Having almost the same unbanked population as Nigeria, Brazil with a new technology-driven financial inclusion exercise-coronavoucher holds lessons for Nigeria’s cash-based economy which is largely dependent on banks for access.
The Brazilian government recently launched the emergency aid programme aimed at giving support to 54 million of its population who became financially vulnerable as a result of the coronavirus crisis.
Through the country’s central bank- Caixa Econômica Federal (CEF), Brazil is paying its vulnerable population 600 reais ($117) monthly until June through the coronavoucher. This includes millions of previously unbanked citizens, who are being provided with a mobile-based savings account.
As of April 8, 2020, 24 hours after the emergency aid registration website and app went live, CEF said it had processed applications from over 25.1 million Brazilians. Of that total, 39.3 percent were reported to have opened the digital account offered by the bank to receive the monthly payments.
The digital account of Brazil’s coronavoucher provides basic functions such as payments and transfers. With no plans of issuing physical cards, the five main telecommunications providers operating in the country – Algar, Claro, Oi, TIM and Vivo – are enabling free access to the app.
The database of socially vulnerable citizens handled by Dataprev, the social security technology company owned by Brazil is automatically assessed and validated against the personal information of citizens applying for financial aid through coronavoucher.
According to CEF, the website where citizens can sign up for the financial support programme had 240 million views since launching on April 7, 2020. Some 62 million SMS messages had been sent to confirm the requests.
Data by the bank show that the Android version of the emergency aid registration app had been downloaded by 21.8 million users, while the iOS version saw 699,000 downloads.
A large number of Brazil’s unbanked population is expected to receive emergency assistance from the government through the coronavoucher, a boost to the country’s 79 percent financial inclusion rate.
Meanwhile, Nigeria with almost 40 million unbanked population, one of the highest financial exclusion rates in Africa at 36.8 percent preferred cash instead of electronic transfers in cushioning the economic impact of the coronavirus pandemic on its vulnerable population.
Just like Brazil, Nigeria has put up measures to ease the pressure coronavirus crisis is having on the income of many households, particularly the most vulnerable in society. The Federal government through the Ministry of Humanitarian Affairs embarked on a Conditional Cash Transfer programme. The National Social Investment Programme (N-SIP), a department under the ministry, handles the cash transfers through its Household Uplifting Programme (HUP).
So far, the Federal Government has rolled out the Conditional Cash Transfer (CCT) palliative in Anambra, Katsina, Kogi, Plateau, Oyo, Kano, Cross River, Bauchi, Adamawa, and Nasarawa states.
“Two days ago at the task force meeting, the Head of Service told me that the conditional cash transfer from the Federal Government would be N20,000 to people in 10 local government areas of Oyo State,” Seyi Makinde, governor of Oyo State said regarding the outcome of the programme in his state.
But, with the choice of physical locations for the conditional cash transfer programme Nigeria is losing an important opportunity to reach the population of financially excluded through digital payment channels which are safer and cost-effective.
In every state the programme has reached, it involved the expensive logistics of transporting bags of cash escorted by heavily armed security personnel to physical locations, long queues by residents and handing over of N20,000 by officials of HUP in the open.
Apart from the security risks this portends, the programme has come under heavy criticism with some people alleging that the process of selecting beneficiaries and disbursement lacks transparency.
To spur inclusive access to financial services in Nigeria, industry experts have recommended the use of electronic payment channels like mobile money and USSD as they have been identified as the easiest way to reach the unbanked population.
“Longer-term, we run the risk of more Nigerians becoming financially excluded as a result of this crisis, at the exact moment when they as individuals and the overall economy would need their participation the most,” said Ashley Immanuel, head of Programmes at Enhancing Financial Innovation & Access (EFiNA) said.
Unlike the Telecommunication companies in Brazil, Telco operators in Nigeria which according to the data by the Nigerian Communications Commission (NCC) has a reach of 86 percent, and 182.7 million customers, the single largest customer base in the country have not been given the opportunity to provide financial services despite showing interest.
Telcos in Africa’s later economy are currently awaiting the Central Bank of Nigeria for a mobile money licence.
Telecommunication operators’ push to offer mobile money service officially got a nod by the central bank of Nigeria with the issuance of guidelines in October 2018 for players to apply for the licence to operate as payment service banks (PSB).
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.
But after almost one year and a half since the apex loosened its policy to accommodate new players in Nigeria’s financial services industry; the direction of the mobile money initiative remains unclear.
According to EFInA, the organization that conducts biennial report for Nigeria’s financial inclusion industry the Central Bank of Nigeria is unlikely to achieve its target of 80 percent financial inclusion rate at the end of this year.
Haven covered Nigeria’s financial inclusion space in the last 12 years, EFInA said the 20 percent exclusion target is unlikely to be achieved due to the country’s widening exclusion rate.
It said even though its 2018 data shows 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,” Ademola said.
The Central Bank of Nigeria 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 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.
ENDURANCE OKAFOR
