By Babajide Komolafe
SINCE 2010, there have been series of efforts across the world to increase financial inclusion, which refers to the number of people that have access to financial services.
These efforts according to Consultative Group to Assist the Poor, CGAP, a global partnership of leading development organisations, is due to proven evidence of the positive relationship between access to financial services such as banking, lending services, insurance and standard of living and poverty eradication.
According to the World Bank, “These and other global and national efforts are paying off”
“Globally the share of adults owning an account is now 69 percent, an increase of seven percentage points since 2014. These numbers translate into 515 million adults who have gained access to financial tools”, the bank stated in its Global Findex Report for 2017.
Nigeria’s financial inclusion effort
In Nigeria, efforts to increase financial inclusion were flagged of in 2012 with the introduction and launching of the National Financial Inclusion Strategy (NFIS).
The Strategy de?ned ?nancial inclusion as achieved “when adults in Nigeria have access to a broad range of formal ?nancial services that are a?ordable and meet their needs and are provided at an a?ordable cost”.
These financial services include: Opening transaction accounts i.e. bank accounts or mobile money wallets; Saving money in the account to earn interest; Sending and receiving money in a convenient and affordable manner; Very convenient and low cost means of paying bills and making daily purchases; Access to finance to meet personal obligations and to establish and operate businesses i.e. loans at affordable rates and under friendly conditions; Investing in instruments for higher returns(fixed deposit, mutual funds, bonds, stock, etc); Insuring risks around assets; and savings for Pension.
“Whoever is taking full advantage of the eight services enumerated above is said to be financially included, the individual who uses a few of the services is said to be financially underserved, while the person who does not use any of the services is said to be financially excluded”, said Niyi Ajao, Managing Director/Chief Executive of Nigeria Interbank Settlement System (NIBSS)
The NFIS was designed to achieve two overall ?nancial inclusion targets namely 80 percent overall (formal and informal) ?nancial inclusion and 70 percent formal ?nancial inclusion by 2020.
Implementing the NFIS
Since the launch of the NFIS in 2012, stakeholders in the financial sector, led by the Central Bank of Nigeria (CBN), have introduced various interventions in its implementation process. These include establishment of Financial Inclusion Steering and Technical Committees across the states in January, 2015 along with the Channels, Products, Financial Literacy and Special Intervention Working Groups.
The tiered Know-Your-Customer (KYC) framework was also introduced by the CBN in 2013 to simplify the requirements for opening and operating bank and mobile money accounts for the low income people. Again, the Agent Banking guidelines were released to bring the services near the people by allowing third parties such as pharmacies, filling stations, supermarkets, cooperative societies etc. to offer banking and mobile money services on behalf of banks and mobile money operators.
Similarly, the National Identity Management Commission (NIMC) had vigorously pursued a comprehensive identity management system for Nigeria while the National Pension Commission (PENCOM) pursued a micro pension framework for MSMEs, informal sectors and those whose income do not come in regular streams.
Furthermore, in collaboration with its stakeholders, the Securities and Exchange Commission (SEC) kick-started the process of increasing distribution channels to increase access to capital market products by promoting collective investment schemes, Capital Market Financial Literacy and a Capital Market Financial Inclusion Strategy.
On its part, the National Insurance Commission (NAIC) had been implementing non-interest based products to reach out to more people even as it released the micro insurance guidelines to provide explicit licensing of micro insurance companies and penetration of micro insurance to micro clients.
The Bancassurance Framework was another effort towards boosting inclusion. It was released by the CBN and NAICOM in order to be used as a platform for extending insurance courage to existing customers of banks.
More recently, collaborations and concessions were made to allow more roles to be played by mobile network operators in the delivery of financial services through subsidiaries. Partnerships were forged with the relevant government ministries in order to make use of their structures and instruments to advance financial literacy across the federation.
In the same vein, the CBN recently released the guidelines for the regulation of Payment Service Banks (PSB) in Nigeria. When this comes in effect this year, it will provide a level playing field for the provision of payment services to the bottom of the pyramid.
Financial inclusion impacts
The impact of these efforts is reflected in the Enhancing Financial Innovation & Access (EFInA), 2018 survey figures released last month, which showed that 63.6 percent of Nigeria’s adult population now has access to financial services and only 36.6 percent are now financially excluded. This represent a marked improvement compared to 2016 when the number of those financially excluded stood at 56.3 million.
EFInA is a non-governmental organization and a financial sector development organization funded by the Department for International Development (DFID) and Bill & Melinda Gates Foundation towards promoting financial inclusion in Nigeria. The firm conducts surveys every two years in order to determine the situation of things regarding financial inclusion in the courtly.
The survey was anchored on several indicators including Banked Population; Remittances; Savings with a Bank; Payments; Received Income; Loan with a Bank; and Banking Agents, among others. An increase of 1.4 percent in the Banked Population from the 2016 to 2018 was found, a decrease of 2.2 percent in Remittances between in two years, and another decrease of 6.7 percent in Saving with a Bank within the period. The indicators of Payments, Received Income and Banking Agents all recorded increases of 3.4 percent , 1.3 percent and 0.6 percent respectably, while Loan with a Bank remained static at 1.3 percent.
The report however found a decrease of 1.6 percent (from 30.1 percent in 2016 to 28.5 percent to 2018) in the non-bank indicators of Pension; Savings through other Formal Institutions; Mobile Money; Mobile Money Agents; Insurance; Remittances; and Loans with other Formal Institutions.
The EFInA survey report concluded that three factors of affordability, institutional exclusion and lack of awareness were the biggest obstacles to financial inclusion. According to EFInA, 60.1 million Nigerians do not have/use a bank account, 96.3 million do not have/use mobile money and 97.9 million do not have insurance.
On the digital usage in the country, the EFInA report revealed that mobile money, which was thought to be useful in the financial inclusion drive, was found to only deepen rather than expand financial inclusion. The report therefore revealed that while 35.5 million Nigerians (36.6 percent of the adult population) use bank accounts only 3.0 million adults have both mobile money and bank accounts, whereas 59.4 million (60.0 percent) neither have mobile money nor bank account.
Financial access by gender
Similarly, the study showed that while 82 percent of Nigerian adults, comprising of subsistence farmers and small business owners, receive their income in cash, 10 percent of those adults receive their own income via mobile money or bank account, while another 8 percent did not receive any income at all.
Savings in the country dropped by 13.3 percent according to the report, while savings in assets, property, and livestock had risen from 47.4 million to 54.7 million since 2016. Other decrease in respect of this indicator was that of borrowing, which went down by 2.0 percent and remittances to 1.0 percent.
On financial access by gender, the report indicated that out of 99.6 million adults in the country, 33.5 million male adult Nigerians were financially included compared with 29.4 million female adults. This represents a decrease in the exclusion rate of 4.3 percent and 5.7 percent in the male and female gender respectively, and a decrease of 4.8 percent for both gender compared with the 2016 figures.
The above led to a revision of the NFIS by stakeholders with the aim of expediting the attainment of the 80 percent financial inclusion target.
“This revised National Financial Inclusion Strategy sets a clear agenda for signi?cantly increasing access to and usage of quality and a?ordable ?nancial services by 2020. The recommendations are based on a review carried out on the original strategy from October 2017 to June 2018 and the need to focus priorities on access and strategies that will provide the deserved results in the target year,” the CBN stated.