Nigeria: Why Access Is Not Inclusion
Banking should be as easy and affordable as fast-moving consumer goods to reach Nigeria's banked and underbanked
In the early 2000s, the arrival of the telecoms companies opened a whole new world of access to telephone services to Nigerians.
Wealthy Nigerians could afford to buy sim cards that cost as high as ₦20,000 ($170) -- that excludes the cost of a mobile handset. For the rest of us, we had to go to the nearest kiosk or mom-and-pop shop to make phone calls, paying as much as ₦50 per minute.
Fast forward to today. We all have mobile phones. We top-up digitally and are able to do more than just call. We can use this technology in our day-to-day lives: e-top ups, USSD transactions, mobile apps, and social media. The difference is that Nigeria has evolved from access to inclusion in the telecommunications industry.
This trajectory is also underway in financial services.
Over the last three decades, Nigeria has come a long way with financial inclusion. Over 45 million Nigerians have access to affordable financial products and services. They have proof of identity (a bank verification number) and a bank account.
From the creation of the NIBSS payment switch to instant P2P transfer to USSD banking, Nigeria's regulators and largest banks -- GTB, FirstBank, Zenith and Access Bank -- pushed through reforms and innovations that drove financial inclusion.
Despite these strides, a large swathe of Nigerians still remain outside the formal banking sector. Financial exclusion goes hand-in-hand with the nature of employment. The vast majority of Nigerians -- representing 84% of the total labor force -- work in the informal sector, both in rural and urban areas. They are market traders, minibus (danfo) drivers, okada drivers, and smallholder farmers. They earn and transact in cash on a daily basis outside of the formal financial system.
Cash is still king in Nigeria. This is not just the case in Nigeria but in all African countries. According to the World Bank, 43% of Sub-Saharan Africans are financially included but 95% of retail transactions are in cash.
The next frontier in financial services will focus on bringing the roughly 30 million Nigerian adults into the formal banking sector. Fintechs have a large role to play with their strong advantage in banking the unbanked and underbanked. They can leverage innovation to reach the last mile and, in the process, expand the financial services pie in Nigeria.
Fintechs cannot afford to shy away from the hard work required to serve the truly excluded -- smallholder farmers, traders, and other informal workers -- rather, we overly focus on cutting a slice of the existing pie and serving the same customers: middle class digital natives who are already banked... Read more on All Africa
Source: All Africa