Inability to offer credit, insurance services is a major challenge for PSB – Fatokun

The fact that the much- anticipated payment service banks ( PSB) cannot offer credit and insurance services is a challenge to onboarding the excluded Nigerian adult population, according to Former Director, Banking Services Department at the Central Bank, Dipo Fatokun.

“Personally, I think there might be the need to look at the  offering of credit by the PSB,” Fatokun said.

Credit has been described by analysts as one of the strongest levers for driving financial inclusion as it serves as a strong incentive for previously unbanked or underserved Nigerians to get plugged into the financial services system.

Counter-intuitively, the PSB regulation explicitly states that lending is not a permissible activity for companies operating under a PSB license. It also states that forex trading and insurance activities are off the table.

According to Fatokun, a credit facility will enable PSB to easily onboard more excluded population.

“For example, a vulcaniser that has been enrolled may be using the platform for payment but when the time comes that he wants to buy a vulcanizing machine of, say, N150- 300,000, he will be directed to a bank.”

On what could be done to enable PSB to offer other services like lending, the former director said. If PSBS are to “offer credit, it may also lead to an increase in their capital requirement” as every “naira that banks give out a loan, it set aside part of the capital for it.”

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The required minimum shareholder capital for a PSB is N5 billion ($ 14m, £10m). while this is a significant amount, one that most “startups” cannot afford as some Nigerian fintech startups request half that amount for their funding rounds, it nothing close to the minimum capital requirement of N25 billion for Nigerian banks.

Meanwhile, some of the payment service banks which were recently granted a licence by the Central Bank had earlier shown interest to been granted approval for indirect lending through a strategic partnership with the Deposit Money Banks (DMBS).

The PSBS are specialized banks established to promote financial inclusion and enhance access to financial services for low- income earners and unbanked segments of the society by leveraging on technology.

“I am proposing that PSBS need strategic partnership to do loans indirectly,” Olufemi Balogun said at an event organized by the Chartered Institute of Bankers of Nigeria (CIBN).

According to analysts, the scarce PSB licence in Nigeria is slowing the mobile money take-off in Africa’s most populous country which has over 40 million unbanked adults.

While two smaller Telcos and a payments company have been given mobile money licences, the country’s largest mobile operators, MTN and Airtel are yet to receive the licence. This is more than two years after the Central Bank of Nigeria gave an official node to non- financial companies to apply for mobile banking licences to assist in deepening access to financial services, not much has changed.

Targeted at Nigeria’s over 36.8 percent excluded population who are mostly in the rural communities, the payment service bank by the apex bank would enable Telcos and other non- financial institution to offer financial services while deepening the country’s financial inclusion rate.

“If Nigeria wants to deepen financial inclusion with the right oversight, then the banks and Telcos should work together to drive it,” Yewande Adewusi, a Lagos- based financial inclusion consultant said.

Adewusi says it is “obvious that what the country has been doing in the past is not working.”

Before now, only banks and licensed financial institutions were allowed to provide financial services ( bank-led financial inclusion model). 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.

The apex bank has a target to ensure that 80 percent of the country’s adult population is financially included in the financial cycle by the year 2020. 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 a 60.3 percent financial inclusion rate 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.

According to Enhancing Financial Innovation and Access ( EFINA), Nigeria’s dream to include 80 percent of its adult population into the financial inclusion net in 2020 may have been unrealized.

While EFINA is expecting to release its 2020 official figures in March 2021 due to the COVID-19 pandemic, the organisation which has covered Nigeria’s financial inclusion space in the last 12 years said it is unlikely that Nigeria met last year’s 20 percent exclusion target by the CBN as available data shows half of the adult population in the country are still without a bank account.

“It is unlikely that we will have met the target of 80% of Nigerian adults being financially included,” Ashley Immanuel, CEO, EFINA said.

Talod Ocean Airfreight Limited, a Lagos base freight forwarding firm, has clinched the World Customs Organisation’s (WCO) Certificate of Merit Award for rendering exceptional services to the international Customs communities.

The award was presented to the firm by Hameed Ali, comptroller general of the Nigeria Customs Service (NCS), at the just concluded International Customs Day Celebration which took place in Abuja recently.

The Certificate was presented to Aare Hakeem Olanrewaju, managing director/ CEO of the firm, by Kunio Mukuriya, secretary general of WCO in Abuja.

Olanrewaju, who expressed delight at the award, lauded WCO and the management of the Nigeria Customs for considering his company worthy of the honour.

He also thanked the management and staff of his company for their dedication to duty. He dedicated the award to those he called ‘young freight forwarders’ who are aspiring for professionalism and international best practices in maritime industry.

He urged the young freight forwarders not to relent in their quest for excellence and professionalism in the practice of freight forwarding in Nigeria.

The WCO certificate award is an international recognition given to private organisations endorsed by their national Customs for having obtained a clean bill of professional practices by the International Federation of Freight Forwarders Associations ( FIATA) for outstanding trade compliance, qualitative logistics services and participation in the global trade initiative programmes which in the local parlance is referred to as ‘compliant declarant/ trader’.

It is an international award that every freight forwarding firm or practitioner aspires to earn. During the annual International Customs Day cerebrations, national Customs are encouraged to nominate organisation that meet the stipulated criteria to represent the country in this category.