Key Financial Inclusion Imperatives on the Road to 2020 (and 2024)

Envisioning the next 5 years in Nigeria’s financial inclusion journey

To mark his reappointment, the Central Bank Governor, Mr. Godwin Emefiele, shared his vision to have 95 percent of Nigerian adults financially included by 2024. This is interesting, because there remains a yet-to-be-met target of 80 percent with a deadline of 2020 which we committed to under the Maya Declaration in 2011.

As ambitious as this new target is, it is not impossible. It does require that we do several key things consistently well. This article identifies a few imperatives that we believe will make the 2024 dream a reality.

Distribution and convenience

Limited access to financial service points in several regions of Nigeria, especially the Northern geopolitical zones, is one of the major inhibitors to financial inclusion. In 2018, initiatives like the SANEF have emerged to tackle this challenge. Strong agent networks are required to ensure financial services are accessible by every citizen, regardless of where they live. However, agent network growth and viability is limited given several infrastructural lags in the country e.g. mobile network connectivity and electricity. Enhancing distribution via agent networks requires us to improve these two things.

Diffusion of DFS

Deliberate efforts are required to empower more merchants with DFS capabilities thereby expanding the DFS-enabled merchant pool. If more merchants are able to receive digital payments, it increases the acceptability of DFS and more citizens are likely to adopt it. With more consumers using digital payments, money stays digital longer and this keeps consumers within the formal financial service value chain.

Affordability

Reducing the fees associated with owning or using formal formal financial services is necessary for increased adoption by the poor and vulnerable. We need to drive this with policies and also support with implementation and monitoring mechanisms to ensure adherence by all ecosystem players. For example, in spite of a guideline on agent charges, agents still often charge above the recommended rates. We also need to examine factors influencing the cost to serve for financial institutions as well as their agents.

Transitioning from Informal to Formal Systems

One thing to remember is, even though people are financially excluded, they are still transacting in their daily lives — they are paying for food, travel, sending money to loved ones etc. The only difference is that these transactions are mostly via cash and do not leave a footprint within the formal sector. The working theory is that if we can introduce formal solutions into these informal networks, it will create shared prosperity by lowering the barriers to access credit as well as introduce the excluded and underserved to new tools and relevant interventions.

Still on the topic of access to credit…

SMEs and Access to Credit

In the middle of this financial inclusion discourse, the underlying belief is that financial inclusion will improve the economic wellbeing of Nigerians. One clear path to this is seen in the MSME sector. If small scale entrepreneurs are formally served and have access to credit, they are able to ramp up their economic activity and also employ more people, which in turn has a ripple effect on the community at large. And because these entrepreneurs are formally included, progress is easier to monitor and track.

SANEF

Let’s talk about the agent network for a bit. The introduction of SANEF, in theory, could in one fell swoop solve the financial access conundrum. However, infrastructural limitations hamper the viability of many of these agents operating in the hinterlands and remote rural areas (Nigeria is about 49 percent rural). These are off-grid regions with little or no mobile network coverage. Thus, intervention funds are required for infrastructural developments in the most excluded areas which would encourage electricity and network providers to roll out services in these areas and thereby creating an enabling environment for agents to thrive.

Nigeria’s financial inclusion journey has been an arduous one. And with the looming 80 percent by 2020 deadline (and not forgetting the new 95 percent by 2024 one), the stakes may have been raised higher. However, we strongly believe the targets are attainable if we prioritise the right problems in order to solve them as well as introduce the appropriate interventions in strategic ways.

What other inhibitors do you think the ecosystem should prioritise solving?