Financial Inclusion: Lofty Idea, Still A Long Way To Go in Nigeria

The launching of Financial Inclusion on October 23, 2012 started the several efforts so far made to ensure that more unbanked Nigerians are brought into the banking space to benefit from banking services. BAMIDELE OGUNWUSI, ANDREW UTULU and IKECHI NZEAKO of INDEPENDENT NEWSPAPER, NIGERIA write on  efforts towards  achieving this lofty idea and impediments on the way.

Financial inclusion has evolved as a key topic on the global development agenda over the last decade.

Its importance has grown substantially over the last years, which is reflected in the growing number of academic studies showing its positive effects.

Financial inclusion is required to enhance incomes, investment and well-being at the household level. It is also critical for economic growth and financial stability at the macroeconomic level.

It is in this regard that Nigeria launched its National Financial Inclusion Strategy on 23 October 2012 with the overall target of reducing the adult financial exclusion rate from 46.3 per cent in 2010 to 20 per cent by 2020.

This means that by 2020, eight out of every ten adult Nigerians should make use of at least one financial product (formal or informal). Within this strategy, distinct targets were stipulated for specific elements of financial inclusion including access to electronic payments, savings, credits, insurance and pension products. For instance, 70 percent of the adult population is designated to utilize electronic payments platforms comprising Cards, ATMs, Mobile Money/Banking and PoS channels by 2020.

In order to effectively implement the Strategy and sustain high-level commitment towards the achievement of its defined targets, a governance structure was established: ‘The National Financial Inclusion Steering Committee’.

This committee, which I Chair, has in its membership relevant Federal Ministers, Heads of Agencies as well as executives of key industrial associations.

The Steering Committee meets biannually to review progress and provide strategic direction on implementation.

On its part, the National Financial Inclusion Technical Committee, Chaired by the Deputy Governor, Financial System Stability of the Central Bank of Nigeria; provides technical guidance and serves as the advisory body to the Steering Committee.

In addition to this; Four Financial Inclusion Working Groups were set up to develop and implement specific initiatives, addressing implementation issues with respect to financial products, channels of delivery and financial literacy.

The groups also focus on the vulnerable segments comprising women, youth and people with disabilities in the country.

The Financial Inclusion Secretariat within the Central Bank of Nigeria oversees the day-to-day coordination, implementation, monitoring and evaluation of the Strategy in conjunction with cross-functional stakeholders across the financial technology, banking, insurance, and pension, capital market sectors, among others.

Based on the bi-annual survey report routinely conducted by the Enhancing Financial Innovation and Access (EFINA), the adult financial exclusion rate had dropped from 46.3 percent in 2010 to 39.5 percent by 2014. This is a very complimentary and favorable development.

Despite Central Bank of Nigeria’s (CBN) effort to promote financial inclusion, the Nigeria Inter-Bank Settlement System (NIBSS) banking industry statistics shows that the number of customers using financial services reduced  by the end of 2017.

The statistics obtained from the NIBSS website on Sunday, showed that the total number of bank customers dropped from 61 million in 2016 to 59 million in 2017.

Similarly, active bank accounts reduced from 65 million in 2016 to 63.5 million accounts in 2017.

According to NIBSS, the banking sector, however, made great strides in linking customers’ account using the Bank Verification Number (BVN).

The report showed that linked BVN accounts grew from 26 million in 2016, to 41.3 million in 2017.

According to a banking industry source, the reduction in banking customers is not unconnected to the Federal Government’s declaration to fight against corruption.

“When Buhari assumed office, many people abandoned their accounts, especially civil servants because of fear of investigation.

“While some out rightly closed down their accounts, others opted for gradual withdrawal so as not to raise alarm,’’ the source said.

The source, who works at one of the top five banks in the country, blamed the BVN for the low patronage of banking products, especially in the rural areas, where awareness was already very low.

Mrs Olaitan Alagbe, a bank customer, disclosed that she closed some of her accounts due to unnecessary and illegal charges by banks.

“First of all, the interest rate is next to nothing, so there is little reason to keep your money at the bank when you can turn it over doing other businesses,” she said.

Another customer, who preferred to remain anonymous said he opened several accounts during the Ponzi scheme boom in the country, but was forced to abandon them after the schemes crashed in late 2016 and early 2017.

However, a source at the CBN said that the reduction in the number of banking customers was caused mainly by the introduction of BVN.

“The reduction may not necessarily be a bad thing. For example, many people opened accounts using different variations of their names.

“A person bearing Musa Salisu Mohammed, may have other accounts as Salisu Mohammed or Musa Salisu.

“So with the introduction of BVN, such customers were forced to regularise their names, however, some opted to close down their accounts, which resulted in the reduction of active bank accounts and customers,’’ the source said.

The CBN source was, however, optimistic that the financial inclusion strategy of the bank would succeed in bringing in more people into the formal banking system.

The Financial Inclusion strategy aims to ensure that major bulk of the money in the economy remains within the banking sector.

A major challenge in the financial inclusion process is how to ensure that the poor rural dwellers are carried along considering the lack of financial sophistication among this segment.

The CBN, Money Deposit Banks, Micro Finance Banks and other stakeholders are currently implementing different policies designed to enhance financial inclusion in the country.

Sterling bank was the first bank to commence the agent banking initiative of the Central Bank of Nigeria (CBN) by launching the new model at Makoko area of the Lagos metropolis.

Besides agent banking, Sterling Bank is also at the fore front of driving Non Interest Banking services in the country, a development, which accounted for 48 percent increase in its gross earnings for the third quarter of 2017.

Under the CBN’s Anchor Borrowers Programme aimed at increasing the cultivation of rice in the country, Sterling Bank in collaboration with the apex bank has disbursed loans to about 22,000 farmers in Kebbi State who were largely under-banked and unbanked.

The loan was structured under the Nigeria Incentive-based Risk Sharing System for Agriculture Lending (NISRAL) and each beneficiary got N250,000 loan, which is currently raising household income in Kebbi.

Sterling Bank has also put in place Extensive Agent Network to ensure that farmers in the rural areas have urgent and easy access to loans without using the Automated Teller Machines (ATMs).