In order to achieve the benefits of financial inclusion, the Central Bank of Nigeria (CBN) and stakeholders strategise on how to increase financial penetration in the country. UDO ONYEKA reports.
The Financial Access Initiative (FAI), has estimated that 2.5 billion adults, just over half of the world's population, do not use formal financial services to save or borrow. Sixty two per cent of adults, nearly 2.2 billion, living in Asia, Africa, Latin America and the Middle East are unserved.
Nigeria is no exception with a large population of financially un-served people put at 46.3 per cent in 2010, according to Enhancing Financial Innovation Access (EFInA), a financial research firm.
In Africa, Nigeria lags behind South Africa and Kenya in terms of the percentage of the population who are financially served.
This is manifested in dearth of access to financial services such as credit, savings, payments/ financial remittances and insurance as a result of financial exclusion. This is mainly caused by inadequate access points, high cost of financial services, low financial literacy, onerous requirements and lack of income.
This has continued to pose serious challenges to economic growth and development in the country and therefore calls for concerted efforts towards financial inclusion by all stakeholders.
According to the Central Bank of Nigeria (CBN), Governor, Mallam Lamido Sanusi, financial inclusion is somewhat a revolution that would change the entire financial landscape for the better said financial inclusion would reduce the number of adults excluded from access to financial services.
Sanusi, who spoke yesterday in Lagos, at the launching of the Geospatial mapping of financial institutions in Nigeria in conjunction with Bill and Melinda Gates Foundation (BMGF) said the broader aim of financial inclusion was the proposed 80 per cent target to be included at least 70 per cent would be in the formal sector.
Chief Executive Officer (CEO), EFInA, Mrs. Modupe Ladipo, said to increase the level of financial inclusion Nigeria, stakeholders would combine their strengthen. According to her financial inclusion is achieved when adults have easy access to a broad range of formal financial services that meet their needs and are provided at affordable cost.
"Access to finance for poor and other excluded groups could assist to alleviate poverty and promote development by enabling them to save, borrow and invest in the growth of the productive sector".
She said making funds available to excluded groups would lead to increase production of goods and services, support reduction of food related inflation, Provide better credit and better portfolios and diversification of portfolio thereby strengthening risk management stance.
According to Ladipo other benefits of financial inclusion include; increased economic activities particularly from the MSME subsector and boosting exports, increase foreign exchange earnings, stability of exchange rate and ability to manage foreign reserves.
EFInA tries to promote financial inclusion in Nigeria. The organisation has carried out national surveys of adults of 18 years and above in 2008, 2010 and 2012 with the aim of providing "relevant and reliable data on the demand for and usage of a range of financial products, both formal and informal in Nigeria". The outcome of the organisation's 2012 survey corroborates those of the Global Findex as it is documented that:
Although 60.3 per cent of Nigerians are financially served, only 43 per cent are formally included- Males 47.4 per cent are more financially included than females 38.3 per cent. According to inclusion in the formal financial sector varies across the geo-political zones in Nigeria in the following order; North West 22.5 per cent ; North East 25.7 per cent; North Central 48.2 per cent; South East 52 per cent; South South 52.3 per cent and South West 57.7 per cent.
According to EFInA report the proportion of adults that are formally included increased from 23.6 per cent in 2008 to 36.3 per cent in 2010 and 43 per cent in 2012. "This implies that the number of financially included adults in Nigeria increased by 10.5% between 2008 and 2012". Deputy Governor, Operations, CBN, Tunde Lemo, said Nigeria declared to reduce the percentage of the financially excluded adults from 46.3 per cent in 2010 to 20 per cent by year 2.
He said that financial literacy component of Financial Inclusion supports better delivery of financial services by educating the targeted excluded group and creating informed financial service providers and better informed users.
According to Lemo, volume of cash management to the financial system estimated at N192 billion in 2012, " adding that 65 per cent of the cash in circulation in the Nigerian economy is outside the banking system. Mobile payments and Agent banking systems will reduce expenditure of currency issues and management thereby free resources for development of important sectors such as infrastructure and other public utilities."
Deputy Governor, Financial System Stability, CBN Dr. Kingsley Moghalu had said at a forum in Lagos last month that, financial stability serves to instil confidence in users of financial services, adding that it also encourages and facilitates productive economic activities and contributes to overall well-being and progress of the society.
According to him CBN as a regulator is responsible to maintain public confidence in the financial sector by addressing all factors that would undermine the sector's long-term stability, without which it would lose its relevance as a medium of economic interaction and payments. Maintaining public confidence demands ensuring that the sector keeps up with all pertinent global developments to make sure it remains relevant to the needs of the public from which it derives its mandate.
He said that for the financial system to be relevant to society, it needs to ensure that as much of the eligible target population has the opportunity to access a variety of financial services ranging from credit, savings and payments, remittances, pensions, capital markets and insurance services. Inclusion is an essential pre-condition to enhancing wealth creation and poverty reduction and ultimately broad based economic development.
Moghalu said the CBN is concerned with the levels of financial inclusion because individuals and households lacking adequate access to a full range of responsibly delivered, affordable and convenient formal financial services would be severely constrained in participating fully in the economy. "This will imply that the financial sector would be constrained in terms of expansion and intermediation because the disposable income in the hands of excluded persons could constitute greater savings and a wider deposit base for banks and other financial institutions. This could hold back overall economic development. Thus, financial inclusion is essential for the attainment of a stable financial system.
A stable financial system is also a precondition for economic growth and development, hence financial inclusion especially when promoted in the broader context of economic inclusion, can raise financial conditions and improve the standards of lives of the poor and the disadvantaged," he said. Access to affordable financial services would lead to increasing economic activities and employment opportunities for rural households with a possible multiplier effect on the economy.
Group Managing Director, United Bank for Africa (UBA), Mr Philip Oduoza, said achieving the target of financial inclusion requires the collaborative efforts of all the stakeholders in the financial industry.
Speaking recently in Lagos, Oduoza said financial institutions are capable of attracting those excluded or unbanked through innovative services. Acting Director, Consumer and Financial Protection Department,CBN, Mrs. Dutse Umma Aminu, said that apart from innovative products, financial literacy and protection through enforcement of consumer rights hold the ace in fast tracking the success of inclusion
