DMBs, MFBs hint at synergising to put a lid on financial exclusion

Deposit Money Banks (DMBS’) and Microfinance Banks (MFBs) in Nigeria are mulling strategic partnerships aimed at engendering financial inclusion, inside sources tell Business Day. Despite falling to 46.3 percent in 2010 from 53.0 percent in 2008, a total of 39.2 million adult Nigerians (46.3% of the adult population) were financially excluded in 2010, the most recent data on the Central Bank of Nigeria (CBN) website show.

The intended synergy between the DMBs and MFBs is in tandem with projections of the CBN, under the auspices of the National Financial Inclusion Strategy, to achieve 80 percent financial inclusion by 2020 in Africa’s largest economy. As the delivery of financial services at affordable costs to low-income segments increasingly makes the rounds as a vehicle for economic development, concerted efforts at reversing the tide of the unbanked populace amid a contracting economy and a hard pressed financial sector is ever more crucial.

“We are in talks with some commercial banks to see how we can partner to drive further financial inclusion of every Nigerian,” said Godwin Ehigiamusoe, chief executive officer of microfinance bank, LAPO with a client base of 2.6 million, in an interview with Business Day. “The major constraint for DMBs, in their drive to penetrate deeper to reach the unbanked populace, is that they are not flexible enough. However, the MFBs have flexible structures that make reaching out to a good chunk of the unbanked populace, who comprise of small scale business owners and low income earners, relatively easy. But they don’t have the funds that the DMBs do,” Ehigiamouse said.

A bank official in tier-two bank, Diamond Bank, hinted at a similar development when contacted. “We are mulling a partnership with MFBs to complement our effort to attract the unbanked populace. I’m not authorised to give further details yet,” the banker told Business Day on condition of anonymity. From 2011 and 2014, 700 million people globally became account holders at banks, other financial institutions, or mobile money service providers, and the number of unbanked individuals dropped 20 percent to 2 billion adults, a World Bank report in 2015 indicated.

Developing countries from Brazil to Nigeria are seeking to stem the tide of financial exclusion and subdue the rising level of poverty. Nigeria is a member of the 100 nation Alliance for Financial Inclusion (AFI), a network of financial inclusion policy makers with the core mission to encourage the adoption of inclusive financial policies in developing nations, to lift 2.5 billion citizens out of poverty. “Rather than work at encouraging the adoption of financial services disjointedly, DMBs and MFBs can work together and achieve much more than they do in isolation,” Adisa Aminu, a developmental expert and a fellow of the Young African Leadership Initiative (YALI), said by phone.