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Published On: Wed, Jan 30th, 2019

CBN and challenge of Financial Inclusion

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By Etuka Sunday

The Central Bank of Nigeria (CBN)’s persistent drive to achieve 80% Financial Inclusion in the country by the year, 2020, is one that should be commended by all Nigerians.
Financial inclusion, according to World Bank, means that individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible and sustainable way.
The World Bank Group considers financial inclusion a key enabler to reduce extreme poverty and boost shared prosperity, and has put forward an ambitious global goal to reach Universal Financial Access (UFA) by 2020.
Global Findex data said, about 1.7 billion adults remain unbanked—without an account at a financial institution or through a mobile money provider. In 2014 that number was 2 billion.
The latest data released by Enhancing Financial Innovation and Access (EFInA) indicates that about 36.8% of eligible Nigerian adults do not have access to Financial Services. This is down from 41.6% recorded in 2016.
The EFInA Access to Financial Services in Nigeria 2018 Survey gives the population of Adults in Nigeria to be 99.6 million (49.9% Male and 50.1% Female). Out of the 99.6 million, 36.6 million Adults, representing (36.8%) are Financially excluded in Nigeria. 71.3% of the financial excluded adults, according to the survey own mobile phones.
It is true that access to financial services opens doors for families, allowing them to smooth out consumption and invest in their futures through education and health.
It is also true that access to credit enables businesses to expand, creating jobs and reducing inequality-the more reason why the Central Bank of Nigeria (CBN) is working assiduously to ensure zero financial exclusion in the country.
Just recently, the CBN mobilised stakeholders within and outside the Financial sector in furtherance of its unwavering push to achieve 80% Financial Inclusion target by the year, 2020.
The stakeholders converged on Abuja from 17th to 18th January, 2019 to brainstorm on the speedy ways this set target could be achieved.
The apex bank believe that with the collaborative efforts of financial sector regulators, banks and other financial services providers, development partners, organised consumer advocacy groups and civil society organization, it would surpass the target of 80% financial inclusion target by the year 2020.
Recall, in 2012, October 23 to be precised, Nigeria launched the National Financial Inclusion Strategy (NFIS). The Strategy defined financial inclusion as achieved “when adult Nigerians have easy access to a broad range of formal financial services that meet their needs at affordable cost”.
The implementation of the NFIS is aimed at reducing the number of eligible adult Nigerians that are excluded from the formal Financial System from 46.3% in 2010 to 20% by the year 2020.
The key elements of inclusion are: that the financial services should be within a distance that consumers can reach easily; the price of financial services should be low enough to make them affordable by the excluded groups; the services offered should exhibit variety and flexibility to enable consumers make appropriate and informed choices; the benefits of the services should be clearly stated to elicit ultimate usage by consumers; and the mode of delivery of services should be convenient, understandable and simple.
Since the inception of the Strategy, several policies have been instituted to ensure that adult Nigerians are formally included.
Some of these include: the National Financial Literacy Framework (2012), Three Tiered Know Your Customer Requirements (2013), Takaful Guidelines (2014), Regulatory Framework for Licensing Super Agents (2015), Guidelines on the Regulation and Supervision of Non-interest (Islamic) Banks (2016), Guidelines on the pass-through Deposit Insurance Scheme (2016) Guidelines for the Licensing and Regulation of Payment service Banks (2018).
EFInA 2018 Survey said, six years after implementation of these policies, the current headline target stands at 63.2%. This leaves a 16.8% gap to be achieved by the targeted year, 2020.
In order to further increase financial inclusion in Nigeria, the NFIS was reviewed and released to the public in November 2018 and the headline targets were maintained.
Research undertaken during the review of the NFIS led to the identification of five target demographic groups that remain most excluded. They include: Women, Rural Areas, North, Youth and MSMEs.
The research shows that financial inclusion is higher among men than women; is lower in the rural areas than urban areas; the North-East and West are the most financially excluded zones; the 18-25 age bracket is the least included age group; and MEMEs are less financially included compared to large businesses.
The Financial Inclusion Secretariat, CBN is the coordinating body and the liaison for all stakeholders in the Financial Inclusion space in Nigeria. The Secretariat is responsible for engaging, coordinating and evaluating initiatives geared towards the achievement of the Strategy targets.
To bridge the identified gaps, the Secretariat said, the revised NFIS implementation in Nigeria would focus on five top priority areas: creation of appropriate Regulatory & Policy environment, Massive Roll out of Agent networks, Simplification of Identity/Know Your Customer (KYC) requirements, Promotion of Digital Financial Services (DFS), and Creation of digital payment ecosystems to support person to government, government to persons (Public sector) transactions.
Speaking at the Maiden Edition of Financial Literacy Stakeholders’ Conference in Abuja, the CBN’S Governor, Mr Godwin Emefiele said, CBN recognises that access to finance empowers people economically; consequently, has put in place policies to make that access possible.
He said, the reduction in the figure of eligible Nigerian adults who do have access to financial services from 41.6% recorded in 2016 to 36.8% in 2018 was encouraging.
He said, “whilst the improvement is encouraging, there is still considerable work to be done to achieve the overall 20% target exclusion rate by 2020. And the Revised National Financial Inclusion Strategy rightly identifies Consumer Protection and its constituent pillar of Consumer Education as critical to the attainment of its objectives.
Emefiele said, low financial awareness and literacy levels as well as consumer confidence remain critical issues, therefore, for the financial inclusion strategy to succeed; they must be given greater attention.
Represented by the Deputy Governor, Financial Systems Stability (FSS), Mrs Aisha Ahmad, Emefiele said, the Conference was organised, so that stakeholders could brainstorm on the strategy policy documents that have been developed to enhance the financial Inclusion agenda.
He said, the conference theme “Implementing Financial Literacy and Consumer Protection to advance Financial Inclusion in Nigeria” couldn’t be more unambiguous in its focus and in its urgency to move from the conceptual to the practical in drive for financial inclusion.
The CBN boss said, “today, the financial system is probably the most affected by technological advancement. New digital products and services have emerged and the internet greatly influences consumers’ purchasing decisions as they continue to adopt e-commerce. For instance, in 2017, in the banking industry, 1.4 billion electronic transactions valued at N97.4 trillion were processed as against 869 million transactions valued at N69.1 trillion recorded in 2016.
“As the markets develop with the introduction of new innovative players, products, and channels, the challenge for regulatory agencies shall be to continually balance supervisory objectives aimed at identifying and managing and mitigating risk with those that support market development and help promote financial inclusion. This can be done; as the 3 tiered KYC policy is a good example!
He said, the CBN is promoting new initiatives to positively drive financial inclusion statistics in the near term.
“CBN recently introduced regulations and guidelines for the licensing and operations of Payment Service Banks in furtherance of its efforts to leverage technology to promote financial inclusion and enhance access to financial services for the unbanked and underserved segments of the population. This is expected to drive down exclusion rates by leveraging wider variety of market participants, leveraging technology and multiple channels to enhance access to deposit products, payments and remittance services to small/micro businesses and low income households.
“The Bank, is also facilitating in collaboration with the Bankers Committee and the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL), and NIPOST, the launch of a national Micro Finance Bank to promote access to finance for credit to fund SMEs and other unbanked groups. The national MFB shall be technology driven and leverage NIPOST’s presence in 774 local gifts and would serve as an efficient channel for the disbursement and monitoring of key intervention funds such as the Anchor borrowers fund, SME fund etc to farmers and SMEs at the grass roots level,” he said.
Also speaking, the Director, Consumer Protection Department, CBN, S.K Salam-Alada said, despite the strides towards fostering financial inclusion, there are significant challenges.
“Prominent amongst these challenges are dearth of financial literacy and awareness amongst consumers and a general lack of confidence in dealing with financial institutions.
“These issues can only be addressed through robust financial literacy and consumer protection programmes. If consumers are not adequately protected – if they are constantly having unresolved issues with their financial services providers, they are bound to be apathetic towards the system. This will negatively affect the financial inclusion rate and ultimately the stability of the financial system.
“At the CBN, significant efforts are being made on a continuous basis to ensure that financial consumers are adequately protected. Since the creation of the Consumer Protection Department (CPD), circulars and frameworks have been released prominent amongst which are the Helpdesk Circular of August, 2011, and the Consumer Protection Framework (CPF).
“The CPF rests on a tripod, namely, Market Conduct Regulation and Supervision, Complaints Handling and Redress and Financial Literacy.
“In the same vein, through the redress mechanism, over N68billion has been recovered in favour of consumers,” he said.
Meanwhile, the Managing Director, Jaiz Bank, Hassan Usman has disclosed the plan of the bank to empower Women entrepreneurs in Nigeria, as part of the Financial inclusion drive of the CBN.
Usman while addressing newsmen at the sideline of the Stakeholders’Conference said, credit facility would be made available for the women entrepreneurs, especially those selling Akara and Fura de Nunu to expand their businesses, and deposit their money with the bank.
Usman said, the bank is currently running a Pilot in a village in Katsina state where the idea would be tested and extended to other of the country if succeeded.
“You know as a bank we are a child of financial inclusion policy of the Federal government, to be able to provide this kind of banking to those who require it. To this end, more than any other bank, we have more to do with this policy in place.
“We have been part of all the process of agency banking, and using technology, but in addition, we are running a pilot in a village in Katsina state, where we will be interacting with women entrepreneurs, who are selling Akara, Fura da Nunu, etc. So that we can empower them.
“We are not going there to get deposit, we are going there to empower them, so that with time, they will generate wealth and deposit, but at this stage we are going there to empower them,” he said. The MD said, the empowerment would not be restricted to only the women entrepreneurs in the village, but also those in the cities.
“We will get them to open account and then we support them with little credit,” he said.
Meanwhile, CBN said it would adopt the following principles to drive greater Financial Inclusion in Nigeria: An appropriately regulated level playing field that focuses on the activity and the actors while adopting a risk-based approach, Stakeholders concentration on areas of core strength or comparative advantage to engender high impact.

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