In this piece, James Emejo examines the unrelenting drive by the Central Bank of Nigeria to get more Nigerians into the financial system, thereby enhancing access to finance, job creation and poverty reduction
The apex bank defines financial inclusion as a situation where financial services are rendered by a range of service providers, particularly the private sector to reach everyone who could use the services and had become key policy priority particularly in developing economies.
In a recent report, the CBN admitted that though gradual progress was being made towards improving on financial services delivery to the unbanked population, “Critical challenges of low financial literacy, inadequate infrastructural facilities as well as inadequate and inefficient technology-based facilities by financial institutions appeared to have limited achievement of significant expansion in financial inclusion level in Nigeria.”
Among other things, the report had recommended a systematic approach, which aligns responsibility and institutions among all stakeholders in the financial inclusion process to guarantee sustainability.
Financial inclusion has become essential projects for government and monetary authorities largely because of its potential to bring a larger number of the unbanked population into the formal financial sector, a situation, which helps in accurate data capturing for financial projections as well as opportunity to extend various financial products that could improve the lives of ordinary Nigerians.
There had been evidences that financial inclusion supports economic growth through the provision of job opportunities along the value chain.
But a large number of eligible Nigerian adults currently lack access to formal financial services, prompting the CBN to embark on aggressive financial inclusion strategies to reverse the tide.
The apex regulator, in addition to several measures already taken to boost inclusion, recently unveiled the National Financial Inclusion Strategy, which is designed to ensure that at least 80 per cent of Nigerians have access to banking and other financial services.
Speaking at the National Financial Literacy Stakeholders’ Conference held in Abuja, the Governor of CBN, Mr. Godwin Emefiele, represented by the Deputy Governor in charge of Financial System Stability, Mrs. Aisha Ahmad, said about 36.8 per cent of eligible Nigerian adults currently do not have access to financial services, pointing out that the figure indicated a significant improvement over the 41.6 per cent exclusion rate recorded in 2016.
He said though this was encouraging, given where the country was coming from, “there is still considerable work to be done to achieve the overall 20 per cent target exclusion rate by 2020.”
Emefiele said the apex bank had also released new policy frameworks on consumer protection, financial literacy and financial education.
He said, “Adequate consumer protection is critical to sustaining the long-term viability of the financial sector because consumer protection is a necessary precursor to building and maintaining trust in the formal financial sector.
“An essential pillar of any consumer protection regime is consumer education, which is founded on financial literacy.
“The benefits of a financially literate population are immense. Consumers are better equipped to make optimal choices in the use of financial products, pose lower credit and default risk.
“In addition, it constitutes a market for sustainable financial services and promotes Financial System Stability by increasing market demand and responsible use of financial services.”
Emefiele said the apex bank recently introduced regulations and guidelines for the licensing and operations of payment service banks in furtherance of its efforts to leverage technology to enhance access to financial services for the unbanked.
According to him, the move was expected to drive down exclusion rates by leveraging wider variety of multiple channels to enhance access to deposit products, payments and remittance services to small businesses and low income households.
The governor, however, stressed that consumer protection and its constituent pillar of consumer education remained critical to the attainment of its objectives for inclusion.
The CBN boss said building inclusive financial systems had become an important objective for policymakers around the world given the positive effects it has on poverty reduction and enhancing economic prosperity.
He said the conference, themed: ‘Implementing Financial Literacy and Consumer Protection to Advance Financial Inclusion in Nigeria,’ could not be more unambiguous in its focus and urgency to move from the conceptual to practical in the drive for financial inclusion.
Emefiele noted that low financial awareness and literacy levels as well as consumer confidence remained critical issues, which must be examined more closely if financial inclusion strategy must succeed.
According to him, the financial system remained probably the most affected by technological advancement with new digital products and services, which had emerged and the internet greatly influences consumers’ purchasing decisions as they continue to adopt e-commerce.
The CBN governor further noted that 1.4 billion electronic transactions valued at N97.4 trillion were processed in the banking industry in 2017, compared to 869 million transactions valued at N69.1 trillion recorded in 2016.
He noted that, “While these developments are no doubt good for the financial system and are expected to aid our financial inclusion efforts, they are accompanied by a myriad of challenges.”
He further identified privacy and security concerns, requiring enhanced privacy and data protection for consumers as issues which continue continued to pose a challenge to achieving financial inclusion.
He also said consumers were exposed to new and more inventive fraudulent practices, which required stakeholders to double their combat efforts.
He said: “The industry is also faced with an increasing complexity of financial products and services accompanied by consumers’ lack of information or capacity to understand such products and/ or their associated risks. Thus enhanced disclosure has therefore become very essential.”
He added that as the markets develop with the introduction of new innovative players, products, and channels, the challenge for regulatory agencies will be to continually balance supervisory objectives aimed at identifying, managing and mitigating risk with those that support market development and help promote financial inclusion.
He, however, expressed hope that there will not only be renewed vigour, but more alliances, partnerships and collaborative programmes at the end of the conference towards achieving its objectives.
“I sincerely believe that through our collaborative efforts, we will not only surpass our target of 80 per cent financial inclusion target by the year 2020, but also have financially capable and more confident consumers that would support the stability of our financial system and contribute to the economic growth of our great country,” he said.
The CBN had over the years facilitated investments in ensuring stability and wider network coverage of ATMs, POS, mobile money and other forms of financial services provision including agent banking- all in a focused measure to cut the percentage of population currently excluded from basic financial offerings that could change their lives.
It is noteworthy that the financial inclusion conference had already starting producing positive results to help the CBN realise its target.
As a result of the positions agreed to by stakeholders at the summit, Jaiz Bank has reiterated its commitment to facilitating financial inclusion to a large segment of the society, which is currently excluded from its financial services.
Its Managing Director/Chief Executive, Jaiz Bank Plc, Mr. Hassan Usman, revealed that those who don’t have access to financial services would be allowed to open account without meeting the strict Know Your Customer (KYC) requirements including utility bills, international passports among others.
According to him: “These people don’t have that but the policy allows us to open accounts for people at that level.
“These accounts are opened as financial inclusion accounts and then graduate into the next level, but what we are trying to do is to use channels such as agency banking, our own branches and other digital avenues to allow as many people to come on board and also empower them with little credit.”
In a report titled: “The Economy of Financial Inclusion in Nigeria: Theory, Practice and Policy”, which is a report by the Chartered Institute of Bankers (CIBN) Occasional Papers Series, there was a recommendation that account opening conditions and documentations needed to be reduced while the KYC requirements should be tailored to take care of the realities in some areas.
The report noted: “Increase in public enlightenment campaigns is required to low income earners, emphasising the benefits of financial inclusion to everybody using different languages, rather than just the middle class and the elite as it is currently done.
“There is need for stable electricity supply to drive the infrastructural facilities provided by banks, telecommunication companies and other related service providers such that fluctuation in internet and other network communication is reduced to the barest minimum if not fully eliminated, this also include ATMs and point of sales terminals.”
There is no doubt that given the current momentum and enthusiasm from the banking industry and other relevant stakeholders, as well as the milestone already achieved in financial inclusion, the CBN’s ambitious target by 2020 is realisable.