The financial services sector in Nigeria, Africa’s most populous nation, has long played a crucial role in channelling economic resources and fostering national development. For decades, it has been a cornerstone of the Nigerian economy. Within this sector, the banking industry, primarily tasked with driving financial inclusion and facilitating access to capital for business growth, has made some strides in bringing a portion of the population into the financial services network.
However, despite some progress, challenges persist, as revealed by EFInA’s Access to Financial Services report in Nigeria 2018. The report indicates that 39.7 percent of Nigerian adults have a deposit money bank account, but 36.8 percent remain financially excluded. This situation becomes even more concerning when considering the substantial number of adults who qualify for financial services access but are unable to do so due to systemic issues.
The banks through product development and allied services offer access to capital for small and medium scale enterprises with a lot of gaps yet to be filled. With this huge population still outside the financial inclusion net, including those who still struggle to access capital for business, it becomes critical to ask, what are the problems with the conventional banking system?
Market analysts say that access to capital has been limited due to stringent conditions and requirements for accessing capital.
In this vein, young businesses that do not have collateral or successful business history are denied access to funding, thus, limiting their ability to create jobs and contribute to the growth of the economy.
Where loans are granted to businesses, the banks watch outcomes and are prepared to takeover collateral that are deposited in the event of a default.
The ordinary citizens have continued to lament incessant bank charges, which have not been properly defined, as conventional banks charge at will without customers really understanding the guiding principles.
The conventional banks seem to weld the sword of Damocles with power to decide the future of their customers and unfortunately, even the regulatory authority has turned a blind eye to this misdemeanour.
“A bank will loan you money for business. They won’t contribute anything to how you succeed or fail, and at the end, they will collect their interest whether you fail or succeed. If you fail, they will gladly take your collateral,” says Augustine Nnamdi, an estate surveyor and valuer, who had an unpleasant experience with a conventional bank.
The emergence of Banktechs in the banking landscape, with their versatile product offerings, improved access to capital, and rapid technology integration, has been a transformative force. And this transformation is gaining momentum with the arrival of The Alternative Bank in the Nigerian financial ecosystem.
The Alternative Bank, with a mixed characteristics of a fintech and conventional bank, has emerged with the focus to close the gaps in the conventional banking service, and a compelling mandate to create wealth and opportunities for the larger populace.
While conventional banks have been there looking for aggregation of wealthy people and successful businesses to manage their wealth, The Alternative Bank looks for where there is aggregation of opportunities, insert itself there, turn it around and stimulates wealth creation.
Its strategy is digitalisation of services through tech-based approach that create wider access and inclusiveness.
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“The reason for establishing The Alternative Bank is first and foremost to bridge the gap existing in the banking system, deal with the issue of lack of access to capital, and the issue of a lack of willingness to access the existing capital even where that exists,” says Abubakar Suleiman, chief executive officer, Sterling Bank Plc
“Another reason for setting up the alternative bank is that if you look carefully, the Nigerian banking system started very corporate. They built these expensive buildings, and they access these high-level customers. The model never really attempted to bank the rest of the society. Now we’re trying to sort of effectively bend that model to be able to bank more from the informal sector,” Suleiman said.
“Within Nigeria an emerging generation of people who value personal freedom and resist conformity, and who are not interested in conventional banking for emotional reasons, or for cultural reasons, or for religious reasons are on the rise. They find the interest-bearing model unattractive. So again, we needed to deliver a banking model that is attractive to the other half of the population that are generally not enthused about conventional banking models,” Sulaiman stated.
The Alternative Bank was recently introduced to the public in a one-of-its kind multi-city launch in major Nigerian business hubs.
The Alternative Bank started in 2014 as Sterling Alternative Finance, after the Central Bank of Nigeria licensed then Sterling Bank Plc to operate a non-interest banking business and has since grown to become one of the largest ethical banks in Nigeria’s non-interest banking sector.
With the recent completion of Sterling’s transition to a full-fledged financial holdings company, The Alternative Bank will operate as the non-interest banking subsidiary of the Group, while Sterling Bank Limited will continue to provide conventional banking services.
The Alternative Bank story is weaved around the visible gaps within the conventional banks, which surprisingly everyone has come to accept and live it, but which should not be the norm.
Suleiman said the intention of the Alternative Bank is how to build from the beginning, a model that is natural to the informal sector, which, according to him, is why they have a model called the ‘Wakeel’, which is an Agent Banking model, a step above the ‘umbrella’ and the ‘POS’. He said, while traditional banking generally tries to manage wealth, the Alternative Bank wants to create it.
“So constantly, if you ask me, we don’t want to manage the existing wealth, because we are still a poor country. We want to activate wealth creation so that we can become a rich country.”
In recognition of the unique financial needs of individuals and businesses, the alternative bank offers personalized financial consultations, tailored solutions, and one-on-one guidance towards ensuring that customers achieve their financial goals. The zero-interest banking principle is dedicated to fostering sustainable practices, responsible investments and financial decisions that contribute to positive social and environmental impacts.
The banks products are designed to bring more people into the formal financial sector with an albeit unconventional approach to e-commerce, investments, assets financing, and renewable energy. It boasts of financial solution such as AltMall for e-commerce, AltInvest for ethical retail investments, AltPower for affordable renewable energy solutions, AltDrive for new and pre-owned vehicle financing, and WasteBanc for the monetization recyclable waste.
These solutions go beyond transactions but focussed on empowering individuals towards their goals, aspirations, and future potential.