Financial Inclusion in Nigeria: Tackling Identity Management
CBN’s BVN waiver and upward review of level-1 mobile money accounts is a step in the right direction
Nigeria’s review of mobile money limits is a good step in the right direction. The next good step, and it’s a giant one, is completing the national identification scheme.
Earlier this month the Central Bank of Nigeria (CBN) reviewed (and increased) the daily transaction and balance limits on level-1 mobile money accounts. The review also suspends the Bank Verification Number (BVN) requirement for KYC level 1 customers.
This is a part of the apex bank’s efforts to drive financial inclusion.
Presently, Nigeria uses a multi-tiered KYC segmentation which groups bank customers into three categories — KYC Level 1 (for low-value account holders), KYC Level 2 (for medium-value account holders) and KYC Level 3 (for high-value account holders). The introduction of this tiered KYC system in 2013 granted banks more flexibility in onboarding financially excluded customers into the financial system. Furthermore the Agency banking framework also factored in the use of banking (third-party) agents in the acquisition of customers.
Previously, all mobile money users were required to have a BVN but this review has excluded Level 1 customers from that requirement. This, no doubt, will enable increased activity within the mobile money ecosystem and this feels like a big win for us at the Sustainable and Inclusive Digital Financial Services Initiative.
In the first week of August, 2017, we hosted our first industry Consultative Working Group (CWG) Forum. The CWG Forum brought together key stakeholders and decision-makers in the financial services industry providers, regulators, aggregators, and technology providers to engage on policy interventions that would enable and support the delivery of digital financial services (DFS) to the unbanked poor.
During the two day event, one of the intensely discussed topics involved national identity management and its implications for the KYC process and financial inclusion. The Central Bank’s KYC transaction limits were brought under scrutiny by participants and all observations, suggestions and recommendations were compiled in a 15-page communique.
Raising transaction limits and balances was one of the many recommendations made at the CWG and it is encouraging to see the CBN review their previous limits.
Still on the topic of Identity Management, accompanying issues raised at the CWG included the lack of a truly inclusive national identity system and fragmentation of identity records and databases. Prior to the current national identity initiative, Nigeria had experimented on several identity management systems that failed to reach critical mass due to a plethora of reasons. In addition, other national and state identification schemes — voter’s card, SIM registration, BVN, driver’s license, Lagos State residents, etc. have since evolved to replicate NIMC’s core mandate. Another problem is the difficulty of transitioning from paper-based identity systems to digital. Such an evolution requires huge capital investment on the part of government.
Fortunately, the National Identity Management Commission (NIMC) was represented at the CWG and they highlighted their ongoing national identity numbering scheme. The scheme which aims to give every legal citizen of Nigeria above the age of 16 a National Identification Number (NIN) is a welcome initiative and has been long overdue.
The issue of identity is a big inhibitor to accessing financial services in most developing economies. Opening a bank account in Nigeria requires each prospective account holder be subjected to Know Your Customer (KYC) checks defined in CBN regulatory guidelines. Amongst other things, KYC requires proof of identity and address. The unbanked population suffers disproportionately as a result of their inability to offer proof of identity despite being somewhat cash rich. And this problem is not unique to Nigeria — about 17% of the world’s population are unable to meet official KYC requirements in their respective countries. Many governments have had to be creative when dealing with this challenge, with some exploring new technologies like Blockchain-enabled digital identities.
The successful execution of the NIN scheme would be a big step in the right direction because a unified identity database would give every Nigerian an official identification document. As of September 2017, NIMC reported to have enrolled and issued NINs to about 21 million Nigerians. This, in addition to BVN, will significantly reduce the difficulty of onboarding the financially excluded.
Participants at the CWG noted the current paucity of publicity, awareness and education campaigns about the national identity scheme and how it is responsible for the limited effectiveness of the project thus far. It was recommended that increased efforts and adequate financial provision should be diverted to promote awareness and education on the benefits of the NIN. Legislators should also be sensitised to appreciate the crucial importance and cross-cutting benefits of a quicker implementation of the national identity registration program.
In the following weeks, we’ll discuss even more issues, observations and recommendations from our CWG regarding consumer protection, privacy, infrastructure, interoperability, bringing financial inclusion to the last mile and creating an enabling environment for DFS.
