Financial Inclusion scorecard for Nigeria’s Tier – One Banks

Nigeria’s five Tier-One or big banks (First Bank, Guaranty Trust Bank or GTB, Zenith Bank, United Bank for Africa or UBA and Access Bank) cumulatively hold about 60 percent of the industry’s assets and as such are a major catalyst for financial inclusion (FI) in Nigeria.

We looked at notes accompanying the Banks Half Year (H1), 2016 results to glean insights about how far they are driving FI.

Access Bank’s Business banking divisions which focuses on small and medium scale enterprises (SMEs) with annual turnover of less than N1 billion, increased loans and advances to customers by 34 percent to N64.251 billion in June 2016, from N47.91 billion in December 2015.

While this may seem impressive the segment only accounted for 3.5 percent of total loans of N1.815 trillion extended by Access Bank for the period.

On a somewhat positive note Access Banks Channels and other E-business income which include income from electronic channels, card products and related services jumped by 679% between June 2015 and June 2016.
“The increase in channels and other E-business income is a result of rise in volume of card transactions,” Access Bank said.

This may mean more Nigerians are being included in the formal banking system through electronic channels.
UBA’s H1 results show that loans and advances to individuals of N128 billion was dwarfed by loans extended to Government in the form of Treasury Bills and bonds totaling N886.6 billion.

GTB, Nigeria’s largest bank by market value says that as part of the Bank’s continuous drive to reach the un-banked, under-banked, small and medium sizes Enterprises (SMEs) in the community, the Bank launched GTBusiness Evolve during the period.

The product is a loan targeted at SMEs for asset acquisition and business expansion. It aims to provide small and medium scale enterprises with increased access to long term financing. The Bank’s Agent banking outlets also added five (5) locations in the last six months to encourage financial inclusion.
However GTB loans extended to individuals was a low N97 billion out of total loans of N1.3 trillion for the period.

Further analysis showed that GTB held collateral valued at N2.2 trillion against Gross loans outstanding of N1.6 trillion.

It is often difficult for people outside the formal banking system or low income earners to get adequate collateral which often shuts them out of loan eligibility.

GTB’s retail customers collectively have the largest deposit liability at 52 percent, giving the bank cheap deposits with which make loans.

They were however were responsible for only 16.9 percent of assets (loans).
The banks E-business income also increased to N17.2 billion from N5.2 billion in June 2015.
Zenith Bank H1 results showed that 80 percent of gross loans were mostly concentrated in the South West region of Nigeria, (Nigeria has 6 regions).

This could mean that other parts of Nigeria are not benefitting from Zenith Banks vast branch network to improve financial inclusion.

FBN Holdings electronic banking income increased by 37.5 percent to N10.4 billion in the period a sign that more people may be using the banks e-channels.

First Bank was also was able to achieve 100 million electronic-banking transactions per month in the period.
The banks’ First monie customers increased (+31% y-o-y) to 3.9 million (Jun 2015: 2.97 million) with active Point of Sale terminals at 6,190 (+97.0% y-o-y) (Jun 2015: 3,142). In the same vein, First Mobile customer base grew (+84.8% y-t-d) to 343,990 from inception in December 2015 (Q1 2016: 186,116). First Bank is also increasing value-added services on its ATMs which now total 2,683.

Nigerian banks seem to recognize the need to grow FI as a win-win means of increasing customers and growing profits; however they probably need to do more and become more innovative in tapping the huge unbanked population in the country.