CBN to deepen rural financial inclusion with proposed PS Banks
In furtherance of its mandate to promoting a sound financial system in Nigeria and the need to enhance access to financial services for the unbanked rural segments of the society, the Central Bank of Nigeria (CBN) has proposed Payment Service Banks (PSB), the apex bank’s exposure draft on the guidelines for licensing and regulation of PSBs disclosed last Friday.
Meanwhile, BusinessDay survey revealed that the lack of proximity to, and availability of, financial service points (FSPs) — bank branches or agents which are meant to provide account opening and other customer service activities are the major barriers preventing rural inhabitants from accessing financial services and products.
“The key objective of setting up PSBs is to enhance financial inlusion in rural areas by increasing access to deposit products and paymnets/ remiitance services to small businesses, low-income households and other entities through high-volume low-value transactions in a scured tehcnology-driven enviroment,” CBN explained.
CBN also discoed that in the circumstance and in collaboration with critical stakeholders in the digital financial ecosystem, such as the Nigerian Communication Commission (NCC), Commercial Banks, Mobile Money Operators and Telecommunication companies, it has conducted several study tours of other jurisdiction that have made significant progress in driving financial inclusion.
In view of the challenges to effective outreach to rural communities as well as the need to complement the services provided by other licensed entities, the CBN therefore issues the draft regulation to provide for the licensing and operations of PSBs in Nigeria.
Although, the PSBs are expected to have a minimum capital requirement of N5 billion, the CBN proposed in the draft. Nigeria’s apex bank is also proposing that entities applying for a PSB license should pay a non-refundable application fee of N500,000 as well as a non-refundable licensing fee of N2 million.
A breakdown of the exposure draft revealed that the PSBs that will be granted the license will only render the following services; maintain savings accounts and accept deposits from individuals and small businesses, which shall be covered by the deposit insurance scheme; carry out payments and remittance (including cross-boarder personal remittance)services through various channels within Nigeria; issue debit and pre-paid cards; and operate eletconic purse.
Meanwhile, CBN disclosed also, that PSBs shall not carry out the following; grant any form of loans, advances and guarantees; Trade in the foreign exchange market except carry out payments and remittance services through various channels within Nigeria; insurance underwriting; under taking any other transaction which is not prescribed by the payment Service Bank Guidelines; establish any subsidiary except as prescribed in the CBN regulations on the scope of banking and ancillary matters, No3, 2010.
“PSBs are expected to leverage on mobile and digital services to enhance financial inclusion and stimulate economic activities at the grassroots through the provision of financial services,” the country’s highest lender cited.
On the structure of PSbs, the Nigeria apex bank disclosed on the guideline that the PSBs shall; operate mostly in the rural centres and unbanked locations, with not less than 50percent access point in ‘rural areas’ as defined by the CBN from time to time; establish ATMs in some of these areas; and be at liberty to operate through banking agents (in line with the CBN’s guideline for regulation of agent banking and agent banking relationships in Nigeria).
Other structures in which PSBs must operate as cited by CBN includes; for them to use other channels including electronic platforms to reach-out to its customers; establish coordinating centres in clusters of outlets to superintend and control the activities of the various access points and banking agents; be technology-driven and shall conform to best practices on data storage; security and integrity; and set up consumer help desks at its main office and coordinating centres to attend to consumers-related issues.
Meanwhile, the National Financial Inclusion Strategy (NFIS) seeks to ensure that over 80 percent of the bankable adults in Nigeria have access to financial services by 2020. CBN in collaboration with stakeholders launched the NFIS on 23rd October, 2012 with the view to reducing the exclusion rate to 20 prcent by 2020.
Despite several initiatives including the introduction of Microfinance banking, Agents Banking, Tiered Know-Your-Customer requirement and Mobile Money Operation (MMO) in pursuit of this objective, the inclusion rate remains below expectation.
Nigeria currently have 41.6 percent exclusion rate, and according to the World Bank’s Global Findex Database, Nigerian adults who are 25 years and above with bank accounts declined by 5 basis points from 49 percent in 2014 to 44 percent in 2017.
The data also showed that 51 percent of Nigerian males had a bank account in 2017 compared to the 27 percent recorded for females; this brings the gap between the male and female to 24 percentage points.
Accordingly, PSBs are envisioned to facilitate high-volume low-value transactions in remittance services, micro-savings and withdrawal services in a secured technology-driven environment to further deepen financial inclusion and help in attaining the policy of 20 percent exclusion rate by 2020, as compiled from CBN website.
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