Strides made in financial inclusion

With financial inclusion being a topic on the rise globally, we see many policies and initiatives being introduced into the Nigerian financial markets today. This rise which has been accelerated by mobile phones and the internet in Nigeria, encourages the Central Bank and other stakeholders in the financial sector to deliberate on ways to raise the bar. so we ask, what is the progress of Nigeria’s Financial inclusion drive? Modupe Ladipo, former chair of the board of Enhancing Financial Innovation and Access (EFInA) joined CNBC Africa’s Esther Awoniyi for this discussion.

We’ve made quite a number of strides in terms of how we’re getting on with financial inclusion especially on breaching the last mile what is your thoughts on the progress we’ve made so far.

When we first started on this journey in 2008, we found that 53.5 percent of the Nigerian adult population was financially excluded and as at the last time we did the survey in 2016, that number had reduced to 41.6 percent.

That’s still a very large number representing about 40 million adults. We have the national financial inclusion strategy which was launched in 2012 and the overarching objective of that strategy is to make sure that by the year 2020, only 20 percent of the adult population is excluded. As at 2016, we are at 41.6 percent.

So you can see we have made some progress, but we still have a long way to go.

Lets talk about the reoccurring challenges that we saw at the beginning, how would you access them now? Have we been able to conquer some of them?

In terms of the core challenges; the barriers to access, we’ve found distance. We don’t have enough financial access points in Nigeria. So if you have to travel a long distance in order to go to your bank branch, it becomes a problem. So if I’m only saving N300 and it costs me N200 to get to the bank branch of course you’re not going to go to the branch, that’s still an ongoing issue. We’ve had issues around ID, a unique ID for all Nigerians.

We’ve had various options or solutions along the way but we still haven’t had one common ID that everybody has.

So that’s an issue that we’re still having to deal with. Irregular income; because we have various large informal segments in Nigeria.

When we do our survey we find that only about 15 percent of the adult population is actually in formal employment. So the rest of the population is either in informal employment or unemployed.

So we have to think about that irregular income and it becomes a challenge. Unemployment; so if you don’t have a job or no source of income, it becomes very hard for you to be engaged in the formal sector.

So as we’ve seen access improve, what we need to then also improve on is the actual usage. So we still see high levels of dormancy, financial literacy is still an issue; people do not understand the benefits of using these financial products or maybe they don’t meet their needs.

That is something we still need to look at, we need to provide more customer centric products and understand that one size does not fit all.

These are the key issues or barriers we’ve seen over and over again and redress mechanisms need to be better available and accessible.

On the issue of awareness; I know the awareness on mobile money itself is still low, there’s progress but there’s so many moving parts I’m thinking how about taking it to the grass level?

Disseminating information at the grass level because a lot of it is going on at the state and federal level and if you want to reach the last mile, those in the communities and villages, maybe using the local government council to do something at that level to spread that information out quickly.

We do do that and currently I think the CBN and some of the market operators in Efina are working on a market awareness campaign for mobile money and agency banking in two particular states in the north and they are running those through radio jingles because we feel that when we do our surveys and ask people where too you hear information from, the radio is a very good source of information.

What tends to happen is that you get that peak through that period when you’re doing that awareness campaign and as that awareness campaign finishes, then there is a drop off.

So they access it and maybe not use it again for whatever reason. We never really go back and understand if it was effective and why it didn’t work, why did they stop using the products, did it not meet their needs etcetera.

The awareness campaign has to be continuous and for a few years which costs a lot of money. It requires high levels of investment and sometimes we’re very much more about short term returns rather than long term patient capital.

For us to really get that message across and keep it top of mind for low income and the rural areas, a lot of investment needs to be made.

Isn’t there impact assessment? Even if you do it for the short term but then you look at the impact that it’s made for that period, it’s something that could encourage longer term investment.

True, but what happens in one state is very different from something that would happen in other state or even LGA to LGA within a state. So it could work well in one state doesn’t mean it’s going to work well in the other state.

So we do understand what has worked and what hasn’t but there is no will to sort of keep paying for that through many LGAs if you’re thinking of the local government in 774 LGAs in Nigeria.

So if you think about a campaign that effectively touches all 774, you can imagine the cost of doing that. So everybody has to really come up with a pool.

How about private sector cash, can we sell this to some corporate bodies?

Maybe the new super-agent network that they are putting together. The expansion facility that was announced recently by CBN, the mobile money operators, the super agents; perhaps through that.

The agents also need to be conveying that message as well, use them as a word of mouth within their own community, but what tends to happen is that that particular agent has his own core business and that’s where he makes his money from.

So unless he realizes that the money that he can make from agent commission supersedes the money he is making from his core business, He’s not going to go out of his way to start marketing that service quite aggressively.

So the thing it’s a very good idea, 500,000 agents by 2020, it’s a very aggressive target, but we need to make sure that we think about how we make sure that the volumes of transactions are at a level that makes it a viable proposition for the agent.