It has been almost seven years since the launch of the first National Financial Inclusion Strategy (NFIS) and since then, if there has been one major learning, it is that financial inclusion in Nigeria is a tough nut to crack.
It is important to remember that between 2012 (when the first NFIS was launched) and now, financial exclusion has only reduced by 2.9 percent (from 39.7 percent to 36.8 percent). However, while we may not have seen the needle move significantly in financial access numbers, we have gained important lessons along the way while identifying bottlenecks and inhibitors. These insights will be pivotal in the achievement of our financial inclusion aspirations, based on how we utilise them.
Meanwhile, in this post, we want to highlight the most important things to keep at the fore even as the 2020 deadline approaches.
The deadline remains 20 percent by 2020
The central bank of Nigeria remains optimistic that 80 percent financial inclusion, as recorded in the NFIS, is still feasible. The original NFIS was launched in 2012 and pegged a target of 80 percent inclusion by 2020 for the financial services industry. In 2018, the NFIS was revised to account for new ecosystem developments and realities, some of which we have written about in a previous blog post, while incorporating many changes, some of which we advocated in our 2017 State of Market Report.
However, despite the change in strategy, the deadline and target remain the same. With less than 23 months to go, the pressure is on everyone to dig into the trenches and get things done.
Telcos can now lead delivery of DFS
There have been many speculations on if telco participation is the missing piece of the Nigerian financial inclusion puzzle. In 2018, telcos finally received a widow to enter into the financial services space.
This was made possible through the creation of Payment Service bank licences which are available to not just telcos, but also mobile money operators, retail chains (supermarkets) and banking agents. With the category and number of DFS providers increasing, it will be interesting to observe the impact this will have on inclusion rates.
The introduction of PSB licences poses many exciting possibilities especially since we have the advantage of gleaning insights from exemplar markets such as India where the PSBs have been in operation for many years which can help us fast track deployment strategies. We also need to understand financial service consumers in order to develop appropriate products and even messaging which will not miss the mark.
We desperately need to solve for Agent Networks
With the race to increase financial access to 80 percent by 2020, last mile delivery of financial services is one major conundrum facing the ecosystem.
To achieve financial inclusion, especially in an emerging market like Nigeria, requires two things — accessibility and affordability of financial services. Nigeria is a big country and the high cost of running and expanding bank branches is unsustainable. Agent networks provide a cheaper and more effective means of reaching the last mile.
In 2018, the Shared Agent Network Facility (SANEF) was launched to roll out 500,000 agents which the aim to extend financial services to people in excluded regions, especially the northern regions of Nigeria. The emergence of the PSBs and their agents into the market ought to also increase the reach and impact of agent networks in the ecosystem.
However, it’s not as simple as that.
Even right now, agents face many challenges to their business, limiting their viability, especially in regions of Nigeria where economic activity is minimal and mobile network infrastructure is absent.
Exclusion remains highest in the north
Achieving 80 percent inclusion requires the ecosystem to tackle the major inhibitors to financial inclusion in those regions that are hardest hit. According to EFinA’s Access to Finance 2018 report, Northern Nigeria has the highest number of excluded adults with about 20.7 million excluded people. The cause of exclusion varies from the lack of access to mobile phones or identification documents to lack of awareness and proximity to the nearest financial institution.
Speaking of awareness…
It is 2019 and DFS awareness still remains low
Among excluded populations, DFS awareness remains very low. In fact, research shows that mobile money usage is primarily driven by the already banked (sort of defeating the purpose).
If we hope to move the needle on DFS adoption, then awareness must increase and urgently so.
In all, 2019 should be an exciting year for the ecosystem as it remains a critical year which will determine the achievement of the 80 percent inclusion.