Shutdown of fintech startups to impact financial inclusion

The shutdown of Nigerian fintech platforms that offer a wide range of financial services that can promote financial inclusion growth in the economy has raised great concerns.

Several notable companies that have shut down include Pivo, a fintech startup with expertise in financial services for small supply chain businesses. Zazuu, a Nigerian fintech startup that folded up on a funding challenge. Kippa, a Nigeria fintech company shut down its offline payment product, KippaPay, to lay off workers.

Emmanuel Olatunji, a financial analyst emphasised the critical role of these platforms in fostering financial inclusivity. “The closure of these pioneering companies not only disrupts the ongoing efforts to provide financial services to the underserved but also risks eroding the progress made in establishing a more inclusive financial system.”

“This deprives millions of people, especially in rural areas, of access to convenient and affordable financial services. It not only impedes their ability to access credit but also hampers their efforts to build a secure financial future,” he said.

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Nigeria had achieved only a 64.1 percent financial inclusion rate which is a marginal improvement from the 63.2 percent it had in 2018, according to data from Enhancing Financial Innovation & Access (EFInA).

EFInA also stated in its report that the 80 percent target that was set for 2020 may not be met until 2030 with the current stage of progress, noting that stubborn access gaps have persisted since 2008.

However, the country’s plans to achieve a 95 percent inclusion rate by 2024, seem farfetched as more foes hinder its progress.

According to the World Bank’s Global Findex financial inclusion data, there are more than 1.6 billion unbanked in the world. Sub-Saharan Africa has about 350 million unbanked adults, accounting for 17 percent of the global total.

As far back as 2010, the World Bank has been calling for financial inclusion in developing countries as a panacea to alleviate poverty and facilitate economic growth.

In many parts of Africa, several factors hamper this movement, such as lack of trust in the financial institutions, lack of money, distance to financial institutions, and religious and socio-cultural barriers, among others.

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Concerns have been raised regarding the potential setback in the digitisation of financial services, a trend that has shown significant promise in promoting financial inclusion.

The closure of these platforms might discourage potential investors and stakeholders from further engaging in initiatives aimed at extending financial services to the underserved, thereby impeding the momentum gained in recent years.

Oyindolapo Olusesi, co-founder of Mustarred Crest said despite the closure of these startups, the ecosystem is growing.

“More options are available from other companies. Agency banking is experiencing its challenges. But it is growing. Companies like Moniepoint, Opay, Palmpay, Kuda, and others are doing the numbers – pulling in more people into the banked net. “ he said.

According to him, these experience brings lessons to incoming and old founders, paving the way for good examples in the future.

He said, “It has an ultimate good for the ecosystem. The lessons from this closure, and shutdown, will help new and existing businesses learn how to do business better.”