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Nigeria unlikely to meet 80% financial inclusion target in 2020 – EFInA

The target by the Central Bank of Nigeria to ensure 80 percent of Nigerian adults have access to financial services by end of 2020 is unlikely to happen Enhancing Financial Innovation and Access (EFInA), the organization that conducts biennial report on Nigeria’s financial inclusion industry, has said.

Having 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 show 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,” Dayo Odulate-Ademola, Head of innovation at EFInA said on Monday at the Social Media Week.

The CBN through its National Financial Inclusion Strategy (NFIS) plans to ensure that 80 percent of Nigerian adults are included in the financial net by the year 2020.

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.

Not only was the country not meeting its targets, but it was also declining in growth. For instance, while Nigeria achieved 60.3 percent in 2012, it declined to 58.4 percent in 2016 against a target of 69.5 percent translating to financial exclusion of about 41.6 percent.

To achieve a more inclusive financial system at an affordable rate, industry experts have advised that Nigeria would need to leverage technology to give access to its excluded population.

“To achieve financial inclusion target that the CBN by 2020 technology has to play a massive significant role and 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 during a panel session at the Social Media Week on Monday in Lagos.

Telecommunication operators’ push to offer mobile money service, a financial inclusion model that has helped other Africa countries in their programme was recently given an official nod by the regulator, the Central Bank with the issuance of guidelines for players to apply for the licence to operate as payment service banks (PSB).

“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 18  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 industry players to apply for the licence to operate as a Payment Service Banks, 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).

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 due 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 which 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 Washington-based non-profit 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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