By Amaka Abayomi
With an estimate of N3.5 trillion circulating yearly within the unbanked and under-banked (constituting over 10 million traders), operators in microfinance banks have expressed their readiness to be in the vanguard of achieving a cashless economy in Nigeria.
The Central Bank of Nigeria (CBN) had announced that effective June 1, 2012, daily cumulative free cash withdrawals and lodgments by individual and corporate customers should not exceed a maximum of N150,000 and N1 million, respectively.
This, according to CBN, is expected to reduce the amount of currency outside the banking system by discouraging the use of cash in financial transactions.
Part of the benefits to be derived from operating a cashless economy, according to the CBN, include bridging the gap between lending and deposit rates, reduced cases of robbery and revenue leakages, reduced cost of processing cash and improved treasury management, and saving the nation an estimated N192bn cost of managing cash in the economy by 2012, among others.
Data from banks show that only about 10 per cent of cash withdrawals from banks are of more than N100,000, meaning only 10 per cent of banking customers who also account for over 75 per cent of all banking transactions, thus accounting for the lion share of the cost of cash management, would be affected by the policy.
Considering that more than 3 billion of the world’s population live on less than $2 per day, about 50 million entrepreneurs using microfinance, while only 4 per cent of Africa’s population having access to bank accounts with only one per cent having obtained loans or other forms of credit from formal financial institutions, it makes economic sense for MfB operators to be involved in this cashless business.
Pointing out that though the trend towards a cashless society is a global one, the Chief Executive Officer, Accion International, Mr. Michael Schlein, noted that Nigeria is not ready for such yet.
“Cashless society is a global trend and Nigerian regulators want to encourage such here, but the truth is that, considering all the factors, it is still a long way away for Nigeria because 5-10 years from now, people would still be using cash in Nigeria. Though we are optimistic that it would succeed as it did in Kenya, Pakistan and other countries, we urged Accion MfB to take advantage of the situation and provide the needed services to our clients.”
Explaining how MfBs can help promote cashless economy, MD, Moneycom MfB, Mr. Sola Olubode, urged MfB operators to register as mobile money operators as a lot of them are in positions to reach those at the bottom of the pyramid.
“Mobile banking is a service that is done through mobile device provided by mobile money operators aimed at promoting cashless economy and it has financial inclusion benefits as many people spend money but most don’t have bank accounts.
“Most MfBs’ customers have mobile phones, so all they need do is registering to open account with their phone numbers. When the bank loads money unto their phones, they just take it to a registered agent, show their PIN codes and collect the money. So the stress of queuing in the banks is removed.
“MfBs’ clients have the advantage of using some of the medium to transfer money and have access to diverse payment options as the CBN is synergizing all the payment services at the least cost to the customers.”
Pointing out that the policy does not mean that cash would no longer be in existence in the country, but that it was aimed at moderating the volume of cash in the system, the Chairman, National Association of Microfinance Banks, Lagos Chapter, Mr. Olufemi Babajide, said the policy would increase staff capacity and create more employment.
“Chances of MfBs being promoters of cashless economy are very feasible as we have already started doing it without any established structure. We are moving to a larger economy and we can’t continue to carry cash about. This policy would increase staff capacity and create more employment.”
For Mr. Godwin Ehigiamusoe, MD, LAPO MfB, the role of MfBs in the success of the policy is anchored on the fact that they touch a large number of people at the bottom of the pyramid.
“If this policy is properly implemented at the level where the under-banked and unbanked would be affected, a large number of Nigerians would benefit and transit into the cashless economy.”
Urging MfB operators to be the end mile to the users by becoming agents to provide the needed services, the Managing Director, Accion MfB, Mrs. Bunmi Lawson, said linking clients’ e-wallets to their bank accounts would increase financial inclusion.
“One of the key things people who are financially excluded want is convenience because they are too busy with their businesses and may not have the time to waste at the banks. This makes putting banking in their hands key and any serious MfB should know that it has to provide that service.
“Surveys have shown that 97per cent of our clients have mobile phones while the number of those that are financially excluded are much more. This means that those that don’t have bank accounts have phones and the advent of mobile money would enable us reach the financially excluded.
“I urge MfBs to embrace it to provide services that are relevant to our clients. It is achievable because the people we deal with know numbers, so they can enter the PIN and codes they need to access their money. It is designed to enable the unschooled operate it.”