Digital financial services key to unlocking financial inclusion gap

A recently launched financial inclusion insights study conducted by InterMedia with funding from the Bill & Melinda Gates Foundation, reveals that individuals unaware of mobile money are largely young. The age bracket of between 15 and 34 years is 60 percent, educated is put at 70 percent and employed is 60 percent. This group has the financial skills and equipment required to register and use mobile money, and could potentially use the service to pay school fees.

Registered bank users who actively use their account are experimenting with more advanced services, compared to past years. More are now saving and transferring money across accounts. Encouraging consumers to deepen their relationship with an account is critical to building retention, especially at a time when the industry is prone to attrition.

Specific to the National inclusion Strategy, it was launched in 2012 and the target is to reduce the excluded population put at 46.3 percent in 2010 to 20 percent by the year 2020. In terms of progress, we have seen significant milestone along the way. By 2014 that 46.3 percent has come down to 39.5 percent. But ultimately we are looking at bringing it down further to 20 percent, so we are making a progress in that regard.

The youth population is actually the segment we are interested in. We believe that they offer huge potential to drive financial inclusion. The focus is to see how we can bring about innovation that will interest them. Over the last year, there has been a lot of development in the financial technology space to address different needs in financial services.

 A number of the banks currently allow their clients to transact on their phones with the basic USSD like *XYZ#. With this code, you can actually receive money from your account. We believe that innovations of this kind are things that can attract the youth population.

The point is not to leave them out, but to see how we can expand access to financial services across the country. It is true we have seen concentration in some areas of the country but the challenge now, which we are working with different stakeholders is to see how we can expand access to every part of the country, whether rural, or urban. It is to see how we can bring financial services closer to the people. And to do this, we believe that digital financial services can help us in terms of deployment of agency banking, adoption of mobile money, more ATM’s, more financial services that people can use in a digital form can help us to bridge that gap.

A number of reasons: one is directly to the issue of financial exclusion. One of the major barriers is distance to access banks. If you have to travel over a long distance to access your money, it may lead to people not being interested in financial services. So the challenge is to reduce the distance. So there is a call now to stakeholders to see how they can increase access point across the country. If they are able to built additional agent points where people can access money there will be an increase in the adoption rate. We also believe that there is need for consumers to take stronger interest in these services. On the side of the supplier, they have to provide access points. Also, the consumers need to request for these services. They need to demand and use the services. That way you can bridge the gap between the supplier and the demand side of financial services.

In terms of the slowdown in the economy, we see it as both an opportunity and a challenge. It is a challenge in the sense that people are affected and their income may not get them as much as they used to get. But we see it as an opportunity in the sense that with the little people have or with the much some people have, with better financial planning and advice they can make better use of it. It is also a call to see how this concern can be addressed. From the side of some stakeholders, it is about providing services, on the side of other stakeholders, it is how they can use the service effectively.

 It is an ongoing initiative. It has started and will continue. And one of the key drivers of financial inclusion is financial literacy, which is about educating people, improving their financial capability, making them aware of the financial products and services including mobile money and related services. We are at a stage of putting financial literacy into the curriculum of schools in Nigeria, such that as the population is growing, they are becoming more aware. So it’s an initiative that will continue. But it is ongoing.

They are related. The cashless policy seeks to know how we can reduce cash in financial transactions and if you reduce cash, you digitize it. It means you should have relationships with financial institutions. Having  relationships with financial institutions either inform of operating an account – saving or current or loan access, dependence on cash will also reduce. On the other hand in terms of consumption, payment for goods and services if you are able to reduce cash, then you can also reduce the cost of managing cash in financial transaction. It becomes cheaper for the user as well as the provider of service. We all know the concerns of cash. Cash is expensive to manage. Cash is also not very secure, but transaction in digital form offers those benefits that people can take advantage of. So the cashless policy has very strong linkage with the financial inclusion policy. It is very related.

What is really important is the information. The first thing is to increase the awareness and sensitization about the services. They need to be educated on ways to use it as well as the benefits. Also, there is what we call use cases. What can it be used for? How can you make it practical? We can communicate as well as show examples of how it can be used.

We are doing this in partnership with many other stakeholders. Specific with CBN, we have what we call the harmonized sensitization fare which we do in different states across the country, every year. But beyond what CBN, other stakeholders as well have taken on the initiative to sensitize the population on different financial services. So it is collaborative.

We believe they are doing a lot. The microfinance sub-sector is very strategic to financial inclusion and I am sure you are aware that over the years the Central Bank has invested a lot in strengthening that sector. As we go along in this strategy, their roles become even stronger in terms of implementation. The point is across almost all local governments in Nigeria today, we have the presence o f one microfinance bank or the other. In terms of governance and processes they are being strengthened but the challenge is the continuous improvement in terms of capital, structure and process. But over the last year, the central bank has invested a lot to that sub-sector to make it stronger player.

 The overall objective of financial inclusion is to reduce the excluded population to 20 percent. Based on the EFInA data of 2014 that has come down to 39.5 percent, which is good progress, but we want to keep moving towards that terminal target of 20 percent. The major concern that we still have is the limited access point for people to access financial services. Studies have shown that distance is a concern for financial transaction which is why we believe digital financial service is the key to unlock that. The cost to build a physical branch is enormous, but you can use a faction of that cost to deploy other electronic channels that many more people can use. Distance is still a concern and what we are doing to address that is to see how we can leverage digital financial services to cover that gap.

 Also, financial literacy is a concern because if the people do not know or they don’t understand, how then can they use financial service. I have talked about how we are building financial literacy into the education curriculum in Nigeria, which is an initiative we believe can help us to address that gap. In terms of process, we have issues with documentation, high requirements, but what the regulator has done to address that is what we call the three tier KYC. At level one – the basic tier, you don’t need so much to open a bank account. You just need your name, phone number, passport photograph and your address to enter into the financial services. This has led to the increase in the number of bank accounts.

But we have moved away from that to say what you need is your address, passport photograph and your name. We didn’t have that five years ago. So there is opportunity for those category of people that we are looking towards to – low income earners to be included.