Nigeria: EFInA Seeks Development of Mobile Money Services

As part of efforts to create more awareness for mobile money services in the country, the Enhancing Financial Innovation and Access (EFInA) recently held a forum.

A statement at the weekend explained that the event titled: “Agent Networks: Opportunities for Mobile Money in the Distribution Value Chain,” was attended by licensed Mobile Money Operators (MMOs), Mobile Network Operators (MNOs), industry regulators, corporate organisations with large distribution networks, payments infrastructure service providers and trade associations, among others.

It explained that the key objectives of the forum was to educate organisations on the relevance of developing an agent network through their distributors; how mobile money can be used for payments; and create opportunities for potential strategic alliances between large corporates’ and mobile money operators.

Speaking at the event, Chief Executive Officer, EFInA, Ms. Modupe Ladipo, stated: “Mobile money will create a cheaper and more accessible electronic payment ecosystem that will broaden and deepen the financial sector.

“More importantly, an effective agent network will ensure that more people are financially included by increasing the number of access points for transactions, and reducing the cost of transacting, especially in the rural areas.

“A critical success factor for the uptake of Mobile Money is the proliferation of ubiquitous agents in as many communities as possible, so that consumers can transact safely and easily, close by to their home or place of work.”

Keynote speaker and Group Chief Executive Officer, CelPay Zambia, Mr. Lazarus Muchenje said: “Mobile money operators have a huge responsibility for expanding financial services in Nigeria.

“The Central Bank of Nigeria (CBN) is extremely proactive and has put in place the levers of success required for the mobile money operators to succeed in their endeavours. The challenge now is for them to ensure their business cases are sound, while having the right people and technology to support the implementation of their plans.”

SOURCE: Leadership Nigeria

Nigeria: CBN promotes financial literacy

The Central Bank of Nigeria (CBN) has expressed readiness to reduce the number of Nigerians that have no access to financial services from 46 per cent to 20 per cent by the year 2020. The apex bank disclosed this in a circular titled: “Exposure Draft of Financial Literacy Framework in Nigeria.”

It was addressed to banks, other financial institutions and stakeholders and obtained from the apex bank’s website.

Nigeria is one of the countries with lowest literacy level , with the literates population puts around 30 per cent. The development has affected participation in banking industry, as well as the economy.

CBN, in its review of on-going reforms said its committed to reduce financial literacy and further improve the industry.

To achieve this objective, CBN has designed a financial literacy framework that aimed at educating Nigerians to improve their understanding of financial products, develop their skills, and confidence to become more aware of financial risks and opportunities.

Subsequently, the banking watchdog has come out with an exposure draft on financial inclusion strategy in Nigeria. It said the draft would articulate a strategic direction for the implementation of financial literacy programmes in Nigeria.

The draft reads: “In continuation of the development role in the Nigerian economy, the Central Bank of Nigeria has developed an Exposure Draft on Financial Inclusion Strategy for Nigeria. The draft was prepared by a German-based Consultancy Firm, Messrs Roland Berger in collaboration with the Enhancing Financial Innovation and Access( EFINa), Lagos, Nigeria.

“The strategy is aimed at reducing the percentage of adult Nigerians excluded from financial services from 46.3 per cent as at 2010 to 20 per cent in 2012. This is with a view to enabling them to have access to financial services, engaging them in economic activities and contribute to the economic development of Nigeria.”

The statement further said CBN is soliciting for inputs from the public to enable the bank finalize the document and further achieve success. It said responses from the stakeholders would play major roles in the efforts to reduce the level of the unbanked population and further make the industry more stronger and competitve.

By Collins Nweze, The Nation

Nigeria: Paga receives $2m grant from EFInA

Zebulon Agomuo, Business Day Online

Paga, a financial services platform, has said it aimed at bringing financial services to over 40 million Nigerians by 2015, even as it received a $2 million grant from EFInA to develop and deliver low cost financial products through Paga’s nationwide agent network. Jay Alabraba, Paga co-founder and director of Sales & Business Development, disclosed to BusinessDay at the weekend.

Alabraba said EFInA chose to award the grant to Paga above a host of other applicants, as a result of the clarity of its planned initiative and track record in performance to date. EFInA, Alabraba explained, was an independent, professional and non-profit organisation funded by the Bill & Melinda Gates Foundation and the United Kingdom Department for International Development (DFID).

“The organisation was set up in late 2007 with a purpose to promote pro-poor financial sector development and financial inclusion in Nigeria,” he added.

The director of Sales & Business Development further explained that Paga, which enables Nigerians to transfer money to anyone via their mobile phones, Internet connected device, or at any agent in its nationwide network of agents, won the award following a highly competitive and rigorous application process that spanned several months, including thorough checks on both the status of the business and viability of its long term potential.

Explaining the new offerings and innovation Paga brings to the financial services sector, he said, “Our low cost financial offering, delivered via our agent network, is yet another example of innovation at Paga – a home-grown company.

Through our banking, insurance and microfinance partners, we will bring savings, loans and insurance to those that need it the most in a manner that is both simple to use and easy to understand.

Delivering more services at the agent point also improves the viability of the Paga agent network as it means additional revenue streams for our agents.” Justifying the choice of Paga for the grant, Modupe Ladipo, executive director and managing director for EFInA, said,

“We have chosen Paga for this grant because of the robustness of their plans and strength of their team. We are confident that by working together we can achieve our mutual goal of universal access to financial services for Nigerians.

“With over 59 million unbanked adults, finding new ways of reaching out to this market and bringing low cost financial services is a major challenge we aim to address.

By bringing low cost services to every neighbourhood we believe we can help bring a large number of Nigerians out of poverty and improve living standards.

Africa: Competition Spurs Access to Banking And Innovation

From TradeInvest Africa

Competition among financial institutions is intensifying in Africa as more governments relax barriers to entry and open their countries’ banking sectors to new players. The flurry of fresh entrants in some countries is credited with helping to drive down banking charges, improve access to banking services and spark off a wave of new products and services.

However, in most countries it is still far easier for companies to gain access to banking services and credit than it is for ordinary consumers, according to members of Lex Africa, a network of leading law firms in 30 African countries.

‘When it comes to banking access, it is important to distinguish between corporate transactions and services for the man in the street. There is often a vast difference between the two,’ says Richard Roothman, banking and finance specialist and director at South Africa-based Werksmans Attorneys.

Roothman says that in the business markets of the continent, an influx of foreign banks is behind the proliferation of corporate banking services such as project finance. ‘Many African countries have a huge desire for big mining, power, roads and water projects, and project finance is the only way to finance these transactions. Almost all of them are financed by foreign banks, which are why a lot more international banks are busy looking at Africa.’

Another reason for their interest is that banks are hungry for business in the aftermath of the global financial crisis. ‘Africa is not a safe haven but other avenues have dried up or are in limbo,’ he says. ‘Foreign banks see that they can make more money by taking a little bit more risk in Africa.’

While corporate banking services are growing strongly, many African consumers are turning to microfinance, mobile phone and retail companies rather than banks for access to financial services. Says Roothman: ‘Micro financiers and other non-banking lenders tend to be more accessible to the man on the street, who is often not seen as bankable. Still, as the purchasing power of Africans grows, there will be more scope and opportunities for banks to service them.’

Kenyan banks galvanised into action

In Kenya, where less than a quarter of the population has bank accounts, banks have been spurred into action in the consumer market by the success of the mobile money transfer services.

Money transfer services were first launched by Kenyan mobile operator Safaricom in 2007 via M-Pesa and other mobile operators now provide similar services. This is one of the main catalysts that have triggered far-reaching change in the country’s banking and financial services landscape, according to Binti Shah, partner at Kenya-based Kaplan & Stratton.

According to studies by Enhancing Financial Innovation and Access (EFInA), a non-profit organisation that promotes financial inclusion, around 20% of Kenyans had bank accounts and about 8% had access to other forms of formal financial services in 2006. By 2009, the percentage of people with bank accounts had crept up to 23% but those using other formal services, particularly M-Pesa, had shot up to 17%. Today’s figure is likely to be even higher because the number of M-Pesa subscribers using the service to deposit and withdraw cash and do money transfers has reportedly increased to 10 million.

This success has galvanised the banks into action. ‘Banks now have much lower entry fees, which means that less wealthy individuals can now afford to open accounts,’ says Shah.

According to Shah, the recent changes in legislation have also made it possible to introduce agency banking, which means banks no longer need to follow the traditional ‘bricks and mortar’ model. Banks are now allowed to recruit other businesses – notably telecommunications companies and retailers with a nationwide presence – to offer banking services on their behalf on an agency basis.

Shah notes that one of the latest boosts for financial access in Kenya is the partnership between mobile operators and commercial banks which, over and above doing away with account-opening fees and monthly charges, pays interest and offers account holders access to emergency credit and insurance facilities.

‘As a result of all these changes, the sector has become very competitive. Access to banking and financial services has improved greatly and charges are coming down. The greater circulation of money also means more businesses are coming up and helps investors feel a little bit more comfortable about investment prospects,’ says Shah.

Nigerian uptake on the increase

Although Nigeria lags behind Kenya in consumer access to financial services, there is “abundant proof of increased access to banking and other financial services “. Osayaba Giwa-Osagie, managing partner at Nigeria-based firm Giwa-Osagie & Co. points to Enhancing Financial Innovation and Access (EFinA) surveys showing significant increases in access between 2008 and 2010.

When EFinA released the results of its first Nigerian financial access survey in 2008, it found that only 21% of Nigerians were banked, while 2% were using micro financiers as banks and 24% were using informal facilities such as savings clubs. That left about 46 million Nigerians, or 53% of the population, without any access at all to formal or informal financial services.

Two years on, the percentage of banked Nigerians has increased from 21% to 30%, according to EFInA’s 2010 financial access study. Overall, the proportion of Nigerians without access to formal or informal financial services has dropped from 53% two years ago to 47% currently.

Citing reasons for the improvements, Giwa-Osagie says: ‘The new generation banks have brought some level of competition into the banking industry, with the introduction of new banking technology and better and faster service delivery.’ He says banks have also branched out from their traditional strongholds in centres such as Lagos into other geographical areas.

Interestingly, basic savings accounts and ATM cards are by far the most popular banking services in Nigeria. Only 1.5 million Nigerians have credit cards, according to EFInA’s studies, and fewer than two million people have overdraft, mortgage loan or vehicle finance facilities. Furthermore, despite the high level of mobile phone penetration in Nigeria, the country has yet to introduce a mobile money transfer service such as M-Pesa, which is proving so popular in Kenya.

A long road to travel in Angola

In Angola, most banking activity is concentrated in the capital Luanda, says Natacha Sofia Barrados, an associate specialising in banking law at FBL Advogados. ‘Outside Luanda, there is only one or two banks and people still keep their money at home.’

Even in Luanda, banking services are out of reach of many consumers. ‘To open an account, you must typically have $200, which is too much for most ordinary people,’ she says, estimating that between 10% and 20% of Angolans have bank accounts. ‘It is getting easier now because a lot of new banks are opening and some do not require a minimum amount.’

Barrados says competition in the commercial banking market is accelerating and that the Angolan Central Bank has made it relatively easy, theoretically at least, for international banks to start operating. ‘The minimum capital requirement is $6-million, there must be a local shareholder and if you are non-resident, you must have authorisation from the Council of Members.’

Far more arduous than applying for a banking license are Angola’s exchange control regulations, particularly around the expatriation of capital. ‘It takes a long time to issue a license to export capital out of the country. In fact, this is very difficult,’ she says.

‘For a new bank to succeed, it is very important to comply with all the rules and to be aware of the exchange control regulations. It is also most important to understand the Angolan environment and to realise that this is not a normal business environment,’ she says. ‘It is not at all like operating in America or Europe.’

How to be successful

Says Pieter Steyn, the chairman of Lex Africa and a director at Werksmans Attorneys: ‘This is the age of African Lions and increasing interest in the millions of African consumers. African demand for financial services will increase in future and although banks with an established African presence have an inherent advantage, they will face increasing competition not only from their traditional competitors but also from novel and innovative ways of providing financial services.’

Lex Africa, is a corporate legal network that comprises of law firms in 30 African countries.

Nigeria: The struggle to aid the unbanked

By Oluwaseyi Bangudu, 234Next.com

With about 67 percent of Nigeria’s adult population never been banked, and only 30 percent of the adult population with a bank account, the pain still resides in the neck of financial experts to seek ways to enlarge the nation’s financial inclusion and aid the unbanked.

In its 2010 ‘Access to Financial Services in Nigeria 2010 Survey’, Enhancing Financial Innovation and Access (EFInA), revealed that 63.5 percent of adult males are unbanked, 76.8 per ent adult females are unbanked and 78.8 percent of rural population is unbanked.

“Only 30 percent of the adult population currently has a bank account, which is equivalent to 25.4 million people. 67.2 of the adult population have never been banked, which is equivalent to 56.9 million people while 2.4 million adults were previously banked” the report stated.

Industry watchers say the main barriers to having a bank account include irregular income, unemployment and distance to the bank branch of which bank proximity is of great concern, especially to the rural population.

Way forward

EFInA, an independent, professional and non-profit organisation set up in late 2007 with a purpose to promote financial sector development and financial inclusion in Nigeria, says the factors which would most likely encourage the unbanked to open a bank account include being employed, having a bank closer to their residence or work and understanding the benefits of being banked as 42.4 million adults who represent 74 percent of the unbanked population would like to own a bank account.

“With over 59 million unbanked adults, finding new ways of reaching out to this market is a major challenge for service providers. New ways of thinking and innovation in bank product and service offerings are needed to capture this market, which includes extending banking beyond branches by the use of technology such as mobile phones and POS devices” the survey report stated.

The Central Bank has stated that it recognizes that innovations in payments system require institutional support; hence, the issuance of relevant rules and regulations in order to provide a level playing ground for all stakeholders in the retail payment industry.

Notable among them are the electronic banking guidelines, guidelines on transactions switching, guidelines on stored value card and prepaid card operations, regulatory framework for mobile payments, national central switch operations rules and regulatory and supervisory framework for the operations of credit bureau.

“Over the next few years, our focus will be on strengthening the institutional and regulatory frameworks that would encourage financial inclusion of unbanked and promote more usage of electronic payment as clearly enunciated in the Payment Systems Vision 2020″ Emmanuel Obaigbona the representative of the director, Banking & Payments, Central Bank of Nigeria said at an event in Lagos.

According to him, certain measures are expected to drive the usage of electronic payments in the near future. He added that the application of mobile technology for financial services especially in rural areas will ensure that a large percentage of the population outside the formal banking system would have access to financial services using one of the three scenarios of card-based, account-based and virtual account.

“The Central Bank of Nigeria has been making efforts under the Payments System Vision 2020, to promote and entrench electronic payments, as the major channel for payment and settlement, by all economic agents, away from the current dominance of cash based transactions. In this regard, mobile phone was identified as a channel for effecting electronic payment between person-to-person”.

The Central Bank has given approval-in-principle to about 20 mobile payments scheme operators to enhance the person to person payments services in Nigeria to commence operations.

Tayo Oviosu, CEO, Pagatech, an electronic financial services firm and one of the firms given the approval in principle by the Central Bank, said given the poor number of Nigerians, electronic banking takes advantage of the wider coverage by mobile phones.

“There are very few people that have formal access to financial services, only about 20 per cent of Nigerians have access to formal financial services and 90 per cent of the bank accounts have less than ₦5000 in their accounts. This shows that majority of the money in Nigeria is outside the banking industry and this poses a very real challenge to banks today. They open bank branches everywhere, yet the issue remains unaddressed”.

“However, this is not the case with the number of mobile phone users. About 60 percent of Nigerians are within the cell phone coverage. This is an opportunity and a way of bringing financial services to the unbanked, through their mobile phones”.

“Paga was founded on the belief that the ubiquity of mobile phones can be leveraged to financial services to all Africans. We strive to develop appropriate technology suited for the local markets where we operate” he added.

Mr Oviosu said Paga is out to ensure that its services are offered at low cost and accessible via its agent network. “In doing so, we can strive towards universal access” he said.

To enjoy the Paga services, all that is needed is a mobile phone that does SMS, an online registration or through an agent.

“Nigeria is the first market for us. Our mission is however is to be the leading electronic currency for Africa and drive financial inclusion. The service was launched to the general public in February, after the appropriation principle by the Central Bank of Nigeria” Jay Alabraba, the firm’s co-founder, Head Sales and Distribution said.

According to him, there are two primary ways to use the Paga product. “You can either use it as an individual, which requires that you register online, or via your phone or you can also go through any of the available agents.

The Paga product enables an individual to send a person to person transfer, send money to anyone in Nigeria, buy or send airtime to anyone across networks and pay bills, and any of these transactions could be done individually or through an agent.

EFInA’s survey reveals that about 56.4 million adults have access to a mobile phone while 53.1 million adults regularly use a mobile phone and 49.2 million adults own a mobile phone.

Of the 56.4 million adults who have access to a mobile phone, 32.3 million of them are unbanked.

Of the 49.2 million adults who own a mobile phone, 25.5 million of them are unbanked, clearly demonstrating the potential for using the mobile phone to provide financial services to the unbanked.

The survey also revealed that 16.8 million adults would consider using their mobile phone to receive money and 13.3 million adults would consider using their mobile phone to send money while 5.1 million adults would consider using their mobile phone to pay bills.

For the unbanked

Banks and financial services providers have been advised to take banking services closer to the customer, through agent banking and its other alternatives. They have also been urged to ensure that the benefits of having a bank account is widely communicated to the unbanked and low income population through several different channels.

Financial services providers can develop innovative savings products to encourage the 23.8 million adults currently saving at home to save in a bank and remittances products which can be linked to bank accounts, according to EFInA, while formal financial providers should identify innovative ways of extending micro and retail loans to the low income segment.

With over 20 companies given the approval in principle to operate on this platform, it is hoped that when licenses are finally given, more Nigerians would have access to formal financial services.

Nigeria: CBN’s interest-free banking gains momentum

By Mushtak Parker, Arab News

It seems that the influential governor of the Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi, is winning the “hearts and minds” debate over the introduction of interest-free (Islamic) banking into Africa’s most populous yet highly sectarian nation.

Following the introduction of new guidelines for non-interest banking by the CBN on 21 June 2011; the issuance of a license to Jaiz International Bank to launch the country’s first interest-free bank subject to fulfilling the bank authorization requirements within six months; and the revelation that the Nigerian Treasury’s Debt Management Office is working on the feasibility of issuing the country’s debut sovereign sukuk within the next year or so, the CBN last week awarded Stanbic IBTC Bank a license to set up an interest-free subsidiary subject to complying with the approval terms within the six months.

Stanbic IBTC Bank is the Nigerian subsidiary of one of the leading banks in South Africa, Standard Bank, which has recently restructured its Islamic finance business away from London and Dubai and to concentrate on markets in sub-Saharan Africa. Standard Bank last year disbanded its Islamic finance team in London which included David Testa, former CEO of Gatehouse Bank, the UK authorized wholesale Shariah-compliant bank, who was a consultant to the Bank on Islamic capital markets; and in Dubai from where Standard Bank acted as an intermediary in a number of sukuk issuances and as a participant in syndicated Murabaha facilities.

Earlier this year it was clear that the focus has shifted to sub-Saharan Africa, where in Tanzania, Standard Bank launched a number of Islamic consumer finance products in Tanzania including Zanzibar. These include Islamic mortgages, leasing and account facilities.

Nigerian banking sources stress that two more interest-free banking licenses may be in the offing, which included promoters from the Gulf Cooperation Council (GCC) countries. One or two of Malaysia’s top banking groups including CIMB are also studying the West African market possibly with Nigeria as its hub. Indeed, the dream of Sanusi is to see Nigeria developing into the hub for interest-free finance in West African in the same way Kuala Lumpur has developed into the Islamic finance hub for Asia and as a wider international Islamic financial center.

It is no secret that Sanusi is an admirer of the dual model Malaysian banking system, where an Islamic banking system operates side-by-side a conventional banking system, cooperating with each other but not inter-acting so as to pre-empt co-mingling of funds. In fact, Bank Negara Malaysia, the banking regulator, has provided the CBN with technical assistance in its interest-free banking strategy. Similarly, the CBN is also getting technical support especially on Islamic capital markets products such as sukuk from the World Bank Group, under a technical cooperation agreement with the Islamic Development Bank, of which Nigeria is a major equity subscriber.

In fact, there was a decent Malaysian turnout, inter alia participants from South Africa, the UK and elsewhere, at the recent International Islamic Finance Conference organized by the CBN in early July 2011.

The good news is that more and more prominent Nigerians from various faith traditions are now becoming aware of the reality and nature of Islamic banking, although some of them would have preferred the Nigerian government to have introduced it as interest-free or alternative banking from the onset instead of Islamic banking or Shariah banking, especially in a religiously sensitive and highly sectarian country.

One of the promoters of Jaiz International Bank, Muhammed Mustapha Bintube stressed at the CBN conference that Islamic finance is an alternative mode of financing based on equity, fairness and transparency, It also empowered people by not financing anything that is harmful to society.

Osaro Eghobamien, a senior advocate of Nigeria and a Christian, speaking to The Daily Independent newspaper recently warned that objections to Islamic banking in Nigeria is a result more from a lack of understanding of what the banking products are really about and how the system works. “You see, all the leading banks in the world provide Islamic banking desk. There is absolutely nothing wrong with it. But maybe we need education. I have heard some inflammatory comments from very senior leaders in Nigeria. It just demonstrated ignorance because they need to ask what it entails. It is only a product that is being delivered by a bank and you have a choice,” he emphasized.

Concomitant with the reality of Islamic banking in Nigeria is the business case for it in a market with a minimum potential of 75 million or so that may rise to over 100 million as the phenomenon and market education about alternative interest-free banking takes root. A survey conducted by Enhancing Financial Innovation and Access (EFInA), a financial sector development organization funded by the United Kingdom’s Department for International Development (DFID) and The Bill and Melinda Gates Foundation, suggested that just under 30 percent of the total adult population of Nigeria would use interest-free banking products when they are introduced in the country. This translates into an immediate market of about 23 million to 30 million people, which for instance is larger than the entire GCC market.

Nigerian like many other emerging countries has a large unbanked population with one estimate suggesting that some 70 percent of the country is unbanked. As such, the CBN could have introduced interest-free banking not only as an alternative system of financial products but also under financial inclusion policies to give more of those unbanked millions access to basic banking services. Some of the most successful efforts in this respect has been in Malaysia through non-bank savings institutions such as Tabung Haji (a mutual society savings institution for pilgrims); the Ar-Rahnu Pawnbroking Schemes; Bank Rakyat, the interest free Cooperative Bank of Malaysia, 70 percent of whose customers are non-Muslim Chinese; SME financing and various microfinance initiatives.

All these initiatives could easily be structured in a Nigerian banking context which would help ordinary Nigerians and the Nigerian economy in mobilizing additional savings which is otherwise lost by the conventional mainstream banking sector for manifold reasons.

In the wider economic context, interest-free financing could play a major role in financing Nigeria’s dire need for infrastructure development especially through the issuance of off balance sheet sukuk (interest-free Trust certificates). The Nigerian government’s own estimate of current infrastructure funding deficit is 32 trillion Naira in sectors such as transportation, power, water supply, education, housing and health. Both sovereign Nigeria and corporate issuers can go to the market to raise financing based on asset-based or asset-backed sukuk structures.

But to do this and to attract investors from abroad, the ministry of Finance will have to introduced enabling legislation to facilitate the introduction of Sukuk including trust laws, SPV (special purpose vehicles) laws; tax neutrality measures for sukuk similar to equivalents in conventional bonds especially for land and real estate based transactions. Here the World Bank is already assisting the CBN and the debt management office under the Joint IDB-World Bank Technical Assistance Program. The World Bank Group has already launched sukuk under its own mantle or jointly with local originators in Malaysia and the Middle East. In Saudi Arabia, the International Finance Corporation (IFC), the private sector funding arm of the World Bank Group, has even launched a joint venture Islamic mortgage company in anticipation of a huge demand for housing finance once the Saudi mortgage law is finally adopted.

Indeed the Federal Nigerian government is currently negotiating a financing facility to finance infrastructure projects under the Public-Private Partnership (PPP) arrangement.

Sanusi for one also appreciates the bigger picture of how sukuk and interest free banking can play a defining role in contributing to economic growth and development, and to financial stability in Nigeria especially in the aftermath of the global financial crisis which was precipitated by the market-based conventional banking system. He is too aware of the potential role Sukuk can have as a diversification of sources of funding for the Nigerian Treasury especially from the international market to finance urgently needed infrastructure, development and SMEs; and at the same time helping to develop and broaden the nascent Nigerian capital market.

Nigeria: ‘23.8 million Nigerian adults have no bank accounts’

By Ademola Alawiye, Punch on the Web

Over 23million Nigerians keep their money at home because they do not have bank accounts, a report has said.

A survey conducted by a non-profit making organisation, Enhancing Financial Innovation and Access, stated that many Nigerians lacked access to formal financial services.

The survey revealed that billions of naira circulated through the informal sector, which had a negative effect on the country’s economy.

It also showed that if 50 per cent of the 23.8 million Nigerians were to save N1,000 per month, over N143bn could be incorporated into the formal sector every year.

The results of the EFInA 2010 survey had shown that 39.2 million Nigerians, representing 46.3 per cent of the adult population were financially excluded, while only 25.4 million Nigerians, representing 30 per cent of the adult population, were unbanked.

A statement by the organisation said, “Evidence worldwide shows that access to financial services contributes both to economic growth and to a reduction in inequality and is therefore key to tackling the poverty trap in Nigeria.

“It is critical for regulators and policymakers to create an enabling policy environment to actively promote both the demand for and the supply of financial services to the unbanked and under-banked.”

It added that an inclusive financial sector was characterised by the diversity of financial services providers, the level of competition between them and the legal and regulatory environments that ensured the integrity of the financial sector.

On opportunities for the private sector, it said, “Providing financial products and services to the low income population represents a large business opportunity for the private sector.

“Providers of financial products and services should develop innovative products and services that better suit the needs of the low income unbanked and under-banked population.”

Finance Without Borders

From This Day -

Key stakeholders in the financial sector are currently engrossed in a programme to extend financial services to all Nigerians. Happening in a country where not even water or salt have been able to go round, Emele Onu analyses the herculean task in pulling through the financial inclusion agenda

Whose duty is it to ensure that all Nigerians have access to financial services? This question is pertinent to correct the dismal data emanating from  the Enhancing Financial Innovation and Access (EFInA) about access to financial services in Nigeria.

The EFInA 2008 Report that only one in five Nigerian adults has a bank account, amply hit the nail on the head that the Nigerian financial sector, despite all the hullabaloo, is yet to position for its role as facilitator for growth and development of the economy.

Financial Inclusion is the provision of a broad range of high quality financial products (such as savings, credit, insurance, payments and pensions), which are appropriate and affordable, to serve the needs of the entire adult population – especially the low income segment. Many Nigerians, for numerous reasons, are unbanked and lack access to formal financial services.

EFInA hosted a workshop in Lagos last week on Global Perspectives on Financial Inclusion and how the Nigerian situation could be corrected.

Part of the recurrent decimal at the workshop was who should lead the crusade for financial inclusion. However, as the experts tried and tried to solve the puzzle, the answer seemed far, far way. Even though financial sector operators dominated by the banks create financial services, they have never pretended to take them to all nooks and crannies of the country and the reason is simple. Financial service or product is an economic good and so will be allocated or distributed where they can command effective demand and profit.

EFInA rightly observed during the workshop that the Nigerian banking industry focuses on  short-term opportunities than productive private investments; also that the sheer size of the Nigerian oil economy provide easy business to banks and postulated as one of the reasons why banks have had a lacklustre approach to taking financial services down market.

The other issue is of course physical accessibility of the nooks and crannies of the country as the EFInA 2008 Report revealed that most of the states of the North West and North East, and in states such as Niger, Nassarawa, Taraba and Bayelsa have less than eight branches per million inhabitants owing to relatively difficult accessibility.

But where the banks are helpless because they are in business and must cover cost and operate profitably, the government authorities such as the Central bank of Nigerian (CBN) could come in.

Having realised that economic growth would proceed at a faster and more sustainable rate, if all segments of the population have access to financial service, the CBN might decide to invest substantially on achieving financial inclusion, even though as social service. Doing that will entail creating an environment that will reduce the cost of production of financial products such that banks’ products become available, accessible and  affordable by most Nigerians.

The CBN Deputy Governor, Financial System Stability, Dr. Kingsley Moghalu, disclosed at the workshop that the apex bank will be intervening through a three pronged strategy – public education, enhancing financial products and facilitating shared infrastructure targeted at cost reduction for financial sector operators.

Notwithstanding, the challenges facing the CBN and EFInA are immense. The 2010 EFInA survey showed that 39.2 million Nigerians representing 46.3 per cent of the adult population are financially excluded. Only 25.4 million Nigerians are banked – representing 30 per cent of the adult population while the unbanked adult population dropped from 79 per cent in 2008 to 70 per cent in 2010.
How will the various stakeholders surmount the startling statistics?

Startling Data on Nigeria
The Managing Director of EFInA, Ms. Modupe Ladipo, said one of the biggest hurdles to improving access to retail financial services in the country is absence of relevant and reliable data and analysis about how individuals and households manage their finances.

As a matter of fact, the financial sector in Nigeria includes a range of institutions offering a wide range of services such as savings, credit, currency exchange, microfinance, consumer lending, SME
Lending and mortgages among others.

According to EFInA’s Access to Financial Services in Nigeria 2008 Survey, only one in five Nigerian adults has a bank account. It also noted that over half of the adult population (52.5 per cent), equivalent to 46 million people, is financially excluded – that is, without recourse to any formal or informal financial products

The headline data masked critically important disparities, notably as regards gender, where it said 85 per cent of women are unbanked, compared to 73 per cent of men. On geography, while some of Nigeria’s states are notably more inclusive than others, the bigger issue is the urban and rural divide where 86 per cent of the rural population is unbanked, compared to 61 per cent of the urban population.
The Report further indicated that most banks lending to the private sector goes to bigger companies and less to small businesses and individuals; highlighting that high interest rates and short loan maturities also make credit less easily accessible to these categories of borrowers.

“Intermediation is still highly skewed in Nigeria towards the public sector compared to other developing countries – in particular, South Africa, where private sector credit/Gross Domestic Product (GDP) was 84.2 per cent and 92.1 per cent in 2006 and 2007 respectively as against 21.5 per cent and 31.4 per cent in Nigeria.

“There are currently over 900 microfinance banks (as at 2008) with a combined asset base of
N157.3 billion (equivalent to just over 1 per cent of the asset base of the 24 commercial banks). Despite the large number of MFBs, only 541,000 (0.6 per cent) adults in Nigeria have an account with an MFB, compared to 21 per cent who have an account with the commercial banks.

“The study shows that except for the oil and gas industries and mandatory insurance products (e.g. buildings, motor vehicles), there is very low awareness of the need for insurance.
Exacerbating this situation is the recent financial sector turmoil that affected the insurance business in several ways,” said ELFInA.

The Report also indicated that usage of credit is highly constrained for low income and self-employed consumers, stressing that although there is considerable diversity of products for salaried people, the cost of credit (typically 20-25 per cent per annum for most categories) and the short tenure of many loans means that debt-servicing costs are highly exclusionary for the vast majority of Nigerians.

According to the research outfit, that may explain why only 3 per cent of those with access to a bank have a loan from the bank, compared to 92 per cent with savings accounts.

On pensions, EFInA reported that the pension fund market in Nigeria is still very small, accessed by only 2.3 per cent of Nigerian adults. It attributed that partly to the reluctance of SME employers to set up employee pension schemes. It observed that the Pension Reform Act 2004 makes it difficult for people who move jobs to a microenterprise or to start their own business to retain the pension benefits they have built up in employment.

For Ladipo, there are three major constraints to financial inclusion in the country – the contextual constraints, regulatory constraints and the systemic constraints. She however, expressed the hope that with encouraging signs at the government and industry levels of a movement towards the creation of a more inclusive financial sector, things will begin to change for the better. Ladipo’s hope, some experts have argued, will be short lived except there is a break from the poverty ravaging the mass of the people.

As a banker told THISDAY at the workshop: “We are talking about financial inclusion when most Nigerians can hardly afford primary needs such as food. That is not possible because you have to eat before you can access financial products.” The view of the banker is well supported by the EFInA Report, which stated : “Almost 100 million Nigerians live below a poverty threshold of $1.25 a day and analysis of the demand side data by income shows the correlation between income and banking status, with the proportion of people banked dropping away sharply where monthly income is N6,000 or less.”

But Nigeria’s apex financial sector regulator, the CBN is confident that the battle will be won. The question will be, how?

Responses the Challenges
The Governor of the CBN, Sanusi Lamido Sanusi, was represented at the workshop by CBN’s Deputy Governor, Financial System Stability, Dr Kinsley Moghalu. Moghalu said as a fresh response to the challenge, the CBN will be establishing a Microfinance Fund. He said the CBN is “preparing ground to establish Micro, Small and Medium Enterprises Development Fund to provide wholesale funding and refinancing facilities for the on-lending activities of microfinance banks and institutions.”

The CBN deputy governor further stated that the monetary authority is making plans towards achieving a comprehensive financial education and inclusion of unbanked Nigerians as a major strategic goal beginning in 2011.
He added that the Development Finance Function of the CBN is undergoing restructuring to enable it drive more effectively the strategic imperative of financial inclusion going forward.

According to Moghalu, the CBN is collaborating with an international organization – Alliance for Financial Inclusion (AFI) for a technical assistance programme that will encourage the usage of mobile payment system through mobile phones and the use of the postal system to extend financial services to remote locations.

He stated further that the CBN is currently implementing the certification programme for microfinance banks and is supporting the activities of the apex associations of microfinance banks and the unlicensed microfinance institutions – mostly non- governmental organisations in collaboration with development partners.

On the whole, Moghalu was confident that the collaboration among the CBN, EFInA and other partner organisations will change the negative situation to something positive even though he said the goal won’t be achieved overnight as the effort is only a process.

Agreeing that it is a process, it is important that people see prospects in the endeavours. That was also the view of contributors at the workshop.

Financial Inclusion Prospects
The Assistant Director, Banking Services, Central Bank of Kenya, Stephen Ndauti, and the Director, Banca de las Oportunidades, Columbia, Carlos Moya, were among the international guest speakers at the workshop.
They both shared their views on financial inclusion from the perspective of policy initiatives, regulations and innovations in their jurisdictions.

Moya stated: “By increasing the geographical outreach of the financial system, through the use of non-bank agents, Columbia  increased its banked population from 47 per cent to 63 per cent from 2006 to 2010”.
Nduati stated that the “key to the success of creating a financially inclusive system, is an enabling regulatory environment that supports innovation.”

The EFInA boss believes that since Nigeria is already responding to the challenges as done by some other countries of the world and since it has worked in those countries, it will also work in Nigeria.

The CBN is said to have created a Financial Inclusion Unit, with responsibility to collect and disseminate reliable information on financial inclusion; participate actively in the decision-making process of the different divisions of the CBN; support evidence-based policy making; contribute to guaranteeing the correct implementation of measures aimed at increasing access to financial services; and also disseminate good practices and lessons learnt on financial inclusion.

According to analysts, the implementation of FSS 2020 as an integral part of Vision 2020 will widen financial inclusion in the country. Also, some of commercial banks are already piloting a number of interesting products and services targeted at the low income, that, it is believed, supports the financial inclusion programme.

EFInA, which is the non government organisation spearheading the campaign pins its last hope on achieving the desired changes in the financial sector on many recent developments. For instance, the reforms of the microfinance sector; the interesting opportunities for the development of agent banking given the esusu/adashi tradition in Nigeria; the fertile ground for m-banking, given that over 70 per cent of the Nigerian population already has access to a mobile phone.

For the workshop participants, hopes must translate to reality.

70% Nigerians do not have bank accounts – Survey

By Ademola Alawiye, Punch on the Web Nigeria -

SEVENTY per cent of adult Nigerians do not have bank accounts, a report by Enhancing Financial Innovation and Access has said.

According to the report, which was presented in Lagos on Thursday, Nigeria remains largely unbanked with only 25.4 million people, representing 30 per cent of the adult population, having bank accounts.

This leaves about 70 per cent of the adult population with no bank accounts.

The report also said that 39.2 million Nigerians, representing 46.3 per cent of the adult population are financially excluded.

An individual is financially excluded if he has no access to financial services.

The report, prepared by an independent professional and non-profit organisation, Enhancing Financial Innovation and Access, said Nigerians remained largely unbanked “with only 25.4 million Nigerians, representing 30 per cent of the adult population, having bank accounts.”

The organisation, conceived by the United Kingdom‘s Department for International Development, however, said the unbanked adult population dropped from 79 per cent in 2008 to 70 per cent in 2010.

According to the Chief Executive Officer, EFInA, Ms. Modupe Ladipo, while presenting the results of the survey, many Nigerians, for numerous reasons, are unbanked and lack access to formal financial services.

She said, “Financial inclusion is the provision of a broad range of high quality financial products (such as savings, credit, insurance, payments and pensions), which are appropriate and affordable, to serve the needs of the entire adult population, especially the low income segment.

“Billions of naira circulate through the informal sector, which has a negative impact on the country‘s economic growth and development.”

Ladipo added, “One of the biggest hurdles to improving access to retail financial services is the absence of relevant and reliable data and analysis about how individuals and households manage their finances. The EFInA Access to Financial Services in the Nigeria 2010 Survey serves to bridge that gap and demonstrate the opportunities to extend financial services to the unbanked and under-banked low income segment.”

The Governor, Central Bank of Nigeria, Mr. Lamido Sanusi, represented by the Deputy Governor, Financial Systems Stability, CBN, Dr. Kingsley Moghalu, said that economic growth would proceed at a faster and more sustainable rate if all segments of the population had access to financial services.

Sanusi said, “The enormity of the financial access gap in Nigeria and financial inclusion challenges call for the creation of an appropriate environment for the private sector and other stakeholders to play their own part. This was the major reason for the launching of the Microfinance Policy in December, 2005.”

He, however, said that some of the microfinance banks had not been able to practically perform effective microfinance banking and address the problem of access to finance by low-income individuals.

Sanusi also stated, “Financial inclusion goes well beyond microfinance and the CBN is committed in ensuring financial services providers work more effectively to drive the strategic imperative of financial inclusion going forward.”

The Director, Banca de las Oportunidades, Columbia, Mr. Carlos Moya, said, “By increasing the geographical outreach of the financial system through the use of non-bank agents, Columbia has increased the banked population from 47 per cent to 63 per cent from 2006 to 2010.”

He noted that an enabling regulatory environment that supported innovation was key to the success of creating a financially inclusive system, adding that there were currently over 9,000 agents and the value of transactions through these agents during this period was $4.7bn.