The World Bank Group considers financial inclusion a key enabler to reduce extreme poverty and boost shared prosperity. Fintech is key to financial inclusion which will open up banking services to all and sundry. Fintech has the potential to make banking services more accessible to those who would otherwise not have access to them. It can help to reduce the cost of financial transactions. It makes it easier to access credit, savings and other financial services.
The primary goal of financial inclusion is to ensure that unbanked and underserved individuals and communities have access to useful and affordable financial products and services that meet their needs –payments, collections, credit, savings and insurance – delivered in a sustainable and responsible way.
A look at the opportunities for financial inclusion
Financial inclusion is essential to the community’s progress as access to monetary touchpoints facilitates day-to-day living, and helps families and businesses plan for everything from short-term goals to long-term goals and unexpected emergencies. As account holders, people are more likely to access other financial services, such as credit and insurance. This is to start and expand businesses, invest in education or health, manage business risk, and weather economic shocks. This can improve their lives.
In Nigeria, financial inclusion has spread across Nigeria over the past few years. This includes job creation, Foreign Direct Investment, private sector innovation, and a push to open low-cost accounts, including mobile wallets and digitally-enabled payments.
Impact of Financial Inclusion on the Nigerian Economy in the Last Five Years
Employment: The World Bank Group considers financial inclusion a key enabler to reduce extreme poverty and boost shared prosperity. This view can be deemed credible based on its effect on the Nigerian economy. According to the Shared Agent Network Expansion Facility (SANEF) there are 1.4M number of financial access points/Agents nationwide. This translates into employment opportunities for over 300,000 Nigerians (excludes operators – MMOs and Super Agent employees). The employment opportunity covers a wide mix of agents, agent aggregators, agent shop handlers, licensed MMOs and their employees as well as licensed Super Agents and their employees.
Financial service touchpoints: To bridge the gap between unbanked citizens and financial services, financial service touchpoints are important. Financial Inclusion has brought to fruition the availability of financial services touchpoints in areas/locations previously unreached and deemed under-served communities. There has been growth in the number of agent touchpoints and volume of banking inclusion services such as POS cash out, G2P Disbursements and payments (e.g. Tradermoni, GEEP etc.), funds transfer and wallet creation in under-served or rural communities. These have improved these communities’ economic development.
As a result, investment in advertising and brand identity has increased. The huge investment in this area has created an avenue for state governments to earn internally generated revenue from operators and agents alike. However, this poses a disincentive for Super Agents & operators as it impacts startup capital and agents’ available trading capital respectively.
Foreign Direct Investment (FDI):
There is growing evidence that inclusive financial sector development can reduce poverty and inequality. When previously unbanked citizens save and
By mobilizing these savings for investments, banks and other financial institutions mobilize these savings for investments that, in turn, help grow the country’s productive sector and spur foreign businesses. In addition, Nigerian Fintechs in the digital financial services space have received multiple rounds of funding and seed capital through foreign direct investments. This has been done by donors and investors across the globe in the past five years.
International donor organisations e.g. Bill and Melinda Gates Foundation also drive Foreign Direct Investment through their partnership with EFInA to sponsor projects on raising financial inclusion rates across the country.
All these highlight the potential and need for a wider-scale promotion of financial inclusion for Nigerian society.
Harnessing the Buying Power of the Financially Excluded
Financial inclusion has as much potential to help financial institutions lend to even poorer communities and reach rural clients. This is as they do to help commercial banks reach the lower middle class.
Only 40.1 million of the adult population have no access to formal or informal financial services. Mobile money uptake and awareness in Nigeria remain low at about 1% and 16% respectively. In addition, EFInA Access to Financial Services in Nigeria 2018 Survey highlighted that out of the 100M bankable adult population in Nigeria, 39.7 have bank accounts, 8% have formal sector employment, 16.7% own business (non-farming), 11.2% own business (farming), 23.4% rely mainly on farming for income and about 53.4% save regularly.
Based on this data, we can broaden our understanding of the population of adults who do not have access to any financial service (formal or informal) in Nigeria, their savings and credit patterns, remittance behaviours, payment channels and their potential to use formal financial services to manage their finances.
We can say that the financially excluded have enormous buying power. Based on economic and social metrics, transactions from this segment are low value and high volume.
Harnessing buying power of the unbanked
• Deployment of products & services that meet the lifestyle of the unbanked and rural dwellers: Despite limited access to banking services, Nigerians have long practised traditional
This unbanked sector also relies on micro-loan services from credit associations that serve their interests. By offering access to the financially excluded, they have additional access to a wider range of services. This can boost the collective standard of living in those rural communities. This can improve financial literacy and awareness.
• Retail-based pricing considerations: Inefficient pricing isolates consumers who would otherwise sign up for a product or service. This is especially true for the financially disadvantaged who earn below minimum wage. By ensuring retail prices for financial services and other products are pocket-friendly, it would encourage customer loyalty and repeated use of the available services.
Deployment of Technology-driven Solutions:
As history has shown, technological innovations are one of the major drivers of economic adoption. For example, USSD is a mobile-based service that requires no onboarding for users and has gained widespread adoption. USSD offers the best available communications technology to deliver mobile financial services to low-income customers. This shows how technological adoption drives financial inclusion.
In addition, research from other countries where mobile money adoption is high has shown a positive correlation between increasing mobile money adoption and significant levels of formal financial inclusion. In Nigeria where the financially excluded population remains high at 40.1 million adults, an expansion of mobile money adoption and usage in the country presents a real opportunity to provide the poor with access to financial services as well as other social benefits and services.
Vtpass, as a fintech is ensuring that bills payment is simple, convenient and smart. Click here to pay electricity bills, recharge your cable TV, and buy educational pins.