Analysis

Why Nigeria lags behind SSA peers in financial inclusion

by BUNMI BAILEY

July 26, 2018 | 8:02 pm
  |     |     |   Start Conversation

Poor level of education enlightenment, adaptation of technology and insufficient telecommunication infrastructure are the reasons financial inclusion in Africa’s biggest mobile phone market has lagged behind its Sub Saharan African (SSA) country peers, analysts have said.

“Some of these countries are better than us in terms of education penetration, early adaptation of technology, for example Kenya with Mpesa has helped their financial penetration level and financial system and other infrastructures like communication, transport etc,” Johnson Chukwu , CEO, Cowry Asset Management Limited, said.

“And these factors may have contributed to the country lagging behind. But the core of it is the poor education enlightenment in educating the people on the value of having a bank account,” Chukwu also added

Ayo Akinwunmi, Head of Research, FSDH Merchant Bank, said that the issue of the insecurity and the high unemployment rate in Nigeria are factors contributing to the decline in financial inclusion of Nigerians

“A lot of banks that are located in these areas where there is high level of insecurity are already shutting down. If there is peace there will be more bankable adults,”he said

“And when you look at the unemployment rate also, people are losing their jobs on account of the recent economic recession we enter in 2016 and existed in Q2 2017 and with the weak purchasing power that we are experiencing is why the bankable adults are dropping ,” He explained

According to the World Bank Fintech Database 2017, the country receded in financial inclusion between 2014 and 2017 and the percentage of banked adults dropped nearly 4 percentage points to 39 percent, while the sub-Saharan African average increased more than 8 percentage points to 43 percent.

“Between 2014 and 2017, the percentage of banked adults dropped nearly 4 percentage points to 39 percent, while the sub-Saharan African average increased more than 8 percentage points to 43 percent,” the Fintech report said

Financial inclusion in the country declined in the last four years to 39.4 percent in 2017 from 44.2 percent in 2014 while SSA countries on average gained across the region as the number of bankable people increased to 42.6 percent in 2017 from 34.2 percent in 2014.

Kenya improved to 81.6 percent in 2017 from 74.7 percent in 2014, Ivory coast improved to 41.3 percent from 34.3 percent and South Africa receded abit to 69.2 percent from 70.3 percent

According to a 2016 report by Financial Sector Deepening (FSD) Kenya, the introduction of MPesa changed the game as the population of adults in Kenya that are financially excluded is about 17 percent from 23 percent within a decade.

“I think there is still a wide communication gap between the telecoms and the banks which can only be addressed by the CBN. In the case of Kenya (Safaricom), every bank in Kenya integrated with Mpesa (mobile money app) for ease of transfer,” Ayodeji Ebo, MD, Afrinvest Securities limited said in a telephone response

“The Telecom then recruited agents across the cities to distribute the products. This model should be further studied and adapted to Nigeria. To work effectively in Nigeria, the intervention of the CBN will be required to ensure positive synergy between the telecoms and banks,” Ebo suggested

In South Africa for example, more than 70 percent of adults, for example, have a transaction account more than in Brazil, Chile, India, Mexico, and Russiaand its life insurance adoption rate is higher than that of far wealthier countries such as Italy and Spain , according to Boston Consulting Group (BCG), a global management consulting firm.

Ivory Coast has experienced a mobile money revolution. There are now more adults with mobile money accounts of 24.3 percent than with bank accounts of 15 percent. In fact, Ivory Coast has the fifth highest rate of mobile money accounts in the world behind Kenya (58 percent), Somalia (37 percent), Uganda (35 percent), and Tanzania (32 percent), according to Brookings Instititue, a highly regarded, nonprofit public policy organization based in Washington, DC.

Financial inclusion is when individuals and businesses have access to useful and affordable financial products and services that meet their needs e.g transactions, payments, savings, credit and insurance delivered in a responsible and sustainable way

This month, the Central Bank of Nigeria announced it is not on track to reach its target of increasing financial inclusion to 80 percent by 2020. It is now reviewing the path it took in 2012 with a “refreshed strategy” and has also signed a co-operation agreement with the Nigerian communications commission to improve the penetration of financial services using mobile phones.

 

BUNMI BAILEY


by BUNMI BAILEY

July 26, 2018 | 8:02 pm
  |     |     |   Start Conversation

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