establishing 10,000 agents had taken up to seven years. This initiative, while capable of enhancing access for the financially excluded, lacks the required trajectory that will enable Nigeria to meet the 2020 target.


On the matter of Know-Your-Customer (KYC) Requirements, the 2015 rollout of the Bank Verification Number (BVN) had provided a way to achieve the primary objective of creating a unified national financial database; enhancing e-payments and reducing fraud risks.

However, even in 2018, the effective implementation of the Tiered KYC Requirements still required an additional review – the challenges remain for customers based in rural areas, who have limited access to physical bank branches, and the capital intensive nature of BVN registration also reduces the ability for banks to ease this challenge. The enforcement of BVN registration for these groups of customers (usually Tier 1 account holders with the lowest verification requirements and account limits) potentially reduces the rate at which financial inclusion is achieved.

ALTON intervenes

He said with banks dominating the activities of the financial inclusion agenda, key stakeholders in other industries identified the need for collaboration to accelerate efforts. In this vein, Nigeria’s largest telecoms operators – MTN, Globacom, 9mobile and Airtel – formed a coalition under the aegis of the Association of Licensed Telecommunications Operators of Nigeria (ALTON) and collectively, resolved to leverage their vast reach and resources to deliver access to financial services to 90 million customers by 2020, and deepen financial literacy across the country. This readiness for participation by non-financial stakeholders was timely, as it coincided with the CBN’s launch of the Payment Service Banking (PSB) licence months after.

This development was significant, considering that the licence would enable non-banks – including telecommunications companies, retail chains, postal and courier service companies, mobile money operators, and FinTechs – to obtain a licence to operate in the financial sector.

Banks kick

Guaranty Trust Bank (GTBank)  has said the decision of the apex bank to license telcos for payment services is a threat to banks’operation.

In a report, Nigeria Macro-Economic and Banking Sector Themes for the year, the banks PSBs will compete with commercial banks for earnings.

“A more compelling threat, however, relates to the recent decision by the CBN to license PSBs to facilitate transactions in remittance services, micro-savings and withdrawal services in rural areas,” it said in the report.

Though it’s a positive move for customers, the report said it would improve customer service and digitalisation of banking services while enhancing financial inclusion.

Last year, MTN Nigeria and Airtel  announced plans to delve into mobile money services with the former expressing hopes that it would get the CBN’s approval and launch in Q2 of this year.

The PSB license will, however, not allow the telcos to offer lending services and participate in the foreign exchange market.

In the report, the tier 1 lender said the capacity of FinTech firms to gain a significant market share would be limited in the absence of collaborations.

But Usoro said these developments set the pace for the years ahead. While optimistic about the progress made so far, there should be an increased alignment between the need and the delivery of the required services. By ensuring that more seamless approaches to BVN registration and account opening processes are established expediently using agents, industry partners, and other available networks; and providing an enabling structure and environment for the participation of payment service banking licensees.

“As we approach the 2020 deadline for achieving the financial inclusion targets, our current position is prime for making significant headway towards 80 per cent financial inclusion.

‘’The CBN recently launched a revised National Financial Inclusion Strategy, which will tackle the challenges that have thus far hindered a quicker pace of inclusion – data privacy and security; a lack of transparency; and limited financial education and literacy. There might be need for additional policies to support these new entrants that are mobilised to address these challenges and bridge the gap in financial inclusion.

“The feasibility of a 20 per cent financial exclusion rate over the next 11 to 20 months may appear doubtful; but if the participating stakeholders are able and encouraged to effectively leverage their positions in the national financial inclusion agenda for the ultimate good of the Nigeria populace. We just might be closer to seeing the needed changes that would enhance our economy and society,” Usoro said.

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