Financial Inclusion: How Best can it be Strengthened?

Financial InclusionFinancial inclusion is a state where adult Nigerians get easy access to brand range of financial services that meet their needs at affordable costs. As a policy of the Central Bank o Nigeria (CBN), its aim is to empower millions of the unbanked viable economic actors. Despite   the inherent prospects of this initiative, it still has challenges which the apex bank believes are surmountable. The continuing   search for the  best  way  to strengthen  and  expand  financial  inclusion  in Nigeria as an agent of accelerated  economic development informed the theme of this  year’s CBN’s annual seminar for financial  journalists.


Off-Shore Experiences

No doubt, the concept of financial inclusion is now a global thing due to its importance and impact on national economic development.

According to the United Nations Development programme (UNDP), an inclusive financial system entails reaching out to poor and low- income people and providing them with affordable financial services tailored to their needs . It  further  recognizes market  potential / income  generating opportunities in lending to the poor  but excluded  population Mr. Paul  Eluhaiwe, director , development  finance  department CBN, noted that  elsewhere  the concept  has worked and   would surely  succeed in Nigeria  with  necessary  co- operation  by the relevant  stakeholders . He enumerated measures taken by such  countries  as Mexico, Pakistan – Kenya  and  Philippines in order  to make  the policy work in their systems.

In the  case of  Mexico, her government  establishment  the  Development National Plan  2007 -2012 as policy  agenda for increasing  the level  of financial  inclusion , strengthening  consumer  protection  and enhancing  financial  literacy. The country’s  national  banking and securities  commission , also, issued  the department  rule  for the  use of  non- financial  services in underserved  region.  In the  Pakistan ,  there is a broad  – based  political  commitments to financial  inclusion  with the  state  bank of  Pakistan  at the  forefront. In the  Philippines, technological and institutional innovations have   helped  the growth of two pioneering  models of mobile  phone  financial services: the bank –based  Smart money (led by mobile network operator, SMART) and the  non- bank based    G-cash  (led by   mobile  network  operator, GLOBE TELECOM). The Central  Bank of the country has also been involved in dialogue with the  Rural Bankers Association of the Philippines  to allow the launch of an innovative  application using mobile money .

In nearby Kenya , its  Central  Bank  is  empowered to play  an active role in expanding  access  through  regulating  and supervising  commercial banks. In fact , at present , Kenya is recognized as a pioneer in mobile  phone  financial  services through the M-PESA mobile payment system which had 17 million subscribers  as at  December  2011. Given the foregoing the CBN’s involvement in the implementation   of the  policy  is inevitable.


Nigeria’s Experience

The 2010 access to financial services in Nigeria conducted by  Enhancing  Financial  Innovation  and Access (EfinA) was   revealing  as it  indicated that 39.million adults (46.3 per cent of the adult population) were financially excluded. The survey by the same organization, two years later, showed slight decline  in some of the  geo- political   zones of Nigeria .

Of course , the Nigeria National Financial  Inclusion strategy became inevitable in  the  country and has  identified  major  stakeholders for the  implementation of the initiative.

The CBN  serves as the secretariat of the financial  inclusion  while the pilot  phase of the implementation of  the strategy  was launched in February, 2013   in Borno state.

The three-tiers of government, donor partners and licensed   and unlicensed institutions are being mobilized to achieve the goals and aspirations of the policy.

According to Mrs  Umma  Amina , acting director, consumer& Financial Protection department, CBN, reports  of this policy  has  started to yield   results. She explained that specific  targets   across five  primary  products  and services ( payments , credits, savings , pension  and Insurance) through a broad  range  of   co-ordinated  interactions with high  priority  have been set  up in CBN.

This includes transportation  of Know Your  Customers (KYC) regulation into a  simplified  risk-based tiered  framework , development  and  implementation of regulatory  Framework  or agent.

Other  are development  and implementation of national financial  literacy  framework , consumer  protection framework  and  implemnetation of  credit   enhancement  schemes  to  empower Micro, Small and Medium  Enterprises.

Represented by  Hajiya  khadijah Kasim, deputy director, consumer education  division, CBN  she explained  that since April. 2012  when the consumer  protection department  was created in CBN , efforts have been made  to strengthen  their  structure  in complaints  management  and dispute  resolution. They now focus attention on comprehensive consumer protection framework which specifically defines policies addressing responsible business conduct by financial service providers. Essentially, CBN’s strategy in financial literacy has been to provide leadership in a multi- stakeholder approach to the delivery of financial education.

The objective, according  to Kasim, is to improve  the knowledge skills and confidence  of consumers to understand  financial risks and    opportunities  that will enable  Nigerians  make  informed  choices and take  effective actions  to improve their  financial well being.


Strengthening and Expansion of Financial Inclusion

Given  the CBN’s  action plans  to ensure  that more  Nigerians  are captured into the formal  financial system, how best can it be expanded and strengthed  for quicker  result? The  panelists on this topic were divided  on the  CBN’s  approach but  they  all  agreed  on the need for  financial inclusion  in Nigeria.

Hajiah Kasim insisted  that the apex  bank  is ever  open  to suggestions from the financial  sector  stakeholders to come out with robust   framework for effective  and efficient achievement of financial  inclusion  goal as obtained in advanced  climes of the  world. she  noted  that with what  is  already on ground  in CBN , once  a  bank  customer has any issue  with his service provider within  a maximum of two weeks , resolution  must  surely  come. Or else, such a customer has the right  to directly approach  the apex  bank for  necessary intervention. Mr. Uzoma Onuoha ,  deputy  director, Development  finance  department, CBN  who was  a discussant, believed that financial inclusion can radically change the status  of Nigerian.

He listed  some  friendly  initiatives the CBN  has  already  introduced  to adequately  empower  Nigerians in order to tap into  financial inclusion  policy.

Some of such initiatives are the  interest  draw back  guidelines  in NIRSAL  loan  processing which make it possible for farmers to enjoy  some form of rebate and Agriculture  credit scheme  for small  and medium Enterprises (SMEs) which mainly targets women  expected to be  launched  next month .

But prince Emeka Obasi , publisher of HALLMARK NEWPAPER, submitted that the issue of financial  inclusion  is fiscal   policy issue rather than monetary affair which is outside the scope of CBN.

According to him, the CBN was dabbling into financial inclusion policy which basically seeks to alleviate poverty in the society,

Obasi who was one of the  discussants  expressed worry  that such  encroachment  of finance  ministry’s  domain by the  CBN remains an aberration even as  he urged  the relevant ministry  to  wake up from slumber and take leadership role in strengthening financial inclusion  .

Among the polices  that need to be addressed  by  the  federal government  to facilitate the financial inclusion drive,  he noted, is the  Land  Use  Act which  should be reviewed  such that most  lands  in the rural areas without  certificate of Occupancy  (C&O) would be  bankable. By so  doing , most  of the rural dwellers and  owners of land would  easily be carried  along in the financial inclusion drive as  they  would  have  access  to credit  to create  further  wealth, he said.

According to him: “ Once  one is  lifted  above  poverty , he  does  not need to be  told  to open  bank  account  and  use necessary financial  products  that  would make  him relevant  to the  system”

Mr.  Onuoha , nonetheless , tasked  state  governments to use  Trust fund models  which  would  enable  their  indigenes  use  same  as  collaterals  to  access  bank  loans.

According  to him,  this  would  complement  CBN’s  current   moral  suasion   approach  to get  banks  do certain  necessary  things  needed to fast track  financial  inclusion  in the  country“

In all , the  discussants  agreed  that since  financial  inclusion  is a  developmental policy , the three tiers  of  government  should be made to play  leadership roles beyond mere access to bank products   by Nigerians. The Citizenry should be made  to be  relevant in the  scheme of the things  by  the government  investing  in skills  acquisitions  for the  youths  and  unemployed  and provision of  storage  facilities  to take  care of seasonal farm produce  Others  are the need for them  to be  actively  involved  in research  and development  as well as  education such that majority of Nigerians should be financially empowered to be ultimately included. By so doing, the economy of Nigeria would be better for it.

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