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Cover Service Data. Using GSM network channels to transmit data, anyone can do the entire gamut of banking – account opening, deposits/ withdrawals, funds transfer, airtime/data purchase, loans applications and much more - on their phone. Essentially, USSD works on a basic phone with black-and-white display, a feature phone and on smartphones. By the same token, financial technology purveyors saturated the market with products and services that in their form and content were supposed to stir significant interest in the unbanked populations. There are apps that allow people to try out their investing skills on their own with little money; apps that allow you to obtain quick loans; free online personal finance tools that provide the best way for consumers to save money; and apps which allow P2P payment through NFC, QR codes or online. We even have a mobile only bank designed specifically for the digital realm, offering easy and convenient banking along with unique and engaging ways to manage money. Yet, despite their best efforts, enough of the unbanked populace are not banking. In fact, 40.1 million bankable Nigerians, representing 41.6 percent of the adult population, are currently subsisting outside the realm and influence of the formal financial sector. What is even worse is that too many of them seem unable to grasp this stark reality. In an economy that is touted as the largest in Africa and a population that accounts for a good percentage of black people on earth, that has strong financial regulation, a functioning banking system, and a network of mobile money services, why is Nigeria lagging far behind its peers? Emerging answers seem to treat contemptuously the energy poured into the efforts outlined above. Last year, global research consultancy, InterMedia published findings from its Financial Inclusion Insights (FII) 2016 Annual Report and Survey Data on the status of financial inclusion in Nigeria. It was based on trends in attitudes, access, use and demand for financial services of what the firm called a nationally representative survey of 6,352 Nigerian adults. FII is a programme also funded by the Bill & Melinda Gates Foundation and designed to build meaningful knowledge about how the financial landscape is changing across eight countries in Africa and Asia (Bangladesh, India, Indonesia, Kenya, Nigeria, Pakistan, Tanzania and Uganda). It produces data and analysis regarding citizens’ financial lives, attitudes, awareness and use of, access to, and advanced engagement with financial products and services. According to the annual survey data, the number of adults who are considered financially included, defined by FII as adults with a registered account at a full-service financial institution, has not improved in Nigeria since 2014. Financial inclusion in Nigeria dropped slightly from 37 percent in 2015 to 35 percent in 2016, lagging behind three other African countries surveyed as part of the programme. In 2016, FII data showed 69 percent of Kenyans, 54 percent of Tanzanians, and 40 percent of Ugandans were financially included. It found that more than half of Nigerian adults do not have access to financial services and that most Nigerians did not know of a mobile money point of service within their environment. Even when they have access, many Nigerians lack the basic resources that facilitate inclusion. Financial litera-
THERE HAS BEEN SIGNIFICANT GROWTH IN FINANCIAL INCLUSION More adults have an account with a financial institution or mobile money service now than three year ago
69+100+ 31+z Z 62+100+ 38+z Z 1.7
69%
BILLION UNBANKED
World's adult population with account in 2017
2
62%
BILLION UNBANKED
World's adult population with account in 2014
PERSISTENT GAPS FOR WOMEN
980 million
Women who who are part of the unbanked population. The gender gap has barely changed since 2011.
SIGNS OF PROGRESS
515 million
Adults have gained access to financial services since 2014, a seven percent increase in three years
MUCH SLOWER PACE
40.1 million
Nigerian adults, representing 41.6 percent of the adult population, that are financially excluded.
EXCLUSION vs REVOLUTION
30%
Share of adults using mobile money in Sub-Saharan Africa, the epicenter of digital financial inclusion
SAVINGS BEHAVIOUR LAGS
27%
Adults around the world who used formal savings services in 2017, which is the exact same level as 2014.
cy is low and necessary requirements for opening a full-service account, such as valid identification are lacking. Banks impose stringent KYC requirements for account opening. These requirements form a wide spectrum spanning from proof of residence (utility bill), copy of ID (international passport, driver’s license or voters card), confirmation of employment to assure source of funds and a passport sized photo. Most citizens fall short on some of these requirements and failure to meet any one of the above immediately makes one ineligible to obtain access to digital payment channels like cards and USSD access. This places 20 /E-PAYMENT REVIEW/ JUNE 2018
the unbanked at a disadvantage because most of them operate outside the formal employment system hence lack part of the account opening prerequisites. Only 79 percent of adults in Nigeria have the necessary documents for opening a mobile money or bank account. The folks at Intermedia pointed accusing fingers at regulatory policies and insecurity for the slowdown in Nigeria’s impulsion towards financial inclusion. They said the requirement of BVNs for maintenance of accounts at deposit money banks, which began in 2014 resulted in account closures due to noncompliance. Another burden was the imposition of a N50 stamp duty in March 2016 by the federal government on bank customers for money received into their accounts, and added charges on cash withdrawals, debit card issuances and online transfers that increased transaction costs associated with bank-based financial services. Worse, Nigeria’s descent into a recession as a result of deepening economic challenges related to a drop in oil prices and runaway inflation rates in 2016 that reached 18.5 percent caused Nigerians to spend more on their daily needs and save less. FII data showed a steep decline in savings-to-debt and income-to-expenditure ratios from 2014 to 2016, with a more than 20-percentage- point decrease in both indicators. In addition to the noticeable impacts on the daily financial lives of Nigerians, this may have impacted their ability to be part of the financial system. This blatant finger pointing wasn’t the limit of international agencies’ criticism of regulatory dynamics for Nigeria’s faltering steps in the area of financial inclusion. A recent report, this time published by the International Finance Corporation blamed the country’s straggle on mobile money on the 2009 guidelines that barred telecom companies from offering mobile money services. The impact of IFC’s position should be understood in the context of two interesting dynamics. One, most of the 25 recipients of the CBN's mobile money licenses have not put boots on the ground to offer the service at all, much less in places in dire need of it. Many of the licensees are dissuaded by the kind of heavy investment in operational expenses that mobile money requires before becoming profitable. Only Pagatech is sufficiently invested in developing the mobile money business. It is steadfastly promoting the service while attempting to leverage partners to build a large agency network for its distribution. Two, since its inception, countries that have seen success in mobile money payments are those that took a radical path through a mobile network operator dominated model and it has brought about financial inclusion to those places while widening access to efficient payment services for everybody. “The vast majority of the fastest-growing deployments are operating in markets where the regulator allows both banks and nonbanks (including MNOs) to offer mobile money services. Partnerships between banks and MNOs to offer mobile money are possible but often difficult in practice,” says the Mobile for Development Guide by the GSMA. “Generally speaking, regulations that promote competition while respecting individual providers’ commercial priorities achieve the best results. Conversely, regulations that only permit banks and other traditional financial service