Despite the remarkable improvement by the Nigerian government in ensuring that financial services reach the unbanked, multiplicity of regulations, long distances to service points and high costs of financial services continue to remain a stumbling block to financial inclusion (FI).
A lot of people, especially in the rural areas, feel banks are too far from them, hence they prefer to buy a safe at home to put their money. Another huge problem identified by experts is the demand by banks for utility bills or identity cards as proof of identity. This is really hectic for many people, as they cannot meet such requirements.
To bolster FI in Africa’s most populous nation, regulators sometimes have to change their rules to ensure flexibility. For instance, in India, the outgoing head of the Reserve Bank of India (RBI), Raghuram Rajan, said the country needed to continue fine-tuning rules on collateral and interest rates to ensure financial institutions have enough incentives to keep lending to the poor.
This means there is an urgent need to reduce the ceiling rates for loans provided by microfinance banks. In Nigeria, microfinance banks and other financial institutions lend at an outrageous rate to small businesses to the detriment of economic growth and development, as the informal sector is the highest employer of labour.
Micro-finance industry provides small loans to individuals arranged through a pay group or organisation. Policy makers in Nigeria have to introduce or formulate policies that will deepen FI as the country lags behind its fellow sub-Saharan Africa peers in making more people use financial institutions.
An enlightening Brookings Institution report recently ranked 21 developing countries on their support for fostering access to financial services and Nigeria was disappointingly not among the top ﬁve countries. The top five countries were Kenya, South Africa, Brazil, Rwanda and Uganda.
The issue of FI is a global phenomenon, as 38 percent of the world’s adults- more than 2 billion people have no bank accounts or savings or borrowing capacity, according to the World Bank. According to the Central Bank of Nigeria (CBN), 65 percent of Nigeria’s population of 180 million people do not have access to the services of financial institutions. That means 63 million people are shut out of banking sector services.
The apex bank is working assiduously to ensure that more people are banked. It introduced the Agency Banking (AB). The AB is expected to provide services such as cash withdrawal and deposit, bill payments, payment of salaries, funds transfer and balance inquiry.
Experts say financial illiteracy, security of the retail outlets, inadequate infrastructure, fraud, poor customer service and low level of profitability are going to be a barrier to implementation of AB.
Overcoming the barrier of FI in a country going through its worst economic crisis in 3 decades is a big task. However, with the proliferation of smartphones and mobile banking, surmounting these challenges looks more feasible than ever before.