Financial Inclusion in Nigeria: The Challenges of Banks & Mobile Money Operators (MMOs)

Nigeria Demographic

Nigeria prides itself as the most populated and economy giant of African continent with over 176million people yet 64% (of the adult population) currently un(der)banked! The financial sector also boost of 22 commercial banks, over 400 mircofinance banks and above 23 Mobile Money Operators who over the years, have been trying to tap into the market potential of the large un(der)banked population in the economy.

From findings, the current un(der)banked population control over 75% of daily retail transaction and it will surprise you that even the banked population are encouraging them through cash transactions because the economy has not transit from her traditional cash based. The result is the increasing number of informal financial operators whose activities is not regulated but control high volume of liquidity which could have been use to create economic opportunities if it were in the hands of the formal financial institutions.



Effort of Central Bank of Nigeria

The CBN in her regulatory capacity introduced several measures through policies, guidelines, licencing and facilitating workshops, researches and support towards bringing the un(der)banked into the mainstream. The activities of the regulator opened up opportunities for all the financial institutions to replicate the same success of stories across the world (such as Grameen Bank in Bangladesh and M-Pesa in Kenya) but it only resulted into the current situation of 64% un(der)banked population! Definitely, something is missing!

The various efforts (with even EFInA giving grants to those who can provide solution to the problem) tell of the significant contribution such a population can generate in this economy that is greatly affected by global oil price which has impacted negatively on the financial sectors.

With the current macroeconomic challenges and uncertain outlook, the Retail space in Nigeria has great potential for deposit mobilization, engaging the underbanked, converting the unbanked, creating liquidity, driving cashless policy and promoting economic growth.



Challenges to the Success of Financial Inclusion in Nigeria

There are several challenges identified that have created the gap and pose as unsurmountable mountain to financial inclusion in Nigeria. They include:

Misconception: Generally, there is a believe that once it works anywhere else (including Kenya), it can work in Nigeria. But the reality is that the culture and economy ideology defer because Nigeria is still predominately cash based. Second, there is another believe that the rate of mobile users should directly result to mobile money subscriber but this, is another mistake because most of the people under the un(der) population are hostile to the wave of electronic financial transaction platform and still believe the “do-it-for-me” service! That is why the “esusu” and “ajoo” (informal financial providers) are strongly trusted and established!
Channel: From the first point (above), it is clear that the prefer channel is not the corporate sit and take coffee approach but rugged style. The reality is similar to gold diggers and commodity trader, while the former dig to extract gold, the former only trade the available gold in the market without even touching it. The most appropriate channel for the un(der)banked is the combination of their trusted traditional method and technology!
Framework: The Mobile Money Operations render financial services through their agents who currently sees such partnership as hindrance to its primary business, while on the commercial banks side, they use contract staffs (called Direct Sales Agent/Executives) to chase customers for deposits with possibility of great risks to bank and lack of comfort by the customers.
Compensation Model: Most of the agent under the Mobile Money Operators and Direct Sales Agent/Executives of the commercial banks complained bitterly on the unattractive incentives from rending such service. Targets that are not backed with market intelligence and strategy for successful implementation!
Market Intelligence: The situation in Nigeria is like asking the sight challenged person (such a blind man) to just run without any direction, assistance or guide! It may shock you that many of the financial institutions (including the Mobile Money Operators) do not even have sufficient market intelligence that can create access to the un(der)banked population. For Instance, in Lagos, many of them don’t even know that there are 442 registered markets with potential of mobilizing over #30Billion deposit (turnover) within 9months!


Moment of Truth

The above points are inconclusive of the current challenges to financial inclusion in Nigeria and your doubt can be cleared if any of the banks and Mobile Money Operators, who claimed to be the pacesetter in financial inclusion can provide analysis of active subscribers, volume and value of transaction, agency spread and profitability! (Trust me, it is just like the empty barrel that makes the loudest noise)

In conclusion, the solution is not far-fetched when the above challenges are thoroughly considered and experts’ advice are consulted for success implementation to increase the percentage of financial inclusion in Nigeria within the next possible time!



Oluwaseun Adesanya

+234-803-849-8000

Lagos, Nigeria

(An international Consultant in financial inclusion and Strategy. He is currently, the head of Corporate Strategy & Performance Management of the leading Software company in Africa, SystemSpecs – Owner of HumanManager and Remita)

https://www./financial-inclusion-nigeria-challenges-banks-mobile-money-adesanya

Mobile money will work in Nigeria, the selfishness of banks will not let them feel comfortable with Telcos rolling out such service, l use Airtel Money in kenya which is basically my phone number and do have a Visa debit card linked to it.

Pavore9:
Mobile money will work in Nigeria, the selfishness of banks will not let them feel comfortable with Telcos rolling out such service, l use Airtel Money in kenya which is basically my phone number and do have a Visa debit card linked to it.

Mobile Money would have work in Nigeria if there is a robust agency network spread to facilitate transactions but currently, majority of the un(der)banked prefer a trusted platform that can guarantee the safety of their deposit and gives them additional value such as interest, microcredit etc. which are not available on Mobile Money

Pavore9:
Mobile money will work in Nigeria, the selfishness of banks will not let them feel comfortable with Telcos rolling out such service, l use Airtel Money in kenya which is basically my phone number and do have a Visa debit card linked to it.

bro

What's the Exchange rate with the card now?
Still about 210 to a dollar?

How many Nigerians are getting sensitized?
Everything is Lagos!!!
As if that is the only entity called Nigeria.

Would be nice

Let me read through

I still wonder how people keep large sum of money with them. How do they have peace of mind

Following

Ok

Mobile Money would have worked if the majority of the Nigerian populace were technologically inclined. As crude as it may sound, the average market woman still prefers physical cash transactions. Appalling, it is.

@op i would have read ur post, but we are allergic to novel/super story here in islamabad.

Thanks.

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The foundation of BANKING is trust by the people, In Nigeria today, the populace hardly trust the current banking system talk less of mobile money......People talk as if the fundamental laws of economics, banking, physics or anything you can think of doesnt work in Nigeria but when you look thoroughly at it you just know the fundamental laws are just being broken hence failure.

[img]http://media3./media/10YNI9aU5LQR68/200w_d.gif[/img]

Heritage bank launched out agency banking. Such innovations can bring reforms to the banking sector.

Chuksemi:
Mobile Money would have worked if the majority of the Nigerian populace were technologically inclined. As crude as it may sound, the average market woman still prefers physical cash transactions. Appalling, it is.

Many of these "crude" poeple are driving cars, using phones, using other electronics because they can see the practicalities of it either By seeing others use such or getting direct/indirect trainings.

The issue here is, how many trainings, adverts or sensitizations etc are they getting (in their local languages) ?

Everything comes at a price, you don't just roll things out and expect people to pick it up by chance. If the operators are active in making the populace see the importance, the ease it comes with, etc in local media (surely cost them money). They will reap it with time.

The customer service for the 'banked' population is ridiculous bothering on gross incompetence, the banking industry should concentrate on delivering excellent services. This will increase consumer confidence amongst existing customers and eventually the so called 'underbanked' population will follow suit.

Honestly I commend the writer for this wonderful piece, Nigeria iis one nation that need to be push to the wall to get things done. The CBN is so relaxed as regards agency business, why not enforce certain laws to frustrate the use of interswitch platform to carry out certain transactions (DSTV bill) n divert this customers to use wallet(eg firstmonie by firstbank)
powered by NIBSS as an alternative.

Why not enforce laws like transactions below 3k should b done @agent location to de-congest the banking hall?

Mobile money ops are ready buh the enabling environment has not being fully given as many still have alternatives to carry out daily financial transactions.

#MyCandidOpinion

K

WorldChanger7:


Mobile Money would have work in Nigeria if there is a robust agency network spread to facilitate transactions but currently, majority of the un(der)banked prefer a trusted platform that can guarantee the safety of their deposit and gives them additional value such as interest, microcredit etc. which are not available on Mobile Money

We need a robust agency network. Across Kenya, there about 100,000 mobile money agents offering deposit and withdrawal services. The platforms are secured. They do also offer loan services based on subscriber's credit rating. I can easily borrow an equivalent of $40 from Airtel Money network and choose to pay back either in a week or two at an agreed interest rate and within 2-3 minutes the loan is approved, l get an sms that the money in now in my Airtel money account which is my phone line. I have the option to go and withdraw it as cash from an agent, go to an ATM to withdraw since it linked to Debit card or use it for online payment anywhere Visa is accepted. Once the subscriber repays the loan promptly, the amount he can borrow next time would be increased by at least 25%

As for banks, most of their customers conduct their financial transactions using agencies, some agencies are as small as a 6ft by space and in there one can collect/send Moneygram, Western Union, withdraw and deposit cash into banks the agency represents. They operate 7 days a week.

Chuksemi:
Mobile Money would have worked if the majority of the Nigerian populace were technologically inclined. As crude as it may sound, the average market woman still prefers physical cash transactions. Appalling, it is.

Sir, technicality of the platform iis far from the issue facing mobile money iin Nigeria.
When GSM came to Nigeria years back people were scared n all buh because it became a tool one can't do without even granny's now Use phones a complex as android.

Enforcement to me will grow mobile money iin Nigeria

Pavore9:



We need a robust agency network.

I don't know bout other banks buh firstbank have a robust agency network across Nigeria

About time but more needs to be done in the area of sensitization most citizens don't know about how it works

The problem is multi-prong. It works in other countries like Kenya because when m-pesa started, there was no easier option for the un(der) banked then as well as the fact that it was championed by the dominant telecoms operator which also made it difficult for other users on other network to part-take in.

In Nigeria, mobile money would have gained traction if only it had began earlier than now. We all remembered back in the earlier days of GSM in Nigeria when it was easier and convenient sending money to our relatives far away through the use of mobile recharge cards of the desired value. The recipient sells and gets the money.... That was then.

In this time and age with all sort of channels available to the average Nigerian, it would be very difficult for mobile money to gain acceptance when POS payments currently struggling to gain acceptance by traders. It is rejected in most places if less than certain amount.

Until CBN themselves starts enforcing cashless Nigeria then we still have to continue with cash.

The under banked controls 75% of retail transaction.

If that's the case, and we can also say that the retail transaction occupies a commanding percentage of total transactions in a certain period, and these transactions are cashed based, then we have just found a challenge to excess liquidity supply and by extension, inflation.

This topic is now no 6 on NL frontpage yet the ongoing discussion of thread itself is still on one page.

Nigeria is not Ready for this type of cashless economy. We don't trust the Government, Telcos operators, NCC, our financial institutions can't be trusted to implement a country wide banking system for the under banked population and more.