The recent hike in the minimum capital base of Micro-finance Banks (MfB) could impact negatively on the country’s search for increased financial inclusion, former governor of the Central Bank of Nigeria (CBN), Muhammadu Sanusi, has said.
Sanusi, who is now the Emir of Kano, said this in a recent interview in Abuja with the Enhancing Financial Innovation & Access (EFInA) on issues surrounding Nigeria’s financial inclusion drive, especially in the north.
“Some of the signals that have been sent suggest that things are getting more expensive and the charges, for example ATM charges,’’ Sanusi said.
He added that with the “very huge increase in the capital base of microfinance banks which will actually just reduce the number of banks that will be available, are only likely to have a negative impact on the penetration of financial inclusion in the system.”
Nigeria, Africa’s most populous nation currently has about 41.6 percent financial exclusion rate. This means that about 40.1 million of the country’s total adult population do not have access to financial services and products, according to official figures.
Sanusi explained however that having been away from the central bank for a long time, he has limited information on the basis for such an increase in the bank’s capital base. Sanusi was governor of CBN from 2009 to 2014.
Sanusi, who headed the ban during the global financial crisis, said he was not criticising CBN for the hike. “I do not know the reasons. I am sure there must be reasons for these,” he said, and added that he had not discussed with the management of the central bank.
Meanwhile the governor of the central bank, Godwin Emefiele, has explained that increase in the minimum capital base was aimed to “strengthen the capacity of MFBs.” Emefiele, spoke through Osita Nwanisobi, the Deputy Director, Development Finance department of CBN at the this year’s EFInA financial inclusion conference. The theme of the conference was “The Business case for Financial Inclusion.”
However, financial inclusion analyst have argued that there are indications the new minimum capital requirements could undermine financial inclusion in a country where millions of people do not have access to bank accounts.
Under the new requirements, the minimum capital base for National MfBs was increased to N5 billion from N2 billion, while that for State MfBs was increased to N2 billion from N100 million. CBN also increased the minimum capital for Unit MfBs to N200 million from N20 million. There are 1,008 microfinance banks in the country, out of which 893 have unit licenses.
Taiwo Joda, MD of ACCION Micro-finance Bank believes that “there are more fundamental issues that needs to be addressed. The overriding issue is on financial inclusion and harvesting more Nigerians into financial system.”
He said that a micro finance bank works on two legs: financial sustainability and social sustainability. “You cannot drive financial sustainability without social sustainability. The new guidelines is focused more on financial sustainability, and as laudable as that may sound, every owner of a micro finance bank is looking at returns on investments because they are business people,” he said.
The CBN has set a target of 80 percent year 2020. CBN has blamed economic constraints, insecurity issues in the northern part of Nigeria, obsolete strategies as part of obstacles to financial inclusion in the country.
CBN at the recent EFInA 2018 conference reassured Nigerians that the set 80 percent financial inclusion rate is still achievable by 2020. “The set 20 percent exclusion target is still achievable,” the governor said.
“I think we have not done as much as we could on mobile phones, and telephone banking,” Sanusi said. “When you look at countries like Kenya and how far they have gone, we could do much better, given the level of mobile phone usage and penetration in Nigeria,” the former CBN governor said.
Nigeria currently has a bank-led financial inclusion model, and that seems to have retarded the country’s inclusion rate as compared to its Africa peers who have through the Telco-led model made progress in including more of its citizens.
A survey by BusinessDay showed that Kenya moved 81.6 percent financial inclusion rate in 2017, from 74.7 percent in 2014, supported by 60 percent mobile money service penetration.
Also, Ghana’s decision to have a Telco-led model resulted in a 73 percent increase in registered mobile money customers in just one year, according to World bank data, and this has helped lift financial inclusion rates in Ghana to 58 percent in 2017 from 41 percent in 2014.
Sanusi said the telephone banking in Nigeria is lagging far behind where it should be. “Now, I’m personally responsible, I think, for having been very strict in terms of insisting on a bank module as far as mobile banking was concerned,” Sanusi explained.
On whether financial inclusion should be opened up to the mobile operators, he called for flexibility in policies, “and after five years of trying something, if it’s not working, maybe we should try something else or introduce some flexibility.”
He concluded that perhaps there is a role for the MTNs and the Airtels in this area, “that maybe they could help “and we could figure out how the concerns of the CBN as a regulator can be addressed while we involve them in this process,” he mentioned.
On how to achieve the 80 percent financial inclusion target, Nwanisobi said that “what we want to do is to include more Nigerians into the financial sector, especially through the shared agent network facility.’”
He said that the essence of that is to offer incentives and allow some of these super-agents and mobile money operators to roll out agent network across the 774 local governments in the country.
Tags: financial inclusion