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The journey to 80% financial inclusion by 2020

Financial Inclusion

Nigerians write or cash fewer cheques these days. They’re more likely to transact electronically via NIP, an instant payment service that can be done over the internet, a mobile phone or from a bank branch, POS, mobile phone or the web. According to data from Nigeria Inter-Bank Settlement System (NIBSS) and the CBN, the volume and value of transactions via these channels respectively increased by 39 and 42 percent between 2017 and 2018. Such data is a metric to judge the gains of the central bank’s cashless policy and the prospects of financial inclusion.

NIP, a smorgasbord of different cashless transactions, accounted for close to three-quarters of the total value of transactions in 2017 and 2018. It’s not clear, however, if most of the NIP transactions were from the confines of a physical bank branch as the data on money sent via NIP lumps transfers made from bank branches, the internet, mobile phones, ATMs, POS and USSD.

Monthly salary alerts are probably the reason for the dominance of NIP.
In other words, Nigerian adults who have a bank account are the major beneficiaries of the cashless policy. And they’re inculcating the cashless habit. In terms of volume, three-fifth of transactions in both years was over the web, via ATMs, POS and by mobile money operators. ATM transactions accounted respectively for 24 percent and 32 percent of the total volume of transactions in 2017 and 2018.

Distance of bank branches has hindered financial inclusion which is more than access to a bank account or an ATM. Where physical banks are absent, mobile money and POS operators are easing payments, the first most basic financial service.

Nevertheless, majority of Nigerian adults (mostly women) are unbanked i.e. don’t have a bank account or underbanked i.e. most of their transactions are cash-based. Not to mention the paucity of other financial services such as loans for individuals and small businesses, insurance and wealth management.

With the emergence of companies (most of them are start-ups) that adopt technology to widen, scale-up and ease access to financial services there has been marked improvements in financial inclusion, says Findex, a financial-inclusion index compiled by the World Bank. Technology-driven innovations coupled with regulations have soothed the aches that come with sending money however remote and changed consumer behaviour.

Innovations from banks like USSD-based payments have changed how we buy airtime, open an account, check our balance, make transfers and withdraw cash. Fintechs have found a way to analyse the creditworthiness of borrowers and approve loans in minutes without physical contact. As a result, cash-strapped Nigerians are able to access credit through alternative sources of finance. The CBN’s introduction of the Bank Verification Number (BVN) allows lenders identify borrowers, has made online lending possible.

The Shared Agent Network Expansion Facility (SANEF), a collaboration of the CBN, banks and NIBSS expanded access to POS in areas distant from a bank branch. And when approved, Payment Service Banks (PSB) will further expand financial access to every unbanked Nigerian with a mobile phone.

Nonetheless, experts say there are plenty of barriers, from regulators, providers and consumers to achieving Nigeria’s 80% 2020 financial inclusion target. The lessons from the gains made so far show the barriers can be overcome through collaboration.

A report by KPMG, a consultancy, reckons that the “right mix of technical skills, capital investments, government incentives, regulatory framework and an entrepreneurial and innovative mind-set” will catalyse the fintech industry.

We have the talent. Adoption of technology is increasing. The market is attractive: a significant number of underbanked and unbanked adults have a mobile phone and Nigeria is a major fintech investment destination in Africa. . Collaboration between fintechs, vendors, financial institutions, regulators and other players in the industry is critical.



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