Akin-Fadeyi: Mobile Money Must Become Central to Our Daily Lives

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The Head of Financial Inclusion Strategy of the Central Bank of Nigeria, Temitope Akin-Fadeyi, in this interview with Obinna Chima speaks on efforts by the central bank and other partners in the sector to improve the adoption of financial services in the country and reduce the number of the unbanked population. Excerpts:

What is the update on the CBN’s financial inclusion strategy?

As you are aware, in 2012 Nigeria released its financial inclusion strategy. Basically, what that strategy is all about was to provide a roadmap for us as a country to promote financial inclusion. Essentially, financial inclusion is all about enabling access of the adult population to financial services that is suitable, convenient and affordable to the majority of Nigerians. Between when the strategy was released and now, we have seen a number of initiatives that have been undertaken across the country. One of them is on the policy development side. Specific to the payment system, we have seen a lot of policies that have been released to promote digital financial services. One of such is the policy on shared agent network which actually supports partnership between the financial service providers and the technology firms to do financial services. It is collaboration between the financial technology companies and the service providers. Another point I will like to talk about is the release of a super-agent framework which essential enables some players to become super-agents and engage other smaller agents to roll out agency banking across the country. And this is important because under financial inclusion, we observed that a key barrier is distance to access points. People traditionally have to travel over 10-20 kilometres to access a physical bank branch or a financial outlet. But the development of agency banking actually enables smaller points to be deployed in-between so that people can access basic financial services. So, those two initiatives are very key in terms of access to digital financial services and support the growth of mobile money in Nigeria which is still at the early stage of adoption. On the other side, there has been improvement in the level of financial literacy. You will recall that at the launch of the strategy, financial literacy was highlighted as one of the key initiatives that Nigerians require to take advantage of opportunities in the financial system. So, what we have seen is the development of the National Financial Literacy Framework which actually provides a blue-print as to how one can engage the population and build their financial capacity. A key initiative that is going on now is the inculcation of the financial literacy framework and financial education into the educational system in Nigeria such that we don’t have to wait until when people are adults before they start learning about financial services. They actually start to learn about the basic from the primary and secondary schools and as they grow, they become more aware about what financial inclusion is all about. Another key initiative that we can also talk about is the development in terms of making it easier to access the financial system. So, to make this happen, the Bank released the tiered Know-Your-Customer (KYC) requirement that enables financial institutions to carry out risk-based profiling of their clients. If I am a basic consumer and my transactions are not so many, I don’t need to provide very stringent requirements to open a bank account. So, tier one, with my name, phone number, passport photograph and address, I can open an account today. I don’t even need to have any amount to open it for a start. Then as I continue to bank with the institution, you can then ask me to bring formal documentation for tier two and tier three. So, the barrier of cumbersome requirements, which was highlighted as a major challenge to access to financial services, is also being overcome. So, these are some of the initiatives we have introduced. The target for the National Financial Inclusion strategy is 80 per cent by 2020. But in terms of the component of that target, there are four components. The first component is the banked population- that is those that have accounts with commercial banks. From the latest EFiNA research, a bi-annual study they do, about 36 per cent of the adult population have accounts in the banking sector, about 12 per cent have accounts in what we call the formal other institutions, and about the same percentage as well have accounts in the informal services such as the Esusu and the money lenders. Now, as at the study which was done in 2014, we knew that 39.5 per cent of the adult population are excluded. Those are the target areas that the central bank is focusing on and wants to bring into the financial system. And to do this, it requires collaboration between the regulator, the market operator and other players to get people to use financial services.

A new research report on financial inclusion by InterMedia showed that more than four among 10 Nigerians experienced some form of economic vulnerability. With that, how do you think the present economic recession will affect your financial inclusion drive?

For me, it presents both an opportunity and also a challenge. It is a challenge in the sense that when we have an economic situation of this nature, earnings are affected. But the point is that as people are enabled to embrace financial discipline, they can manage their lives better. If you look at the financial inclusion strategy, one key thing that comes out is the message on savings. Savings is not until you have a lot of money, but it is about starting with what you have. Whatever resources you have, if you are enabled to use it better and to learn, they can be better resources managers. People can also learn that when they have bank account(s) and they are in need, they can also get loans from the financial institutions to meet their needs. You don’t have to sort it out all on your own, be it a loan to take advantage of a business opportunity or a loan to address an immediate for personal use. This is why I said it is both an opportunity and also a challenge. It is a challenge in the sense that earnings are affected and people don’t have as much disposable income as they had before. But with the little they have, with the right financial discipline and advise, they can make better use of it.

What role do you think digital financial services would play in poverty alleviation?
Digital financial services have actually been proven from research across the world, that the cost of transactions can be a lot cheaper than dealing in cash. Cash has a lot of attendant risks. The cost of moving it around and the cost of processing it are enormous. Cash is expensive. But digital financial services through different channels are cheaper and can be more affordable by majority of Nigerians. So, we need to keep pushing in Nigeria. But to make this effective, the access points need to keep growing. The service quality needs to keep improving and the consumer protection needs to be stronger, such that as you bring more people into the financial system, we are not leaving them vulnerable.

One of the findings by the report mention earlier is that patronage for mobile money services is still very low in Nigeria, what is the central bank doing about that?

For mobile money participation, the major concern has been limited availability of access points. If I have money on my wallet and I have to go 50 kilometres to the next banking agent, then it is no longer convenient. So, to address that concern of limited access points, we brought up the issue of shared agent network where partners can come together and develop many more dispense such that it is easy for consumers to reach. We also have the super-agent licence that has been issued presently to two operators which promotes agency banking and the deployment of more agents such that they are closer to people and the services they offer becomes more readily accessible.

But the concern with agency banking is that most of the agents are concentrated in the urban areas, whereas there are lots of unbanked people in the rural areas. So, what can be done to correct that?

It is a mix of approach and I agree with your observation in terms of the concentration of the access points. When we worked on the geo-spatial mapping analysis last year to actually plot out where the financial points are available, it corroborated what you just said. So, there is an on-going initiative, working with industry players to see how these points can move out from the core concentration in specific regions of the country, to move them around. But the call is also on the consumers because it is one thing to have the services available, but it is another thing to have the people to use them. So, on one hand, there is an initiative for the service providers to make their services available, but on the other hand, consumers need to take advantage of the services that are available. So, what we advocate for is stronger use cases for mobile money and for it to become central to our daily lives. Can I use mobile money to pay for transport? Can I use mobile money to pay for school fees? Can I use mobile money to make my purchases? So, it is these opportunities that can drive uptake on the side of the consumers, when they see a stronger need for it and he service providers as well when they see more people using it.