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CBN needs to leverage technology to achieve 80% inclusion target – stakeholders

If 80 percent of Nigeria’s adult population are going to have access to affordable and sustainable financial services by 2020 as projected in the National Financial Inclusion Strategy (NFIS) the central bank would have to leverage on technology, industry stakeholders have advised.

Nigeria has about 40 million adult population who do not have access to a basic bank account and according to the World Bank, access to savings account it the first step towards achieving financial inclusion.

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The Central Bank of Nigeria, however, has a plan to ensure only 20 percent of the country’s population are excluded from the financial net.

“What technology does for us and in a market like this is it helps us leapfrog infrastructure challenges,” Dayo Odulate-ademola, Head of innovation at EFINA said on Monday at the Social Media Week.

The 2018 data by EFINA put Nigeria’s financial inclusion rate at 63.2percent, meaning that as much 36.8 percent or about 40 million adults still lack access.

If the apex bank is to achieve its objective through the strategy launched seven years ago, it would have to bridge the 16.8 percent inclusion gap before year-end.

But the CBN had in a circular on July 2018, lamented that Nigeria was not meeting any of the financial inclusion targets agreed and contained in the 2012 Financial Inclusion Strategy.

“To achieve financial inclusion target that the CBN’S inclusion strategy has set up at 80 percent irate by 2020, technology has to play a significant role. What I see technology doing in terms of Nigeria’s financial inclusion is actually to democratize access, that is the first thing it does,” Wole Adeniyi, executive director at personal & business banking, Stanbic IBTC Bank said.

The target by the Central Bank of Nigeria to ensure 80 percent of Nigerian adult have access to financial services by 2020 is unlikely to happen, EFINA, the organization that conducts biennial report on Nigeria’s financial inclusion industry have said.

Haven covered Nigeria’s financial inclusion space in the last 12 years, EFINA said the 20 percent exclusion target is unlikely to be achieved as its data shows that Nigeria’s exclusion gap was widening.

It said even though its 20218 data showed that more people became financially included the financial inclusion pace was however not matching the country’s population growth rate.

“What we saw between the 2016 and 2018 data was that more people were becoming financially included but not at the same pace as the population growth rate which is why the 80 percent target of financial inclusion for this year or conversely the 20 percent exclusion target is unlikely to be met if we are all particularly realistic,” OdulateAdemola said.

If the Central Bank of Nigeria is going to beat the projection and achieve its target, it would have to ride on technology as a catalyst, industry experts said.

“Inclusive financial inclusion can be achieved through the use of technology,” Uzuma Dozie, the founder and CEO of Sparkle.

High poverty rate, lack of identity, illiteracy and closeness to financial service providers are some of the reasons responsible for Nigeria’s high financial exclusion rate.

According to Yele Okeremi, MD/CEO of PFS, Nigerians will remain financially excluded because they are financially disempowered.

“We still have a large population living below two dollars a day, how do you want to include them financially?” the CEO questioned.

The lack of incentive to open a bank account is another reason why the exclusion rate is high in Nigeria, Uzoma said asking why a low income earning Nigerian would want to be financially included.

“What is the benefit, what is the incentive?” The founder added saying “beyond financial inclusion, there is also social inclusion; why do I need a bank account if I can’t afford it?”

According to the consumer division of financial services, multinational Citigroup countries that should grow fast in driving financial inclusion through technology (in mobile money) but have faced policy roadblocks include Egypt and Nigeria.

“We now flag Nigeria as the market most likely to see rapid growth in the short term as we foresee an industry transformation following regulatory changes that will allow telcoled mobile money models,” New York-based lender said.

Telecommunication operators’ push to offer mobile money services in Nigeria received the official nod of the regulator, the Central Bank with the issuance of guidelines for players to apply for the payment service bank (PSB) licence.

“The roll-out of Payment Service Banks guidelines that allows licensing of telco subsidiaries is welcome and should be implemented,” International Monetary Fund (IMF) said in April 2019.

About a year and six months after the Central Bank loosened its policy to accommodate new players in Nigeria’s financial services industry; the direction of the mobile money initiative remains unclear.

Since October 2018 when the apex bank requested that industry players should apply for the licence to operate as a Payment Service Bank, only three firms; Hope PSB a subsidiary of Unified Payment, Globacom’s Money Master and 9Mobile’s 9PSB have been issued Approval-in-principle (AIP).

A PSB license will allow the companies to among other things; maintain savings accounts and accept deposits from individuals and small businesses, which is covered by the deposit insurance scheme; carry out payments and remittance (including cross-border personal remittance) services through various channels within Nigeria; issue debit and prepaid cards, and operate an electronic purse or wallet.

According to London based Group Special Mobile Association (GSMA), “from a regulatory perspective, one basic requirement for mobile money to succeed is to create an open and level playing field that includes non-bank mobile money providers such as Mobile Network Operators (MNOS).

Read also: ARM commences 2.0 Accelerator programme to drive Nigeria’s Fintech growth

Before October 2018, only banks and licensed financial institutions were allowed to provide financial services in Nigeria.

Although telecom operators and other Fintech companies indicated interests to operate in the market, the CBN policy would not allow them. The regulator eventually shifted because of the increasing rate of financially excluded people in Nigeria and the lack of progress in getting banks to provide financial services to people living in areas that lack access.

Telco-led financial inclusion model in African countries has led to tremendous progress in the number of people with access to financial services owing to the already existing large customer base of the Telcos.

Kenya has about 60 percent mobile money service penetration, while Ghana has about 40 percent service penetration, and Nigeria with a lot more population numbers, remains at 1 percent owing to its bank-led model.

Ghana’s decision to have a Telco led model resulted in a 73 percent increase in registered mobile money customers in just one year, according to World Bank data, and has helped lift financial inclusion rates in Ghana to 58 percent in 2017 from 41 percent in 2014.

This was not different for Ivory Coast who has experienced a mobile money revolution. As a result, there are now more adults with mobile money accounts of 24.3 percent than with bank accounts of 15 percent.

Ivory Coast has the fifth highest rate of mobile money accounts in the world behind Kenya (58 percent), Somalia (37 percent), Uganda (35 percent), and Tanzania (32 percent), according to Brookings Institute, a Washingtonbased nonprofit public policy organization.

Kenya also improved to 81.6 percent financial inclusion rate in 2017 from 74.7 percent in 2014, Ivory Coast improved to 41.3 percent from 34.3 percent and South Africa increased marginally to 69.2 percent from 70.3 percent.

“The new data for 2020 will tell how close to the 80 percent financial inclusion target we’ll land,” Odulate-ademola said.

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