Financial Inclusion in Nigeria: The Challenges of Banks & Mobile Money Operators (MMOs)
Nigeria prides itself as the most populated and economy giant of African continent with over 176million people yet 64% (of the adult population) currently un(der)banked! The financial sector also boost of 22 commercial banks, over 400 mircofinance banks and above 23 Mobile Money Operators who over the years, have been trying to tap into the market potential of the large un(der)banked population in the economy.
From findings, the current un(der)banked population control over 75% of daily retail transaction and it will surprise you that even the banked population are encouraging them through cash transactions because the economy has not transit from her traditional cash based.
The result is the increasing number of
informal financial operators whose activities is not regulated but
control high volume of liquidity that could have been use to create
economic opportunities if it were in the hands of the financial
institutions.
Effort of Central Bank of Nigeria
The CBN in her regulatory capacity introduced several measures through policies, guidelines, licencing and facilitating workshops, researches and support towards bringing the un(der)banked into the mainstream. The activities of the regulator opened up opportunities for all the financial institutions to replicate the same success of stories across the world (such as Grameen Bank in Bangladesh and M-Pesa in Kenya) but it only resulted into the current situation of 64% un(der)banked population! Definitely, something is missing!
The various efforts (with even EFInA giving grants to those who can provide solution to the problem) tell of the significant contribution such a population can generate in this economy that is greatly affected by global oil price which has impacted negatively on the financial sectors.
With the current macroeconomic challenges and uncertain outlook, the Retail space in Nigeria has great potential for deposit mobilization, engaging the underbanked, converting the unbanked, creating liquidity, driving cashless policy and promoting economic growth.
Challenges to the Success of Financial Inclusion in Nigeria
There are several challenges identified that have created the gap and pose as unsurmountable mountain to financial inclusion in Nigeria. They include:
* Misconception: Generally, there is a believe that once it works anywhere else (including Kenya), it can work in Nigeria. But the reality is that the culture and economy ideology defer because Nigeria is still predominately cash based. Second, there is another believe that the rate of mobile users should directly result to mobile money subscriber but this, is another mistake because most of the people under the un(der) population are hostile to the wave of electronic financial transaction platform and still believe the “do-it-for-me” service! That is why the “esusu” and “ajoo” (informal financial providers) are strongly trusted and established!
* Channel: From the first point (above), it is clear that the prefer channel is not the corporate sit and take coffee approach but rugged style. The reality is similar to gold diggers and commodity trader, while the former dig to extract gold, the former only trade the available gold in the market without even touching it. The most appropriate channel for the un(der)banked is the combination of their trusted traditional method and technology!
* Framework: The Mobile Money Operations render financial services through their agents who currently sees such partnership as hindrance to its primary business, while on the commercial banks side, they use contract staffs (called Direct Sales Agent/Executives) to chase customers for deposits with possibility of great risks to bank and lack of comfort by the customers.
* Compensation Model: Most of the agent under the Mobile Money Operators and Direct Sales Agent/Executives of the commercial banks complained bitterly on the unattractive incentives from rending such service. Targets that are not backed with market intelligence and strategy for successful implementation!
* Market Intelligence: The situation in Nigeria is like asking the sight challenged person (such a blind man) to just run without any direction, assistance or guide! It may shock you that many of the financial institutions (including the Mobile Money Operators) do not even have sufficient market intelligence that can create access to the un(der)banked population. For Instance, in Lagos, many of them don’t even know that there are 442 registered markets with potential of mobilizing over #30Billion deposit (turnover) within 9months!
Moment of Truth
The above points are inconclusive of the current challenges to financial inclusion in Nigeria and your doubt can be cleared if any of the banks and Mobile Money Operators, who claimed to be the pacesetter in financial inclusion can provide analysis of active subscribers, volume and value of transaction, agency spread and profitability! (Trust me, it is just like the empty barrel that makes the loudest noise)
In conclusion, the solution is not far-fetched when the above challenges are thoroughly considered and experts’ advice are consulted for success implementation to increase the percentage of financial inclusion in Nigeria within the next possible time!
by Oluwaseun Adesanya
+234-803-849-8000
Lagos, Nigeria
(An int'l Consultant in financial inclusion and Strategy. He is currently, the head of Corporate Strategy & Performance Management of the leading Software company in Africa, SystemSpecs – Owner of HumanManager and Remita)
Effort of Central Bank of Nigeria
The CBN in her regulatory capacity introduced several measures through policies, guidelines, licencing and facilitating workshops, researches and support towards bringing the un(der)banked into the mainstream. The activities of the regulator opened up opportunities for all the financial institutions to replicate the same success of stories across the world (such as Grameen Bank in Bangladesh and M-Pesa in Kenya) but it only resulted into the current situation of 64% un(der)banked population! Definitely, something is missing!
The various efforts (with even EFInA giving grants to those who can provide solution to the problem) tell of the significant contribution such a population can generate in this economy that is greatly affected by global oil price which has impacted negatively on the financial sectors.
With the current macroeconomic challenges and uncertain outlook, the Retail space in Nigeria has great potential for deposit mobilization, engaging the underbanked, converting the unbanked, creating liquidity, driving cashless policy and promoting economic growth.
Challenges to the Success of Financial Inclusion in Nigeria
There are several challenges identified that have created the gap and pose as unsurmountable mountain to financial inclusion in Nigeria. They include:
* Misconception: Generally, there is a believe that once it works anywhere else (including Kenya), it can work in Nigeria. But the reality is that the culture and economy ideology defer because Nigeria is still predominately cash based. Second, there is another believe that the rate of mobile users should directly result to mobile money subscriber but this, is another mistake because most of the people under the un(der) population are hostile to the wave of electronic financial transaction platform and still believe the “do-it-for-me” service! That is why the “esusu” and “ajoo” (informal financial providers) are strongly trusted and established!
* Channel: From the first point (above), it is clear that the prefer channel is not the corporate sit and take coffee approach but rugged style. The reality is similar to gold diggers and commodity trader, while the former dig to extract gold, the former only trade the available gold in the market without even touching it. The most appropriate channel for the un(der)banked is the combination of their trusted traditional method and technology!
* Framework: The Mobile Money Operations render financial services through their agents who currently sees such partnership as hindrance to its primary business, while on the commercial banks side, they use contract staffs (called Direct Sales Agent/Executives) to chase customers for deposits with possibility of great risks to bank and lack of comfort by the customers.
* Compensation Model: Most of the agent under the Mobile Money Operators and Direct Sales Agent/Executives of the commercial banks complained bitterly on the unattractive incentives from rending such service. Targets that are not backed with market intelligence and strategy for successful implementation!
* Market Intelligence: The situation in Nigeria is like asking the sight challenged person (such a blind man) to just run without any direction, assistance or guide! It may shock you that many of the financial institutions (including the Mobile Money Operators) do not even have sufficient market intelligence that can create access to the un(der)banked population. For Instance, in Lagos, many of them don’t even know that there are 442 registered markets with potential of mobilizing over #30Billion deposit (turnover) within 9months!
Moment of Truth
The above points are inconclusive of the current challenges to financial inclusion in Nigeria and your doubt can be cleared if any of the banks and Mobile Money Operators, who claimed to be the pacesetter in financial inclusion can provide analysis of active subscribers, volume and value of transaction, agency spread and profitability! (Trust me, it is just like the empty barrel that makes the loudest noise)
In conclusion, the solution is not far-fetched when the above challenges are thoroughly considered and experts’ advice are consulted for success implementation to increase the percentage of financial inclusion in Nigeria within the next possible time!
by Oluwaseun Adesanya
+234-803-849-8000
Lagos, Nigeria
(An int'l Consultant in financial inclusion and Strategy. He is currently, the head of Corporate Strategy & Performance Management of the leading Software company in Africa, SystemSpecs – Owner of HumanManager and Remita)
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