The Enhancing Financial Innovation & Access (EFInA) organisation sees opportunities in agent networks which it says when explored can increase Nigerians’ access to financial services.
This was disclosed in the recent research by the Lagos-based financial inclusion body, titled; Article on Exploring Opportunities for Increasing the Development of agent Networks in Nigeria.
“In order to achieve universal access to financial services, Agency banking serves as veritable channel for distributing financial products and services that are too hard to reach areas in a cost effective manner,” EFInA cited in the research that was made available to BusinessDay.
Meanwhile, the research by EFInA was conducted at a time when there is still deliberation on the model and sector that can best drive Nigeria’s financial inclusion.
The Africa’s most populous nation has an exclusion rate of about 41.6 percent, which represents about 40.1 million of the country’s total adult population who do not have access to financial services and products.
Although the Central Bank of Nigeria (CBN) aims to include about 80 percent of the country’s population by the year 2020. However, the impediments to achieving the set target are ascribed by the apex bank to economic constraints, insecurity issues in the northern part of Nigeria, obsolete strategies, among others.
“Financial exclusion leads to loss of opportunities, retarded economic growth and increased poverty levels. A well-developed financial system accessible to all triggers saving culture, investment decisions, uptake of technological innovation and in the long-run, economic growth. Therefore, financial inclusion is instrumental in bridging the gap between the included and excluded; the rich and the low income,” EFInA explained in its research.
Meanwhile, the financial inclusion agency disclosed in its recent research article that the basic functions of agent networks are: Account opening, Cash-In and Cash-Out services while the secondary functions are Transfers and Bill payments. Other possible functions are Micro pension, Microinsurance, BVN enrollment, Identity registrations- Voters ID, National ID etc.
Furthermore, it cited that Agent Networks can help address the barriers to the roll-out of conventional (non-agent) access points, which includes: High fixed costs of dedicated physical infrastructure in remote locations, high operational costs (e.g. high security, staff salaries, high speed internet connectivity, 24hrs electricity etc), limited market size leading to conventional access points being loss-making beyond a certain point.
“Rolling out agent networks has potential of reducing the cost of distributing financial products/services, as: Agent costs are spread/shared across other business activities of the agents, Agent costs are largely variable costs than fixed costs, hence less hampered by low transactions volumes and it is fast and easy to set up, and thus minimises the capital expenditure of expansion.” EFInA said.
Meanwhile, CBN had recently proposed a Payment Service Banks (PSB), which is aimed at driving financial inclusion in the rural area.
Although PSBs are expected to have a minimum capital requirement of N5 billion, the country’s biggest lender is also proposing that entities applying for a PSB license should pay a non-refundable application fee of N500,000 as well as a non-refundable licensing fee of N2 million, as compiled from the apex bank’s exposure draft on the guidelines for licensing and regulation of PSBs which is published on its website.
EFInA concluded by saying that access to financial services plays a key role in developing strong and efficient financial infrastructures, which facilitate the growth of an economy and alleviates poverty.
“Improving access to finance for low income households and micro enterprises can unlock income earning opportunities and self-reliance for many, hence, leading to the achievement of sustainable economic growth.”
Tags: financial services