The World Bank and many other organisations have defined financial inclusion to mean access to financial products and services but a recent report by Mastercard revealed that simply providing access to financial services is not enough.
To achieve any real financial inclusion impact, people also need to become active users of financial products, the New York-based multinational company has said.
“Simply providing access to financial services is not enough. To achieve any real impact, people also need to become active users of financial products,” Ann Cairns, Vice Chairman of Mastercard said.
The report, Unravelling the Web, which was commissioned by the financial services company revealed that globally, 20percent of people with a bank or mobile money account have not used it for more than a year, and many more people only ever use their account on an occasional basis.
Thus, in the absence of banking services, or if financial products are rarely used, people inevitably turn to informal providers, such as neighbourhood savings clubs, local money lenders, and unlicensed remittance services or Esusu, Adashe, or Ajo, as its fondly called in Nigeria. The most populous country in Africa with 36.6 million excluded adult population.
According to Mastercard, most people on low incomes tend to be experienced users of these informal financial products, and to have intricate and well-ordered financial lives. However, they do not have legal protection, face significant risks, and may pay more for a vastly inferior product.
As the report says, “the battle for inclusion is not about creating completely new behaviours or building entirely new markets. Nor is it about providing simple access to the financial mainstream. It is about how bona fide players and regulated providers can do a better job of out-competing the informal sector.”
The recent report by Mastercard revealed that mobile technology has the potential to draw an extra 607 million people into the financial mainstream – and reduce the world’s unbanked population by more than a third.
“On its own, technology cannot tackle exclusion, nor can it address the deep gender gap in financial inclusion. On the contrary, it could exacerbate the inequalities,” Cairns noted.
Thus, the financial services company recommended the need to take a human-centred perspective. “We need to better understand the financial lives of underserved populations, evaluate the informal financial products and services they currently use, and the risks they are exposed to.”
“If you live on $2 a day, why would you upload that into a bank account or a mobile phone, instead of keeping the hard cash close to you? Only by coming up with the solutions and technologies that are culturally sensitive and demonstrably enhance the individual’s situation can we ensure that they will be used and help bringing the excluded into the financial mainstream,” the Mastercard Vice Chairman said.
Also commenting, Ashish Lall, Senior Advisor at PS-engage said indeed, understanding Set featured imageindividual and country context is critical for the successful introduction of technology. “Providing access to financial services without thinking of ways to increase incomes is of little value. The informal service sector is huge (and cash-based) in developing countries and this initiative represents an excellent three-way partnership to provide access to formal credit as well as training on financial skills.”
The Central Bank of Nigeria (CBN) said it is poised to ensure it include 80 percent of Nigerian adult population by next year. To drive home that course, the apex introduced various financial inclusion schemes.
On October 23, 2012, the central bank of Nigeria in collaboration with industry stakeholders launched the National Financial Inclusion Strategy (NFIS) aimed at reducing the financial exclusion rate of adult population from about 53 percent in 2008 to 20 percent in 2020.
Less than a year to the deadline, the apex bank has 16.8 exclusion gap to bridge to achieve the set target.
According to Godwin Emefiele, the governor of Nigeria’s central bank, over the next five years, through initiatives and policy measures such as the Shared Agent Network (SANEF) and the Payment Service Bank (PSB), the apex bank intend to broaden access to financial services to individuals in underserved parts of the country.
Endurance Okafor
