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Deepening mobile money initiative in 2016

By Chijioke Nelson
13 January 2016   |   2:28 am
The snail-paced mobile money operations are gradually picking up. In numbers, it has exceeded N800 billion and 76, 852, 409 marks in total value and volume of transactions respectively, with over 24, 389,263 subscriber-base. Rising from the challenges of inability to fully comprehend the scheme, lack of technology by those licensed to operate and low level…

Mobile_money-1

The snail-paced mobile money operations are gradually picking up. In numbers, it has exceeded N800 billion and 76, 852, 409 marks in total value and volume of transactions respectively, with over 24, 389,263 subscriber-base.

Rising from the challenges of inability to fully comprehend the scheme, lack of technology by those licensed to operate and low level of the awareness by the public, the scheme is now riding on the back of rapid growth of the mobile telephony put at over 120 million subscriber-base.
 
The transactions were recorded with the scheme’s product offerings like the cash in/cash out; bills payment; funds transfer (to other accounts); and airtime top up.

On employment generation through mobile money operation, there are about 98, 158 agents enrolled across the country as Mobile Money Operators (MMOs). This is s feat so far considering where the initiative has long been coming from, but it is still a far cry from the potentials. Indeed, 2016 would be another opportunities for stakeholders to deepen the impression already made.

An operator of a thriving vulcaniser business in the environs of Kirkiri, Apapa, Lagos, Baba Segun, has little education, but currently enjoys patronage from every segment of the society. This, he attributes to two factors- his vulcanising skills and his mobile phone.

“My phone is my number one equipment. It determines how many jobs I get everyday. Though I don’t know how to operate it at first, I had to force myself to learn how to use it”, he said. Now, even though he could barely read or write, he easily operates the mobile phone.

Despite the level of business patronage, Segun however, does not have a bank account. Why? “What do I need a bank account for? Is it to collect the small money I charge for my job or to buy equipment? I collect my money in cash and I also pay cash for whatever I need”, he said.

In fact, he is not alone in this pattern of thinking, but only represents millions of other Nigerians who have a mobile phone, but does not have a bank account. The Biometric Verification Number (BVN) exercise just showed that that there are about 25 million Nigerians with bank accounts. You might as well ask, where are other Millions of Nigerians.

Still, statistics from the Nigeria Communication Commission (NCC) have shown that there are about 148 million mobile phone subscribers. This may also mean that more than 90 million Nigerians with mobile phones have no bank accounts and also do not have access to financial services. 

Surely, they are the ones regarded as unbanked or financially excluded. According to the 2014 Access to Financial Service Survey, 36.9 million of Nigerian adults representing 39.5 per cent out of 93.5 percent adult population were excluded from financial services. In addition, 57.9 percent of these were women.

Fortunately, a September 2015 report said the renewed campaign on financial inclusion in the country have yielded positive results as the current rate of adoption has moved up by 6.8 per cent to 60.5 per cent.
 
By the record, about 56.6 million of Nigeria’s adult population are now into one form of financial services relationship or the other, with about 36.9 million others, representing 39.5 per cent being the current exclusion rate.

But the Committee of E-Banking Industry Heads (CeBIH) believes that these unbanked Nigerians can be attracted to enjoy banking and other financial services through mobile money- using the mobile phones to conduct financial transactions.  Of course, the modality to achieve this was the focus of the 2015 yearly retreat of CeBIH, in Uyo, Akwa Ibom state. 
 
With the theme “Mobile Payments for Financial Inclusion in Nigeria – Prospects and Challenges”, in a bid to attract the likes of Segun to the financial system, experts led by the Central Bank of Nigeria (CBN), had also in 2012, crafted a strategy called National Financial Inclusion Strategy. This was aimed at reducing the percentage of adult Nigerians that do not have access to financial services from 46.3 per cent in 2010 to 20 per cent in 2020.

The Chairman of CeBIH, Tunde Kuponiyi, who harped on the potential of mobile phones in enhancing financial inclusion, said: “The good thing about the mobile phone and in fact, any device that has Internet connectivity, is that it can be used as a payment device and this is what will significantly enhance inclusion not only as store of value, but also as a payment platform.”

As part of efforts to achieve the National Financial inclusion Strategy, CBN in 2011, licensed 21 companies to offer mobile payment services. Furthermore the CBN introduced agency banking, which allows banks and mobile payment operators (MPOs) to render services through third parties in various locations.  

But these measures are yet to bear the desired fruit in terms of massive attraction of the unbanked population into the financial sector. 
 
“By all counts, there are less than 5,000 active agents across the country, while the 21 Mobile Money Operators have been unable to scale. Consequently, only 47 percent of Nigerians have access to financial services within five kilometer”, Divisional Chief Executive Officer, Interswitch Financial Inclusion Services, Mike Ogbalu, said.
 
Giving reasons for the development, he pointed out that availability/visibility of mobile payment operators/agents and awareness of bottom-of-pyramid (BOP) financial services is still very low. 
 
Agent value proposition remains weak and unattractive.  High cost of effective agent network rollout remains a challenge to most service providers, while most providers have short term investment focus. 
 
He noted that with 95 percent of financial services concentrated in the urban areas, the existing financial services infrastructure is grossly inadequate to change the Nigerian Financial Services Landscape.
 
To address these challenges, Governor of Akwa Ibom, Emmanuel Udom, reiterated the need for sound policy framework, innovation and awareness. 
 
“Beyond a sound regulatory framework, we cannot drive the adoption of electronic banking without the right technology, the right standard, and above all, a sustained and robust awareness of the Nigerian public,” he said.
This however, requires a lot of capital and to make significant impact in the area of attracting the unbanked, mobile payment operators need to invest more.
 
This, according to the Deputy Director, Banking and Payment System Department, CBN, Jimoh Musa, has made the apex bank to increase the capital base of MPOs. 
 
“All mobile money operators must raise capital base to N2 billion.  We have realised that the key success factor to mobile money is agent network.  However, it takes money to build agent network. It takes N100, 000 for an agent outlet to be properly set up,” he said.
 
Perhaps one of the high points at the CeBIH retreat, was the presentation on “The Digital Financial Marathon:  Kenya’s Evolution Towards Digital Financial Ecosystem,” by the General Manager, Commercial Bank of Africa (CBA), Eric Muriuki Njagi. 
 
The presentation cited the experience of CBA in the use of mobile payment services to generate savings and extend loans to millions of Kenyans, as well as the experience of Kenya in the use of mobile payment to drive financial inclusion. The success factors, according to Njagi, are:  Identity authentication; distribution and facilitating legislation, interoperability; and alignment of need/opportunity to capability.
 
“The discussion should shift to digital inclusion from financial inclusion. Financial transaction should be a result of digital inclusion. Mpesa, Kenya’s globally acclaimed mobile payment product, led to the creation of agency banking model and business. Financial inclusion may not increase wealth, but influences how households responds to shocks.”

He added that for mobile payment to succeed in enhancing financial inclusion in Nigerian, “The BVN should be promoted to all stakeholders, particularly government. The BVN should also be used as unique (secondary) identifier with the credit bureaus, and possibly a pre-condition to credit.
 
“The authorities should identify the minimum level of sufficient Know-Your-Customer requirements to open a retail account. Stakeholders should undertake serious consumer education of credit reference bureaus”.
 
He advised posited that for financial institutions to develop agency model that are economically viable, as well as propagate low cost biometric POS, there should be assurance of operational integrity.

Achieving the above, according to Kuponiyi, implies the need for collaboration among multiple stakeholders and developing mobile payment that suits the lifestyle of the likes of Segun mentioned at the onset.
 
“It is imperative as we develop the mobile money to enhance inclusion in 2016, to also look at acceptance of payment from the medium, as the process won’t be concluded until value is really added to the bottom-of-the-pyramid, which is destination point- those we want included financially.  The inclusion service must address what these segments spend money on typically, and in short, must address their lifestyle”, he said.

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