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Understanding imperatives of financial inclusion in economic growth

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Financial inclusion is critical to the growth and development of the nation’s economy as evidenced in its contribution to poverty reduction in the country.

Financial inclusion is the fifth principle in the Nigerian Sustainable Banking Principle (NSBP) adopted by the bankers committee at a retreat in July 2012.

“We will promote financial inclusion, seeking to provide financial services to individuals and communities that traditionally have had limited or no access to the formal financial sector”. This was the agreement made by all deposit money banks and the merchant banks, (then discount houses) during the NSBP agreement.

Meanwhile, senior political leaders including Yemi Osinbajo, Vice President have made public statements that emphasise the importance of financial inclusion, most recently during the official visit of the UN Secretary General’s Special Advocate for inclusive finance for development to Nigeria in November 2017.

Government officials have also emphasised the need to act swiftly and collaboratively to accelerate progress towards financial inclusion by “propagating digital financial services as simple, flexible and easy alternative channels for reaching the country’s remote areas and rural hinterland”.

Past research shows the potential economic benefits of digital financial services (DFS), including greater financial inclusion, which targets to include 46 million new individuals, GDP boost of 12.4 percent by 2025 (USD 88 billion), new deposits worth USD 36 billion, new credit worth USD 57 billion, three million new jobs, reduction in government leakage annually of USD 2 billion.

In 2010, Nigeria made a commitment to reduce the adult financial exclusion rate in the country from 46.3 percent to 20 percent by the year 2020. To achieve this, the Federal Government on October 23, 2012, launched the National Financial Inclusion Strategy (NFIS).

Mudashiru Olaitan, director development finance, Central Bank of Nigeria (CBN), said while some notable milestones have been achieved, overall financial exclusion rate stands at 41.6 percent based on the biennial access to financial services in Nigeria survey (EFInA 2016).

The CBN has been working with various stakeholders to conduct a review and refresh of the strategy.

Recently, the CBN, deposit money banks, Licensed Mobile Money Operators and Super Agents reached an agreement to fund the expansion of a shared agent network to deepen financial inclusion in Nigeria.  The agreement entails an aggressive rollout of 500,000 agent network within two years to offer basic financial services, such as Cash-in, Cash-out, funds transfer, bill payments, airtime purchase, government disbursements as well as remote enrollment on BMS Infrastructure (BVN) to an estimated 50 million Nigerians that are currently under-banked or unbanked.

Commenting on the Shared Agent Network Expansion program, Herbert Wigwe, Chairman of the Body of Bank CEOs/ CEO of Access Bank Plc said; “This agreement reflects our commitment to aggressively pursue the CBN 2020 Financial Inclusion target in an integrated way with minimal systemic risk to the financial system.  This initiative will also generate over 500,000 new jobs over the next two years”.

The SANEF initiative involves on-boarding 40 million low income and unserved Nigerians into the financial system, increasing financial access points from the current 50,000 to 500,000 by 2020 and deepening access to mobile and digital financial products and services such as savings accounts, micro loans, insurance, and pensions by Nigerians.

Presenting an update of the project to the media recently, Titilola Shogaolu, divisional CEO, Interswitch Financial Inclusion Services, said since the launch of SANEF in March 2018, more people have been empowered, and more have been employed.

We have done trainings in different region, including Anambra, Kebbi and Kano among others. We have done market storm in Kaduna, Kano and a few other states, sensitising and creating awareness.

Others who addressed the media are Bolaji Lawal, a member of the Technical Committee, SANEF, Stanley Jacob, committee of e-Business industry heads (CeBIH), Victor Etuokwu, executive director, personal banking, Access Bank PLC, and others.

They noted the creation of over 70,000 new financial access points, and that nine operators are currently party to SANEF with N4.5 billion disbursed.

There are plans to scale up Bank Verification Number (BVN) to 70 million by 2020 from 33 million currently. Already, 10,000 remote BVN devices have been ordered by NIBSS and currently being deployed to Banks, MMOs and Super Agents.

SANEF committee also disclosed that NIBSS and the banks are committed to enroll 40 million new unique BVNs between now and year 2020, of which 10 million would be enrolled in 2018, 15 million in 2019 and 15 million in 2020, adding that NIBSS will pay agents N100 for every unique BVN enrolled.

The SANFE project will see new product design that will help deepen financial inclusion such as a savings account bundled with an array of features (insurance, pension, micro credit). This will create a pull factor to attract the financially excluded into the system.

The committee will be liaising with regulators (CBN, NAICOM) to secure approval and launch of the product by October 1, 2018. Other products planned include: micro retail loans, micro retail savings, retail insurance, and micro pensions.

Etuokwu sees SANEF as a national assignment that requires collective strength to pull resources together to create a common standard for service delivery.

The project seeks to deepen financial inclusion in Nigeria through an integrated ecosystem with strong regulatory oversight, consumer protection and interoperable payment systems with limited concentration risk.

It will create a platform for Nigerian owned financial services companies to grow, whilst empowering and creating jobs for Nigerians. So, wherever the SANEF sign is, a customer can perform basic financial services such as account opening, cash deposits, cash withdrawals, funds transfers and bills payments.

It will reduce transaction cost, provide convenience, job opportunities and increased adoption of digital financial services.

It provides a platform to handle government social disbursements and initiatives. In addition, it promotes Financial Inclusion and empowerment, positive social impact and development. 500,000 new jobs will be created through SANEF by 2020.

In his comment on behalf of the mobile money operators, Tayo Oviosu, founder & CEO of Paga, said “To significantly grow financial inclusion in Nigeria we need to offer truly effective digital financial services that operate on all mobile telecom networks and a robust nationwide network of agents for convenient access.

The Shared Agent Network Expansion program supports our plans to rapidly scale up the agent network over the next year. With this expansion program, the entire financial industry will reach deeper into even more communities and give millions of Nigerians convenient access to financial services”.

HOPE MOSES-ASHIKE

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