• Purpose

The case for financial inclusion in Nigeria

28 March 2023
Uche Odukwe

It’s estimated that 63% of Nigeria’s 200-million population is financially or economically excluded. Uche Odukwe, JUMO’s Country Manager for the region explores the opportunities available to bridge this gap and grow the retail, commercial and digital footprint for this segment of the population. She believes this is the key to growing and sustaining the Nigerian economy.

What is financial inclusion? 

Financial inclusion is a term used to describe a population’s reasonable access to affordable financial services, and includes a range of services that are required to meet the overall financial needs of a person or business, for example payments, savings, lending and insurance.

The Nigerian government through CBN (the Central Bank of Nigeria) has realised the value of Inclusive finance and a lot of effort is being made to drive financial inclusion.

Financial inclusion initiatives in Nigeria

The CBN has also rolled out a number of initiatives like Mobile Money/USSD banking in 2009, with the intention to leverage the growth of mobile phone penetration. About 90% of adults in Nigeria own at least one mobile phone and a SIM card. Another key initiative of the CBN was the launch of agency banking in 2013, with the aim of reaching the largest population of the unbanked in rural communities, where access to the internet and banks is non-existent.

Other initiatives include KYC tiering, which gives financial institutions leeway to onboard customers with minimal information, such as KYC Tier1, and the sanctionable mandate on banks to maintain loan to deposit structures of 60:40 (where retail, consumer and mortgage loans are made available to individuals). The PSB (Payment Service Banks) licensing initiative and the laudable policies around eNaira (a central bank digital currency) are taking shape to achieve the inclusion for every adult Nigerian.

For every person that’s financially included, we’re ultimately also including a family, a community and in many cases, an entire village.

Barriers to financial inclusion

Fortunately, the CBN is steadily and decisively ticking off all the complex factors that have stunted increasing financial inclusion in Nigeria. These barriers include:

1. Lack of documentation: The aforementioned KYC tiering addresses this, and the NIN (national identity programme)  which has ensured the minimum availability of documentation. 

2. Low levels of financial literacy: By reducing the complications of opening, activating and using a formal bank account, and making the process simpler.

3. Lack of close-proximity to service points: By leveraging the landscape of the PSBs and the structures/processes they have in place to address this concern.

4. High service charges: The introduction of transparent and attractive fees for the services offered is a win-win.

What is the key to driving financial inclusion?

One critical thing to consider is how we change the behaviour of an individual who is accustomed to keeping his funds as cash and has been paying and receiving money, in cash. The real question to ask is, what value do PSB features provide to encourage behavioural change? The ability to offer credit in the form of loans to large unbanked portions of the population will most definitely drive greater adoption of the PSB initiative as an overall strategy to growing financial inclusion. Loans can be offered to PSB customers through collaborative partnerships with PSBs and the FSPs as the data and capital providers, leveraging JUMO’s technology. Together we can serve this unbanked market segment in a more cost-effective way, driving access to financial services and providing more financial choices to the people of Nigeria. This would add great value and act as a catalyst to changing mass consumer behaviour long term.

As a fluid regulator with the determination and drive to financially include 80% of its population, Nigeria’s focus should not just be on providing some financial services to excluded markets. It is paramount that the unbanked receive access to sufficient financial services, including credit, that can add tangible value and opportunities for economic growth.

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