Nkechi Ibe
The overall objective of financial inclusion as stipulated in the 2018 Annual Report National Financial Inclusion Strategy (NFIS) Implementation is to bring the underserved segment of the population (unbanked population) into the formal financial system by providing them with access to financial services.
The nation’s economy planners argue that an improved access to finance is an important factor in accelerating sustainable economic growth, reducing poverty and unemployment as well as enhancing the stability of the financial sector. This entails the provision of a broad range of financial services, which are relevant, appropriate and affordable for the entire adult population, especially the low income and rural segment of the population.
Such services as enunciated in this policy document include, but are not limited to, savings, credit, insurance, payments, remittances and pensions. The intention of the Central Bank of Nigeria (CBN) as the government agency driving this process is to ensure that people from different segments of the society are encouraged to have access to the financial institutions and be able to avail themselves of various financial programmes being offered by different policy initiatives of the government.
Without stretching the importance of an inclusive financial system, it must be understood that this is widely recognized in policy circles, as it has become a priority in many countries not just Nigeria. On the part of the apex bank, this policy is focused on achieving its core mandate of ensuring price and monetary stability in the economy by increasing the scope of savings, investment and consumption decisions that are made within the formal financial sector.
The CBN hopes that a more inclusive financial system will bring financial decision makers within its purview and thus enable the monetary authority, monitor, regulate and supervise financial transaction with a view to maintaining financial system stability. It will also improve theefficacy of monetary policy interventions. In the prevailing circumstance, it is encouraging to note that the National Financial Inclusion Strategy (NFIS) being driven by the bank is yielding positive results. Emerging figures indicate that the financial exclusion rate of adults has progressively improved from 46.3 per cent in 2010 to 41.6 per cent in 2016 and 36.8 per cent in 2018, as against the NFIS target of 20.0 per cent by 2020. The apex bank is immensely excited that with the improved macroeconomic environment such as stable exchange rate, monetary and financial stability in the recent times, efforts are on to foster a conducive environment for financial inclusion to thrive, particularly in the underserved segments of the country.
However, if the NFIS target of 20.0 per cent target for adults by 2020 is to be achieved, the strategy specifically strives to explore priority themes of youth, women, rural areas, small and medium enterprises (SMEs) and the northern region. These priority areas, it needs to be stressed, are expected to close identified gaps and tremendously advance financial inclusion. Emphasis will also be placed on the use of technological tools in improving access to finance among the underserved.Consequently, it is an inexorable fact that a stakeholder-driven implementation approach would give impetus to the achievement of the targeted outcomes. At the pace the CBN is moving, one is inclined to be optimistic that the fundamental building blocks for incremental growth in the policy objectives have already been laid.
This optimism is further buoyed by the survey number, which show a marginal increase from 58.4 per cent in year 2016 to 63.2 per cent in 2018. The measurement also disaggregated financial inclusion data on state-by-state level for the first time. While the data showed significant improvement in the North West and North East zones, the two zones remained more disproportionally excluded than any other zone at 62 per cent and 55 per cent exclusion rates, respectively. The South West remained the only region to havesurpassed the targeted 20 per cent exclusion rate by 2020, with 19 per cent exclusion rate recorded in 2018.
Regardless, the CBN insists that 2018 is a Year of Landmark Financial Inclusion Policies and Initiatives. The apex bank is satisfied that, in addition to being a measurement year, 2018 can be described as a very important year that brought a massive shift in financial inclusion policy approach. First, in its analysis, the CBN pointed out that the National Financial Inclusion Strategy was, within the period, revised to address changes in the regulatory and technology landscape, with a view to accelerating the achievement of the strategic objective of 80 per cent Financial inclusion by year 2020.
The core of the Revised National Financial Inclusion Strategy, by CBN’s assessment, is focused on a first principle approach with two overarching principles, creating a level playing ground and adopting a risk-based approach while at the same time encouraging stakeholders to play in the area of their core strength or comparative advantage. The strategy also seeks to leverage Digital Financial Services (DFS) to drive financial inclusion by enabling Digital ID, expanding agent network, focusing on business cases that would drive Government to People (G2P) and People to Government (P2G)payment, among other priority area.
As a direct offshoot of the revised strategy, the CBN issued a Payment Service Bank (PSB) Licensing and Regulatory framework. In line with the NFIS principle, provision was made for non-traditional player like the Telco’s, Fast Moving Consumer Goodcompanies (FMCGs) and all entities with large distribution network to leverage on their existing structure and provide financial services for the unbanked. According to the policy trust, promoters of PSB would have 25 per cent of their presence in the excluded areas.
One issue that has bedevilled the penetration of financial services to underserved area is insufficient location agents. To achieve the financial inclusion target of 80 per cent by 2020, Nigeria requires 62 agents per 100,000 adults of which as at December 2017 only 28.2 agents per 100,000 adults had been recorded. Financial inclusion survey numbers show a marginal increase from 58.4 per cent in 2016 to 63.2 per cent in 2018. Significant improvements are recorded in the North West and North East zones, although they still lagged as states with the highest exclusion rates.
Unfortunately, credit penetration is still at 3 per cent at 2018. Lack of collateral and high interest rates, among other challenges, have hindered availability of credit, especially to MSMEs. To address this gap,the Bankers Committee in April 2018 launched the Agri-Business Small and Medium Enterprise Investment Scheme (AGSMEIS). The scheme seeks to provide access to credit to MSMEs at a concessionary rate, with no collateral.