One of the key findings of the Customer Segmentation study executed by the Lagos Business School (LBS) is that broader community engagement, including with religious institutions and informal social groups, is essential to driving financial inclusion in Nigeria.
The study also identified the need for unconventional approaches to on-boarding financially excluded persons such as the use of livestock ownership as collateral for financing, amongst others.
Six customer segments of financially excluded persons were identified in a new report by the Sustainable and Inclusive Digital Financial Services initiative (SIDFS) of the LBS, which was launched alongside an art exhibition and in partnership with Dalberg and the Bill and Melinda Gates Foundation.
These are Vulnerable Believers, which form 12 percent of the population; Resilient Savers, which form 21 percent of the population; Dependent Individualists, 22 percent of the population; Digital Youth, 19 percent of the population; Confident Optimists, 14 percent of the population and lastly, Skeptical Cultivators which form 12 percent of the population.
Olayinka David-West, Academic Director and Senior Fellow at the Lagos Business School who also leads the Sustainable and Inclusive Digital Financial Services initiative, said, “one of the many challenges of Financial Service Providers (FSPs) is limited knowledge of customers, and as a result they often overlook high potential customers or misidentify their needs, and invest in products and channels that sometimes miss the mark.”
“The customer segments presented in this study provide insights into the behavioural and attitudinal traits of the Bottom of the Pyramid (BoP) population, currently estimated at 75 percent of Nigeria’s population (about 135 million persons), with a view to providing FSPs with correct information to create fit-for-use, segment-aligned digital financial products,” David-West added.
Nneka Eze, Partner and Nigeria Director, Dalberg, said: “As part of our work to define a novel, globally applicable approach to segmentation, we conducted deep research in six countries across Africa and Asia.”
“As with all the countries, the Nigeria report introduces a novel approach to segmentation that integrates contextual, behavioral, and psychometric variables that is useful in identifying patterns, highlighting nuances and differences between people that may not be clear from their contexts alone. Overlaying a segmentation using behavioral and psychometric approaches with FSPs’ existing segmentation strategies, we identified opportunities to drive market share— reaching people that a broad demographic approach to the market may not reach or energize,” Eze said.
In addition, the report proffers principles on engaging with last mile customers based on motivation and adoption triggers uncovered.
For instance, in dealing with Vulnerable Believers; people who are mostly lower middle-class to poor, religious, predominantly rural, with limited education, use financial services infrequently and struggle to pay bills; the report says the task is figuring out how FSPs, government or development organisations can leverage religious institutions as a channel for financial information and support and also how to develop agricultural programs that allow this group to take control of their financial lives.
Moreso, for Skeptical Cultivators, who draw on more people than average for support during emergencies, yet face difficulty raising emergency funds and distrust people in their communities, the task is how to encourage Mobile Network Operators (MNOs) to incentivise and facilitate greater phone ownership and usage by the segment, to improve access to services, provide daily liquidity, support financial planning and disciplined savings, build financial confidence and autonomy, and foster financial connections and access to emergency support.
Similarly, for Dependent Individualists, who have the weakest financial health of all Nigerians, face high income volatility and are less likely than others to save, plan for managing expenses, or cover household expenses, have average cash-based financial behavior, but often own land and livestock, the task is to explore how their high livestock ownership can be used as collateral for agricultural financing and how to develop or extend agent networks sustainably that provides better access to formal financial services for the segment.
The research study is the most representative of Nigerians with a sample size of 1,200 across the country. The study integrated three variable types into its segmentation approach to expand information about BoP consumers, strengthening typical approaches to segmentation.
The Sustainable and Digital Financial Services Initiative of the Lagos Business School says it will continue to carry out research to aid in driving financial inclusion as a key indicator for meeting the Sustainable Development Goals (SDGs).
