The slow take-off of mobile money in Nigeria amid scarce licence could cost Africa’s largest economy some of the much-needed foreign direct investment, as investors eyeing the industry could settle for Ghana and Kenyan with more developed regulatory policies.
Crypto.com, a global cryptocurrency exchange company, and investors in Sweden, disclosed their interest in Africa’s mobile money industry at the Fintech Week London on Monday.
“We, for example, are trying to set up partnerships with telecom companies in Africa so that people can have access to financial services and be able to transact using mobile money,” Mariana Gospodinova, general manager, Europe, Crypto.com.
Read Also: Despite agent banking growth, Nigeria still behind peers in mobile money
According to Gospodinova, telecoms have been providing financial services in sub-Saharan regions of Africa and have expanded to some extent, West Africa. “Mobile money is becoming more popular in those regions than opening bank accounts,” Gospodinova said at the Fintech Week in London.
Largely driven by mobile technology, Kenya’s financial inclusion expanded from a low base of 26.7 percent a decade ago to 83 percent in 2020. The East African country is one of the world’s leaders in mobile money services. Telecom’s operator Safaricom pioneered its M-Pesa service 12 years ago to cater for Kenyans without access to the formal banking network.
While Nigeria went late to the party as the Central Bank of Nigeria (CBN) only gave an official nod to telecoms and other non-financial companies to offer financial services in 2018, its slow licensing pace and scarce permits have delayed the industry’s take-off.
The industry regulator gave its first set of licences to three players in August 2020, two years after it received applications. Even so, the country’s largest mobile operators, MTN and Airtel, are yet to receive the licence, more than three years after they applied to help deepen access to financial services in a country where almost 40 million adults do not have a bank account.
“I think it is really interesting what telecom providers have done with mobile money accounts in a lot of emerging countries in sub-Saharan Africa in particular. I think to some extent it is now an already aged technology, but, interestingly, the telecoms have disrupted some banks in some of the regions,” Zeiad Idris, co-founder/CEO, Algbra, said at the Fintech Week London.
According to Idris, “We have a lot to look forward to in terms of where things are going. It is also important that whether it is from a regulator perspective or from a technology perspective that we understand that we are serving people and people have needs.”
Kenya’s 83 percent mobile money led financial inclusion growth rate in 2020, meaning eight in ten adults in the East African country have access to formal financial services. This mirrors the potential of Nigeria’s payment service bank (PSB), but for licensing challenges, the most populous nation in Africa could lose more than just having a high financial exclusion rate.
“From a Swedish/Nordic perspective, there is more and more interest in Africa. I believe it is the pandemic that is further pushing digitalisation, mobile money payments, etc,” CEO of Findec, Sweden’s Fintech Hub, Anders Norlin, told BusinessDay on the sidelines of the Fintech Week while stressing the investment opportunity Swedish investors see in Africa’s mobile money industry.
Targeted at Nigeria’s almost 40 million unbanked population who are mostly in the rural communities, the payment service bank by the CBN would enable telecoms and other non-financial institutions to offer financial services while deepening the country’s financial inclusion rate.
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 interest 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.
Almost a decade ago, the apex bank set a target to ensure that 80 percent of the country’s adult population are financially included in the financial cycle by 2020. The CBN had in a circular in 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.
Nigeria failed to meet its National Financial Inclusion Strategy target for 2020 to include 80 percent of its adult population into the financial system. EFInA data showed that only 64.1 percent was financially included by the end of last year.
This means that 36 percent of Nigerian adults, or 38.1 million of the country’s 106 million (18 years and above) adults, remain completely financially excluded. This is a shortfall by 16 percent points from the desired target of a 20 percent exclusion rate.
The 2012 strategy by the CBN had also aimed to reach 70 percent of Nigerians with formal financial services by 2020; the actual figure reported by the EFInA’s Access to Financial Services in Nigeria 2020 Survey released last Thursday showed it was 51 percent – a shortfall by 19 percent points.
“At our current rate of progress, we will not reach the 2020 financial inclusion targets until around 2030,” Ashley Immanuel, CEO of EFInA, said.
Financial inclusion means that people have access to basic financial services like a savings account, credit and insurance. A higher exclusion rate in Nigeria could lead to a poorer population, as lack of access to credit and insurance puts them at an economic disadvantage.
“From a regulatory perspective, one basic requirement for mobile money to succeed is to create an open and level playing field that includes non-bank mobile money providers, such as Mobile Network Operators (MNOs),” London-based Group Special Mobile Association (GSMA) said.
