About 1.4 billion adults have no access to banking, the World Bank’s Findex survey finds.
Between 2011 and 2021, the Sub-Saharan Africa region experienced the fastest growth rate in account opening and usage in the world.
Findex 2021 also shows that Nigeria, the region’s most populous country, is one of the seven economies that together house more than half of the world’s unbanked adults.
Mobile technology has reduced the number of ‘unbanked’ in developing countries like ours.
Financial inclusion is essential to alleviating poverty and achieving inclusive growth.
Financial inclusion for SMEs can lead to innovation and job creation.
What is financial inclusion? According to the World Bank, financial inclusion is defined as access that people have to a useful, broad range of affordable, quality financial services and products, in a manner that is convenient to the financially excluded, unbanked, and underbanked, in an appropriate but simple and dignified manner with the requisite consideration for client protection.
Despite the tremendous growth in the last decade, there is still a wider gap between users and non-users of formal financial services in the sub-Saharan African region, most especially Nigeria. In this thought-leadership article, Babatunde Adebajo shares his fintech domain opinions on the Nigerian state of people’s access to formal financial services.
Babatunde Adebajo has over 7 years of working experience in both traditional and digital banking sectors. He’s responsible for product growth and user acquisition – the position that has truly given him the Nigerian view of this issue and explained the role of technology in financial services adoption.
How Important is Financial Inclusion for Nigerians?
Babatunde Adebajo: The importance of having access to useful and affordable financial services cannot be overemphasized. One of its fundamental importance is for economic growth. Access to secure banking services over the Internet enables individuals and businesses to manage their finances better.
To build a thriving society, the government and other stakeholders need to advocate for the adoption of formal ways of saving, payments, access to credit and loans, insurance, and a lot more.
What are the biggest challenges and reasons why Financial Inclusion has been slow in adoption despite awareness campaigns?
Babatunde Adebajo: There are various factors that have been adduced as the major causes of the slow adoption. It starts with financial literacy, and heavy documentation when opening bank accounts to cultural/religious barriers. Some are due to low income and a lack of access to the internet.
To increase adoption and reduce the Findex rate, financial education, and dissemination should be localized. Like the way in which some traditional banks serve customers in their local languages. The fintech startups that accounted for over 60% of financial services should also adopt these strategies. In some cases, they take advantage of religious houses to disseminate financial information.
Another problem is that of voluntary exclusion due to factors such as culture, religion, and dependency on adult family members like parents. Digging deeper, there are other reasons behind the slow adoption of formal financial services such as lack of information, complex fintech product features, and insufficient incomes.
What is the role of government in driving Financial Inclusion?
Babatunde Adebajo: The Nigerian government with the World Bank in partnership with the Apex Bank and other financial institutions could revisit the issue and set sustainable goals around total inclusion. In Nigeria, there are almost hitch-free digital financial transactions through mobile applications, unlike other sovereign nations in Africa. However, there are many active steps that need to be taken. For instance, strengthening of infrastructure and harmonization of public data. The service providers rendering credit/loan facilities should have access to updated data at the Credit Bureau.
Another role of government is to create policies that are well-thought-out. With these policies, service providers could enjoy an enabling environment that would facilitate them in shipping products that customers like most.
How can fintech improve Financial Inclusion?
Babatunde Adebajo: To have a full grasp of the role of financial technology in deepening the expected inclusion in Nigeria, we need to assess the current level of inclusion that fintech startups have been able to achieve so far. Over a decade ago, the only form of accessing formal financial services was through traditional banks which usually took longer time to complete and with heavy documentation.
With the advent of fintech startups, the rules of the game began to change as was majorly experienced during the COVID-19 and the recent cash crunch brouhaha meted by the Central Bank of Nigeria. When it comes to financial inclusion of the unbanked and the underbanked population working in the informal sectors of the economy.
Some notable fintechs such as OPay, PalmPay, have localized entry levels with step-by-step KYC requirements to access simple and convenient financial services such as having bank account numbers the same as their mobile phone numbers. This enables millions of people to transact and make payments online.
According to the World Bank’s definition of Financial Inclusion, beyond access to affordable and quality financial services is the consideration for client protection. Some populations voluntarily exclude themselves from access to banking services because of low security around products and services. In addition, the population in the informal sectors still prefers to transact with traceable banks with physical branches. By strengthening the security architecture and reorientation of the public, this status quo would be greatly reduced.
When it comes to convenient fintech services to the unbanked, localization of product design and development may be a key attraction. The Product team should work with other departments and existing customers before churning out products.
In summary, financial inclusion and the role of technology are mutually beneficial for better service delivery. It has been discussed in different forums the importance of being financially included. To achieve speedy results, investment in infrastructure, capacity development, and business policies will help the service providers and internet stakeholders to provide uninterrupted banking services.
