That most Microfinance Banks (MFBs) are not connected to a switch, raising processing time and costs of operation, is a barrier to achieving the financial inclusion target.
Being connected to a switch is about making transactions for one bank to another through connecting platform such as the Nigeria Inter-Bank Settlement System (NIBSS) and Interswitch, among others.
One of the operators of the largest microfinance banks based in Lagos confirmed to BusinessDay on Monday by phone that a lot of MFBs do not have such connection.
The operator was concerned that many people do not understand the concept of microfinance banking as they take it to be commercial banks.
However the operator said many of the microfinance banks ride under their corresponding banks to connect to a switch.
Last week, the Central Bank of Nigeria (CBN) released the revised National Financial Inclusion Strategy (NFIS) and the major goal of the revised strategy is to reduce the proportion of adult Nigerians that are financially excluded to 20 percent in year 2020 from it baseline figure of 46.3 percent in 2010.
There is opportunity to capitalize on the potential of microfinance especially to serve women, rural people and youth. But according to the NFIS report, lack of Microfinance Institution (MFI) regulation results in occasional bad customer experiences and lack of trust.
While basic entry requirements are low, MFBs are constrained by stringent requirements, for instance, staff qualifications requirement limit MFB’s ability to expand their footprints – and therefore to make a broader anomaly impact.
Another barrier to financial inclusion, which the private sector and civil society players can address include banks lack capital incentives to invest in recruiting, training and retention for potential direct and third party networks.
More, so people in rural areas may lack trust in agents, in particular when they are recruited from outside of the community’s language and culture.
However, an analysis of financial inclusion status as at 2016 showed that the South West geopolitical zone had reached 18 percent exclusion rate while South East and South-South recorded 28 percent and 31 percent, respectively. The exclusion rate for North Central geopolitical zone stood at 39 percent while that of North East and North West were 62 percent and 70 percent, respectively.
The age dimension to financial inclusion in the country indicates that the most banked brackets are ages 26 to 35 and 36 to 45 as the percentage of banked stood at 44.2 percent and 45.6 percent respectively.
Conversely, the least banked age bracket were 18 to 25 years followed by 56 years and above as they recorded 27.5 percent and 34.2 percent banked rate respectively.
Financial inclusion performance by products, channels and enablers (2016) indicated that the percentage of adult Nigerians that had access to payments, savings, credit, insurance and pension services stood at 38 percent, 36 percent, 3 percent, 2 percent and 5 percent as against the targeted figures of 56 percent, 46 percent, 29 percent, 25 percent and 26 percent, respectively. In the channels category (measured in per 100,000 adults), banks branches, MFB branches, ATMs, PoS terminals and Agents were 5.6, 2.3, 18.0, 116.3 and 18.8 in 2016 as against the targets of 7.5, 4.6, 46.2, 524.1 and 37.2, respectively. Furthermore, in the enabler category, the share of adult population that registered under the National Identity Number (NIN) scheme peaked at 15 percent as against the target of 67 percent in 2016 while the proportion of adult population that had Know You Customer (KYC) Tier 1 ID leaped to 60 percent compared to the targeted 67 percent.
Hope Moses-Ashike
