Introduction
The growing importance of financial inclusion as a catalyst for economic growth and development has been well documented in several articles. Financial inclusion is viewed in many parts of the world as aright of all citizens to social inclusion, better quality of life and an instrument for strengthening economic capacity and reducing income inequality.
As such, policymakers have treated financial inclusion as a basic right for all citizens. Despite its importance, Financial inclusion has continued to pose a challenge to nations across the world, particularly in Africa which possesses great opportunities for financial services on the micro-level. In order to transform these huge opportunities into reality, what is needed is a realistic framework by policymakers and an innovative approach that surpasses market’s expectations and encourages all stakeholders.
Although steady progress is being made, critical challenges remain such as low financial literacy, insufficient infrastructural facilities which has constrained the achievement of substantial expansion of the financial inclusion level in Nigeria. This paper will analyse the concept of financial inclusion in Nigeria, the National financial inclusion target and
examine the role of the telecommunication companies in achieving this target.
Financial Inclusion in Nigeria
According to the Central Bank of Nigeria (“CBN”), “Financial Inclusion is a state where financial services are delivered by a range of providers, mostly the private sector, to reach everyone who could use them”. Financial inclusion relates to “a process or situation which allows for ease of access to, or availability of and usage of formal financial systems by members of the economy.
It describes a process where all members of the economy do not have difficulty in opening bank account; can afford to access credit; and can conveniently, easily and consistently use financial system products and facilities without difficulty”. In that regard, financial exclusion is the inability of an individual, household or group to access formal financial products and services.
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In recent times, financial Inclusion has assumed a critical development policy priority in many countries, particularly in developing economies due to its importance as a driver of economic growth. The challenge of inadequate financial inclusion is reserved for
developing economies alone. Indeed, all countries either emerging or high-income conceive and implement policies that aim to guarantee the majority of the population access to financial services.
In Nigeria, the utmost challenge in the financial inclusion process is ensuring the inclusion of rural dwellers, considering the dearth of financial services among this segment of the Nigerian society, owing to the generally low level of financial literacy, amongst other factors. The majority of the estimated 40 million financially excluded Nigerians do not
have knowledge of these services and their benefits.
Financial Inclusion Efforts of the Central Bank of Nigeria
The Government of Nigeria, through the CBN has put in place a variety of policies to spur greater financial inclusion. The CBN in its regulatory capacity has acted through policies, Guidelines, licensing and facilitating workshops, researchers, and support towards getting the underbanked into the mainstream. These policies have opened opportunities for financial institutions (both local and foreign) and technology and mobile companies to enter this market (such as Grameen Bank in Bangladesh and MPesa in Kenya).
The CBN launched the National Financial Inclusion Strategy on October 23, 2012, which was aimed towards reducing the financial exclusion rate from 46.3% in 2010 to 20% by 2020. The goal was to increase the rate of adult Nigerians with access to payment services from 21.6% in 2010 to 70% in 2020, those with access to savings from 24.0% to 60%; Credit from 2% to 40%, Insurance from 1% to 40% and Pensions from 5% to 40%, within the same period. This target was revised in 2018 to a financial inclusion target of 95% by 2024.
Although the goal is bold, the strategy indicates its long-term dedication to enlarging financial services access and use to underbanked populations. To achieve this, the CBN has set up a Financial Inclusion Secretariat to coordinate the implementation of the Strategy. The CBN has also released frameworks regarding Agent Banking, tiered knowyour-customer requirements, Anti-money laundering and combating the financing of terrorism (AML/CFT), MSME Development Fund, Financial Literacy, Mobile Money Operation and other Cash-less Policies, Shared Agent Network Expansion Facilities (SANEF) and the eNaira.
It should be noted however that although Nigeria is advanced in payment systems, financial inclusion (FI) in Nigeria is still growing and lags behind the primary target set in the National Financial Inclusion Strategy of 2012 by the Central Bank of Nigeria (reducing financial exclusion to 20.0% by 2020 from 46.3% in 2010). According to a report by Enhancing Financial Innovation and Access (EFInA), only 64% of Nigerian adults were financially included as at the end of 2020. This shows that 36% of Nigerian adults or approximately 38 million adults remain financially excluded.
The Role of the Telecom Industry in Driving Financial Inclusion
The speedy development of mobile money is creating unparalleled opportunities for poor and underserved communities in developing countries to actively participate in the economy. For millions of these individuals around the world, a mobile phone signifies more than just a device for communication; but a payment terminal that is easily accessible. Based on this alone, the importance of telecom companies in the future of payment systems is bound to be essential.
Recognising this, the Nigerian Communications Commission (NCC) and the CBN signed a Memorandum of Understanding (MoU) in 2018 demonstrating their commitment towards driving the financial inclusion and ensuring mobile money penetration in the
country. This has led telecommunication companies in Nigeria to establish several micro payment systems providing basic transaction services to Nigerians. An example of this is the MoMo Agent services established by Y’ello Digital Financial Services (YDFS) a subsidiary of MTN Nigeria in 2019. Following its launch, YDFS expanded its MoMo products and services to include bill payment, cash deposit, and withdrawal, as well as data, airtime purchase components and bulk disbursement services. These services have also been expanded to over forty banks and other financial institutions nationwide,
providing seamless financial solutions to more people.
In line with the MOU on digital payment systems, the Central Bank issued guidelines for licensing, regulation and operation of payment service banks (PSBs). The guidelines aim to drive financial inclusion in rural areas by offering high-volume, low-value transactions in remittance services, micro-savings, and withdrawal services. The telecommunication companies have moved to register PSBs in line with the regulations. 9PSB Limited a subsidiary of 9mobile and MoneyMaster PSB Limited a subsidiary of Globacom Limited had earlier received PSB licenses in September 2020. In addition to this, MoMo PSB Limited a subsidiary of MTN Nigeria and Smartcash PSB Limited a subsidiary of Airtel Africa have received approval in principle (AIP) from the CBN in November 2021.
It is hoped that this this foray by telecom companies in payment systems will increase the drive towards financial inclusion. It is apt to point out that although PSBs might increase the number of people with a bank account, financial inclusion entails more than just having a bank account; it requires a range of financial services that includes, but is not limited to, payments, loans, insurance, and pension products and services. It is hoped that with time and a strong customer base, these services can be expanded to cover a wider range of available services.
Conclusion
Financial inclusion is widely considered today as a tool for economic development, especially in for poverty reduction, employment generation, wealth creation and enhancing welfare and general standards of living. However, to translate those opportunities into reality, policymakers need to continue the drive to create a realistic framework ensuring a pioneering approach, appropriate engagement with all stakeholders and collaboration with technology companies where necessary as we drive towards the future. On the other hand, telecom companies may need to forge strategic partnerships that will
enhance the reach of their services to the unbanked reducing costs and improving affordability.
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