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How innovation is pushing Nigeria’s financial inclusion drive [Opinion]

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By Victor Ilo

NIGERIA has come a long way in its financial inclusion pursuit. From 2012 when the Central Bank of Nigeria, CBN, initiated the Nigerian Financial Inclusion Strategy, NFIS, till almost 10 years later, a lot has happened.

One of the advancements is a service which enables customers to withdraw cash via mobile money agents from their bank accounts without the use of an Automated Teller Machine, ATM, or card. This cardless cash withdrawal service utilises a secure gateway that protects customers against fraudulent transactions and requires validation using their bank PIN.

But how important is this? While there has been progress with financial inclusion in Nigeria, data from Enhancing Financial Innovation and Access, EFInA, revealed that as at 2018 only 59.1 per cent of women compared with 67.5 per cent of men were financially included, representing a gender gap of 8.4 per cent.

Although there is a slight progress from the 9.8 per cent recorded in 2016, the gap must be closed sooner. This is considering that there are about 2.8 million more women than men in Nigeria. Without closing the gap, Nigeria can only dream of reaching the 95 per cent inclusion target set by the CBN for 2024.

Like in the case of many developing countries, mobile money is more likely to close the financial inclusion gap among women than regular financial institutions and bank accounts.

So, how can Nigeria close the gender gap and attain her financial goal efficiently? The idea is for all financial service providers to work in synergy allowing the disruption of technological innovation to take the lead.

If the traditional banks could achieve this alone, we will have a rather insignificant exclusion percentage by now. It is reasonable that the CBN introduced the NFIS and, later, agent banking structures, allowing interested organisations to contribute effort to financial inclusion.

The nature of mobile money, aided by agent banking, makes it easier and cheaper for financially undeserved communities to access basic financial services.

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The NFIS allowed for innovation in the banking and finance sector and technology disrupted the traditional banking system. It allowed the growth of fintech in Nigeria with solutions like digital banking and payment gateways. The competition that digital banks posed for traditional banks forced them to either imbibe digital products or go ahead to create their own digital platforms.

As a Stears article put it: “When Wema Bank launched its digital bank, ALAT, in 2017, it signalled that Nigerian commercial banks had woken up to the age of fintech products”. Around the same period, a number of Nigerian banks also launched their digital products.

A 2020 Agusto & Co report on Consumer Digital Banking Satisfaction Index showed that digital banking has made good progress with the involvement of the traditional banks. However, only 46 per cent of the survey respondents are aware of digital banks. This signifies that digital banking is unpopular.

The challenge still remains that many among the financially undeserved are unable to afford smartphones and are quite digitally illiterate. This is in addition to the lack or scarcity of banking branches and ATMs in rural and peri-urban areas which accommodates a majority of the unbanked and undeserved.

Hence, this huge number are excluded from using basic financial services. Obviously, it will take more than technology to achieve the CBN’s 95 per cent financial inclusion goal by 2024.

What is needed is more collaborative effort among the banks and other financial service providers, especially institutions with capable agent network spread across the country.

It was in the news recently that Y’ello Digital Financial Services, YDFS, expanded its MoMo Agent cardless cash withdrawal service to over 40 financial institutions. According to reports, the service was previously exclusive to Access Bank users but has now been expanded to customers using First Bank, GTBank, Zenith Bank, and other tier-one banks.

With this, the underserved can now access cash from their accounts without having to visit an ATM or use an ATM card.

Mobile money service is more inclusive as it allows one to perform financial transactions using a feature phone. The service is one of the most innovative provided by agent networks who have been able to penetrate communities across Nigeria. MTN’s YDFS, for example, has over 300,000 agents, as revealed in a Stears report.

By the trajectory of things, the row in Nigeria’s financial sector is a major distraction for where the country’s financial industry is headed for.

What the sector leaders should be looking to achieve now is collaborating with capable organisations and giving more room to innovation as it continues to drive Nigeria’s financial inclusion goal.

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