NIGERIA HAS SO MANY FINTECH COMPANIES! HAS THIS CHANGED ITS POOR STATE OF FINANCIAL INCLUSION? — YOU WILL BE STUNNED BY THE ANSWER
The easiest way to lose me in a conversation is to say any of the following words: “Fintech” “Unbanked” “Financial inclusion” or “fintech”. It’s funny because it was not always this way for me (Hell, I was going to throw my own hat in the ring in 2015). So what changed? I can’t say to you with any measure of certainty what truly changed (I grew up, I guess).
However, since we’re on the topic, in 2015 when I attempted to throw my hat in the ring (and got taught a lesson of my life), I was inspired by that infamous EfInA report about how roughly half of Nigeria’s adults remained unbanked. Ha! The wheels turned, my mind sparked and I swore I had THE idea.
That feels like a lifetime ago now. And I am certain that many a presentation have featured this soul-stirring stat from EFInA, and many a Venture Capitalist has drooled in return. I mean, look at that juicy population. Look at those numbersssssss. $_$
With that said, why are we here today?
It was in the same spirit of reminiscing this morning, that I asked a question on my social media: of what effect has having so many Fintech companies had, on Financial Inclusion in Nigeria?
So out of curiosity, I reached right for the data. There’s something I like to do when I have thesis questions like that pop into my head. I note what my initial assumptions and hypotheses are, and then I compare them with what the data says. Sometimes, I am right. Some of the time, I am so widely off the mark that I am relieved I never voiced such nonsense in public.
This question about the effect of Nigerian Fintechs on Financial Inclusion in Nigeria was no different. For perspective, I started my research with the question: exactly how many Fintech companies does Nigeria have? This answer was difficult to glean. I got a ballpark answer:
56[1] (as at 2017)
That’s a lot of players! Wow!
Okay, okay. By how much has financial exclusion shrunk in Nigeria since 2011 (when the big push for Financial Inclusion began?) I dug through the most recent CBN Financial Inclusion Report, so that you wouldn’t have to (you’re welcome btw).
9.5%[2]
While 9.5% doesn’t seem like a whole lot of people, that is 8.9m. Then again, that still doesn’t hold a lot of importance, until you have perspective. How much went into making sure that 8.9m people got financially included?
Almost a billion dollars??? for 9.5%???
This is not even close to the big numbers we were promised! 🙁
Okay I promise, I will give you only ONE more piece of perspective to help make sense of how poor the performance has been so far. I don’t know if you have heard of mPesa? In Kenya? If you haven’t, I will just cover it in one sentence. mPesa is likely the most successful Mobile Money Platform in the world. In about 3 years it radically changed the landscape of financial inclusion in Kenya, and became a model for other developing countries (with varying amounts of success). Here’s worth mPesa’s growth chart looks like:
Now, look at what Nigeria’s Financially Excluded charts look like:
The jaundiced middle finger on the left, is the percentage of the unbanked. After what seemed to be a big move from 2008 to 2010, it has remained relatively flat. For comparison, you are looking at 10 years of work, and about $1bn in investment. The mPesa chart, was a 3 year period. I’ll share 2 more charts, and I promise, I am done. But yeah, this isn’t looking good at all.
In the first chart, between 2010 and 2012, the reduction in the number of the unbanked people in Nigeria between each reporting year, reduced by about 6%. Not bad. And then it simply had an accident in 2014 and 2016, and only started to recover in 2018. Going by this, the average reduction over the 10 year period puts us at about 3.08%.
Meaning that we will drive down Financial Exclusion to 5% of our population in about… 60 years
I kid you not.
With that said, in the second chart, we can see that at least there’s hope? Glass half full, if you will. We had 2.6 million people get access to financial inclusion. While the number of players and investment in the industry may not be very inspiring. At least there’s a bit of good news in giving so many people a chance at access.
That’s something.
With that said, I will end here. I have a few thoughts on how the current players in the Fintech space are failing the same people they profess to be providing financial access to, and how they can go about solving this problem.
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References
[1] Medici Global — 56 FinTechs Companies in Nigeria Enabling Inclusive Growth — Retrieved on March 15, 2020 from https://gomedici.com/56-fintech-companies-nigeria-extending-access-to-financial-products-for-inclusive-growth
[2] Central Bank of Nigeria — 2018 Financial Inclusion Annual Report — https://www.cbn.gov.ng/Out/2019/CCD/Annual%20Report%202018%20Financial%20Inclusion.pdf
Originally published at https://lisabi.io/blog.
