What is the role of trust in banking the unbanked? To what extent is the lack of trust about a lack of financial literacy and education?
Trust is very crucial in banking the unbanked because you need to convince someone who would rather put their money under their pillows, in a safe or with a local cash collector that using your tools will bring them more returns and access to a lot more facilities. It is driven by the fact that informal methods offer a level of flexibility they cannot access with traditional banks, ease of access to their money, familiarity with custodians of the system of their choice, history of the system serving their families and communities amongst others, notwithstanding the security challenges with the informal system like theft, fire and flood hazards.
Lack of financial literacy and education influences the lack of trust to a large extent, people will not use what they do not understand especially when it comes to their money. So, the more we educate people on the importance of financial tools like bank accounts, BVNs and POS agent businesses around; they are able to access loans, grow their business and more importantly track their spending and expenses. It could also provide a means to promote trust and transparency.
GEEP is a social intervention program by the Federal Government of Nigeria established to provide financial inclusion and access to microcredit for Nigerians at the bottom of the economic pyramid. Much like E-Settlement, the initiative provides access to financial services- but with a focus on loans. What potential is there for public-private partnerships that could amplify the reach and effectiveness of Nigeria’s financial inclusion drive?
When it comes to achieving many national developmental goals the popular saying “teamwork makes the dream work” should be one of the foundational pillars driving implementation. No doubt, it is first the duty of the government to make investments that drive financial inclusion for the bottom of the pyramid, provide socioeconomic resources and incentives that help people make a living. But partnerships with the private sector players, donors, social enterprises and developmental partners will go a long way to deepen results achieved especially when it comes to targeting and ensuring that solutions reach those who really need them.
GEEP is an amazing initiative and the potentials for public-private partnerships in pushing the financial inclusion drive are enormous, currently we- E-Settlement -get support from the Government through Shared Agent Network Expansion Facilities (SANEF). For products and services that compliment ours like the GEEP, we can help community members cash out and pay back their loans through our agent network, we can also partner to provide a special loan package for our partners and prospective partners who want to push financial inclusion in their communities but may be cash-strapped; it will be easy to recoup the loan paybacks through our processes. We are also focused on helping people at the bottom of the economic pyramid and we are currently working on a product that will give them access to easy-to-use financial facilities both on their phones and through our agent network.
Thinking again about the needs of low-income Nigerians, what gaps would you say currently exist in meeting their financial service’s needs and how fit-for-purpose are current products and interventions in the market?
Access to loans is one gap we have noticed and there are a lot of products trying to fill that with fast loans. Another gap is accurate data so we know what we are really dealing with and the level of intervention needed, take the cash access and loan I mentioned just now, someone can apply for loan on 10 different apps, maybe get 6 or 7 and default on most, now if we had a standard record-keeping system with the buy in of every single stakeholder, so that everyone provides data and can access data, providers would be able to see applicant’s history and make informed decisions based on that.
Creating a system that ensures that low-income Nigerians at the bottom of the pyramid can easily be identified is another huge gap that must be closed. An ID is one of the most important documents required to be financially included; it also creates access to other government-led interventions and social programmes. We also need to close gender gaps. According to EFInA’s 2020 financial services survey, adult men are more likely to be banked than adult women- 32% of men are excluded compared to 40% women.
Solutions also need to focus on solving infrastructure gaps in rural areas (i.e., network technology, devices, financial services providers, security) and creating easy access to the same. This way, we will see improved penetration and acceptance of fintech and mobile money providers in hard to reach areas and areas where a high number of the population are unbanked like in the North West and North East zones . You will find that some communities have the required infrastructure, but access continues to be elusive. With regards to formal banking structures, there is a need to review and redesign existing products targeted at the bottom of the pyramid to ensure that they can access those services. Also, we need to see improved synergies and policies that result in an increase in public-private partnerships that include fintech, banks and mobile network provider partnerships.
What does digital inclusion within local contexts of access to finance look like for rural communities and economically disadvantaged Nigerians?
Digital inclusion for rural communities and economically disadvantaged Nigerians can be as little as people having access to feature phones for USSD banking, basic financial education, ability to open bank accounts and check their balance with POS agents or even getting small scale loans easily. It presents a means through which the nation can fast track financial inclusion goals. This has worked in other countries like Kenya, Cameroon, Rwanda, Tanzania and there is a use case for this in Nigeria too. The 2020 EFInA financial services survey showed an 81% growth in mobile penetration, agent banking networks, and digital financial service meaning that there is a potential for this to succeed in Nigeria too.
Agent banking has become a successful strategy for achieving financial inclusion goals (according to EFINA, 84% of financial access points in rural areas are provided by agents), but when you consider that only 38% of rural dwellers have access to financial services providers and access points, to what extent would you say that this strategy has translated into increased access to basic financial services and what more needs to be done by government and industry alike?
The strategy has done a good job to be honest, but we need to take the bull by the horns and go deeper, some communities cannot be accessed by road, how do we ensure that the agents serving those communities have enough cash to meet demand? Having pervasive agent networks and multiple access points is a good foundation for financial inclusion and this needs to be encouraged. However, more needs to be done to support agents with things like access to cash and security. On top of the foundation, we need to then layer availability of customised financial services for that segment of the market, as most financial products available in the city are not suitable for rural markets.
To what extent do you think the approach to the NIN-SIM registration exercise takes into consideration the interests and needs of the excluded? If properly executed what impact do we expect to see as it relates to financial inclusion?
Personally, I think the NIN-SIM registration is perfect and really takes the interests and needs of the excluded into consideration. To use many banking products right now, you would need a BVN and you can’t get a BVN without a bank account – now how would a product that wants to target the financially excluded verify or even onboard the truly excluded? NIN-SIM is perfect for this because a lot more Nigerians have mobile phones no matter how small or basic than they do bank accounts or financial products, so this helps fintech focused on financial inclusion truly include the excluded. The NIN-SIM strategy captures all the much-needed data and is a federal government database meaning it is applicable almost anywhere. I think it is a step in the right direction. In the long run it has great benefits, but adequate measures need to be in place to ensure ease of registration for our most vulnerable and disenfranchised. As for the impact, as I mentioned earlier, it will help us truly include the excluded, that means people may be able to access financial applications and services without first needing to open a bank account and that is a huge step.
As an institution providing access to financial services for the unbanked, how important is funding for players serving these critical segments of the market?
Funding is really key for players in this industry and by funding, I mean on all levels, from institutions like ourselves to agent partners and even the consumers. The economy is not at its strongest right now especially in light of how the pandemic affected businesses and individuals. Before we push inclusion in people’s faces, we need to ensure that they even have the funds to use the service and this can be done by providing access to interventions and solutions that create wealth for them.
With regards to companies like ours providing financial services for the unbanked, funding means that we are able to grow and scale to deepen our reach in hard-to-reach communities and rural areas. For us, at E-Settlement we would be able to expand our existing agent network from over 60,000 to 200,000 within the next few years. Achieving this objective will mean significant development and impact for individuals, the community, and our broader financial inclusion targets.
What is E-Settlement’s contributions to inclusion in Nigeria, especially hard to reach places and how do you seek to expand this further?
Our agent banking network solution, PayCentre currently helps over 60,000 agent locations provide financial services to millions of Nigerians in every state of the federation. We are constantly engaging underserved communities to engage and train agents so more people can be serviced. We are focused on making what can be a stressful process for our partners and the customers they service almost painless, for example, we were the first to introduce instant settlement to agents and this helps them service more people, furthermore; we also introduced our transaction dispute solution that reduces the chances of a customer going to fill a dispense error form (at a bank not close by) by 90%. We are always training our agents on best practices, industry processes, how to grow their businesses and better serve their customers. Just this month, we introduced our insurance feature to ensure agents can bounce back after unforeseen incidents that would normally cripple their businesses, we are also launching our loan feature soon. We are actively seeking funding to help exponentially scale our services and ensure all communities especially the hard-to-reach places are financially included in Nigeria.