The many roadblocks to Financial Inclusion (1)

The microfinance sector was created to assist the poverty reduction drive of the Nigerian government, by enhancing financial inclusion. The sector, which derives its strength from the Microfinance Policy Framework launched in 2005, has grown in leaps and bounds. There are currently at least 1000 microfinance banks licensed by the Central Bank and regulated jointly by it and the NDIC. There are also several non-bank microfinance institutions of the NGO type not regulated by the CBN and the NDIC. In other words, there is a lot of positive activity going on in the sector.

For one, we need to recognize the efforts of the operators, who are more or less mandated to give loans without collateral but cannot raise a kobo from anyone, including the CBN, without collateral. We should appreciate their situation, especially the fact that they are obligated to follow strong regulatory guidelines notwithstanding their industry and environmental constraints. Of course, such regulations are necessary to strengthen the industry and prevent the consequences of failure of these deposit-taking institutions.

But the financial sector has some benefits that follow the apparent attention it gets from the authorities. Despite the seemingly high level of regulation aimed at it, the Nigerian banking sector could pass for a favoured sector when compared to other. For one, the number of times we gather to brainstorm over it far outweighs those of any other sectors. In fact, one could say that the financial sector is always going through constant reforms, unlike any other sector. When last did we seriously gather to thrash out the reasons why, for instance, doctors, arguably the most expensive graduates to produce in any family, are so poorly paid. If that is a question of demand and supply, why are they always embroiled in altercations with their employers, especially the government, over unpaid bills? Even if we discuss their affairs, how far do we go to ensure the decisions we reach are implemented.

Even in the financial services sector, it appears that equals are treated unequally. The banking subsector seems to be the most favoured segment. Other segments of the multi-component sector, such as insurance and stock broking, are not as focalized. Perhaps, this may explain the wide differentials in the growth of the various subsectors relative to banking. In the past few decades, the banking subsector has been the employer of choice, comparable only to the oil sector. Productivity has been very high and factor incomes very high. Although the situation is gradually changing, as young people no longer jump at bank jobs as in the past. The stress and job insecurity in banking have become disincentives to young people who now prefer jobs that allow them to think much more outside the box and work at their own pace.

Yet, some other sectors will cringe when they see the favours enjoyed by the banking subsector. When the CBN responded to the yearnings of Nigerians to remove the COT charged by banks, their joy was palpable. They praised the CBN for being responsive and protecting the interest of bank customers. But they were wrong. The CBN had another plan. It quickly reintroduced the COT in a different name – Account Maintenance charge – some free money taken from the poor masses by banks whose mega profits do not attract mega taxes nor reflect the suffering in the land. This act at worst looked like an integrity issue for the CBN and at best it was seen to be promoting the profiteering tendency of banks. There is no other sector making the kind of money the banks make, yet the CBN could not save the citizens from this unwarranted charges that has been abandoned in other climes.

The foregoing comments are not in any way advocating that we should reduce the support for the financial services sector. Far from it; indeed, it is suggesting that more effort be made to get the sector to play its proper role in the development of the economy. It should be more responsive to the needs of the economy. Its prosperity should also be shared by those that drive its success – its customers. There is a link between the financial sector and economic growth. They have a nexus that must be strengthened rather than weakened. But we need to make the financial sector more responsive and vibrant. A vibrant financial sector is a prerequisite for a vibrant economy. Our goal of financial inclusion depends on how well the sector responds to it.

It was clear that part of the forces behind financial exclusion is the lack of access to financial services and payment systems. The CBN has gone ahead to promote the introduction of new financing channels for transactions – POS, Agent banking, and Mobile Money. These channels have proven useful in other countries but to a large extent, many of them have been underutilized and poorly promoted in Nigeria. People are not sufficiently motivated to use them. Awareness is low and there are no cost incentives to make people the change.

Statistics show that Nigerian banks have about 30million customers. How many of these are using the POS? Data shows that very few of them – about 3.5million or 12 per cent use the POS. While the reason for the low patronage of the POS is not clear, a cursory look will show that it may not be unconnected with the fact that most of the gadgets do not work. Many have been embarrassed to find that they could not pay with their debit cards at POS in places they made purchases. Either the network is down or there is one story or the other. The current joke is to send a staff of the vendor to follow you to the nearest ATM to withdraw cash and then come and pay to the vendor. This is a most polite way to tell you “Oga we think you will run away if we let you go alone to get the money at the ATM, so we will follow you”. Even the idea of going to the ATM is bad enough to discourage the use of the POS, let alone being followed by some waiter lest you run away.

I remember how a BDC at the international airport was able to serve only two persons in over two hours on the day I attempted to buy my BTA from there, as directed by government. The network, according to them made it impossible for them to serve us timeously. In some places, one finds so many POS machines but none works. This is to say nothing of the charges, which users incur for using it. Such charges also need to be reduced at this introductory stage. Why can’t they even be waived knowing what the banks stand to gain if we all get into the payment net? The truth is that many have gone back to carrying cash and those without bank accounts are not encouraged to open one, especially as armed robbers now come with POS, which for some strange reason always works.. Kai! Nigeria.

Emeka Osuji