Concerns mount over huge barriers to Nigeria’s 2020 Financial inclusion target

There are mounting concerns that Nigeria will not be able to progress on its financial inclusion target by 2020, except it tackles inflation, infrastructure deficits, human capital, geopolitical uncertainties, misguided government policies, as well as remove some other barriers, Obadiah Mailafia, a financial analyst and former Deputy Governor at the Central Bank of Nigeria (CBN) said on Tuesday.

Mailafia was speaking at a special session on financial inclusion organized by BusinessDay, titled, “Breaking the Financial Inclusion Barrier” on the sidelines of the sidelines of the ongoing Nigeria Economic Summit (NES#24) in Abuja.

The Central Bank of Nigeria (CBN), in July this year alerted that Nigeria was not on track to meet the 2020 targets set out in the National Financial Inclusion Strategy (NFIS) of 2012.

The impediments to achieving this target have been ascribed to economic constraints, insecurity issues in the northern part of Nigeria, obsolete strategies, among others.

Initially, the NFIS defined 15 targets for channels and products as well as 22 key performance indicators (KPIs) related to these targets, but Nigeria still lags across all these measures.

The National Financial Inclusion Strategy (NFIS) Redraft identified 5 crucial priorities to increasing financial inclusion in the country, with emphasis on creating a conducive environment for the expansion of DFS, enabling the rapid growth of agent networks with nationwide reach, reducing KYC hurdles to opening and operating a bank account, creating an environment conducive to serve the most excluded and driving adoption of cashless payment channels, particularly in government-to-person and person-to-government payments.

Speaking at session, Mailafia alluded to these factors and listed factors critical for Nigeria to deepen financial inclusion to include creating access to and depth of credit, credit intermediation, including interest rate spread and costs of monitoring by banks among others.

Quoting recent World Bank data, Mailafia said as much as 54 percent of the worlds’s population lack access to financial services of any kind.

For developing countries the percentage is as high as 70 percent.

According to McKinsey, 2.5 billion people and over 200 million businesses are excluded from access to banking and other financial services.

Mailafia further raised the concerns that credit access barriers, which continue to prevent optimal access to banking services heightened by hidden charges, ATM withdrawal charges, email alert fees and what he called ‘other frivolous fees’ remain some other critical challenges.

But for Nigeria to further progress in bringing in the financially un-included into the net, technology would serve as a key catalyst, Mailafia said as broad band in the country expands and estimated to reach 30 percent by 2018.

“Government will have to leverage on the power of technology to achieve greater financial inclusion,” he noted.

In his welcome remarks, BusinessDay Publisher, BusinessDay Media Ltd, Frank Aigbogun told the gathering that the discussions on financial inclusion and fostering way forward could not have come at a better time.

He suggested to the telcos to assist in ensuring those at demographically disadvantaged region basically in rural business and within certain financial range do their financial transaction at a zero cost to facilitate inclusion of more people into financial nets.

Also speaking Ola Bello‎, a participant at the breakfast session raised the concerns that non-functional data base for Nigerians remains a major inhibiting factor to facilitating greater financial inclusion.

“If we do not buckle up on the issue of having a harmonised data for all Nigerians, it would be difficult for us to make any meaningful headsway in our journey to financial inclusion. We know that many young people are already doing something in the financial inclusion space and many cash transfers going on in the space, but the demographics of the spread remains a source of worry because of improper data of the populace.”

Relating the new Central Bank Policy on Micro-finance Bank to impact on financial inclusion,‎Taiwo Joda, the Managing Director of ACCION Micro-finance Bank said,”There are more fundamental issues that needs to be addressed. The overriding issue is on financial inclusion and harvesting more Nigerians into financial system.”

According to him, “Micro finance bank works on two legs which are: Financial sustainability and social sustainability.You cannot drive financial sustainability without social sustainability.The new guidelines is focused more on financial sustainability., as laudable as that may sound,every owner of a micro finance bank is looking at returns on investments because they are business people.”

‎”For instance,if I have to invest in share capital of N200 million naira to establish a micro finance bank,as a minimum capital requirement to set up a micro-financial bank,am not going to put it in a rural area,where the economy does not support a return on investment that would encourage my investments.”

‎While suggesting ways to facilitate financial inclusion through the platform of the micro-finance banks,he said,” The key questions we should be asking is how do we unbundle the Micro-finance bank.For instance,when we have a rural Micro-finance bank operating in a rural area for instance,I don’t need N200 million.If I apply,I should be allowed to do it because of the type of services I deliver there without necessarily tieing me to a capital base.”

He noted that Kenya and Tanzania had done so measure of categorisation of the Micro-finance Banks focusing on specifics such as Education,‎ housing sector among others.”

He suggested that the first thing to do is to focus on the unbundling the licencing pattern of the micro-finance bank in the country.

“This implies categorisation of the functions, hence by implication, those who want to be a unit, state and national micro-finance bank ‎can pay up the required capital, but the CBN can create another layer of categorisation that allows and drives financial inclusion in the rural areas.”

‎He confirmed that the CBN had, in a circular issued guidelines for the micro-finance banks, mandating anyone operating a unit micro finance bank to raise its capital to a minimum of N200 million capital, for a state micro-finance bank, N1 billion; and for a national micro-finance bank,it would be N5bn”

He recalled that prior to now, the capital base for a unit micro-finance bank was N20 million, a state micro-finance bank is N100 million, whereas a national micro finance bank is N2bn.

“So,you are talking of between 100 and 200 percent increase,” he stated, adding that “Although the new circular sounds laudable, it is anti-financial inclusion.

Speaking on government’s effort on providing credible data, Seyi Adenmosun, Head,Operations at the National Identity Management Commission said,”Over the last two years,there has been a harmonisation committee set up by the office of the Vice President.‎ In partnering with NIMC,the world Bank and the French Development Bank came together to fund an eco-system approach to data gathering.”

Harrison Edeh, Abuja