As the guardian of the financial system and project manager of the National Financial Inclusion Strategy, the Central Bank of Nigeria (CBN) is pushing financial inclusion to the front burner, with the ultimate aim of creating a more vibrant and successful economy and improving living standard.
In the lexicon of finance and banking, financial inclusion or inclusive financing is defined as the “the delivery of financial services at affordable costs to sections of disadvantages and low income segments of society”.
The G20 defines innovative financial inclusion as “improving access to financial services for poor people through the safe and sound spread of new approaches”.
The operational elements of financial inclusion are, availability of a wide range of innovative financial products and services including payments, savings, credit, insurance and pension products; ease of access to finances products and services within the reach of all groups, affordability for low income groups, and designing of financial products according to target clients’ needs.
The stakeholders as defined by FSS2020 are banks (deposit money banks, primary mortgage institutions and microfinance banks), other financial institutions, and insurance companies, regulators (CBN, Nigeria Deposit National Identity Management Commission, National Insurance Corporation and Nigeria Commission).
Others are Technology I Telecommunication Firms (ATM service providers, mobile service providers, e-payment/e-channels operating and Public Institutions include Federal Ministries of Agriculture, Finance, Education, Trade and Investment and others.
Microfinance banks in particular play a key role in promoting financial inclusion, and there are 866 of them serving an approximately 3.2 million people, white there are 21 commercial banks serving an estimated 20 million people.
Experts believe that financial inclusion will engender the development of a stable financial system funded by non-volatile savings.
In a report in 2010, Strategy Consultant to CBN, Roland Berger, noted that Nigeria was a mid-level player in the sub-Saharan banking sector, and lagged behind some of its peers in Africa with respect to financial inclusion.
It was stated that 36 per cent of adults, an estimated 31 million out of an adult population of 85 million were served by formal financial services, companied with 68 per cent in South Africa and 41 per cent in Kenya.
The International Monetary Fund (IMF) in its Financial Access Survey, 2013 noted that African countries are showing the fastest growth in financial inclusion in the world.
The parameters used for the survey are:
* Number of commercial bank branches per 100,000 people (reportedly has grown around 180 per cent since 2004)
* Access to ATMs is low income countries (improved more than three-fold).
* A four-fold increase in commercial bank depositors per 100,000 people.
* 40 per cent growth is real GDP per capital income from 2004 to 2012.
CBN believes that financial inclusion has reached 60 per cent in Nigeria in 2013, with deposit money banks accounting for 50 per cent and the apex bank has expressed commitment to reduce the unbanked from 46 per cent to 20 per cent in 2020.
Financial inclusion is a masses–oriented concept and a key tool to poverty alleviation. It helps to develop habit to save and increases entrepreneurial spirit and national output. It engenders economic growth faster.
As such, it is paramount in supporting micro, small and medium scale Enterprises (MSME) which are engines of growth and job creative, to start, grow and flourish. Pundits say that increased access to finance for MSMEs through financial inclusion (credit made on the back of mobilised savings), will lead to greater productivity and increased non-oil export, with the subsequent demand for the naira, which will stabilise its value.
CBN has demonstrated a strong commitment to support MSMEs through the establishment of a N200 billion MSMEs development fund.
CBN Governor, Sanusi Lamido Sanusi, had remarked that “MSMEs play a major role in Nigeria’s economy with about 95 per cent of firms in the organised manufacturing sector of SMEs, which account for about 75 per cent of industrial employment, yet contribute a mere 10 per cent to is a main stream GDP”.
Globally, financial inclusion is a main topic. The G20 is strongly committed to adamancy the and has included it as one of the main pillars of the development agenda, and is working in collaboration with Alliance for Financial Inclusion (AFI), the Consultative Group to Assist the Poor (CGAP) and the International Finance Corporation (IFC).
At their summit in St Petersburg in September this year, it endorse the G20 financial inclusion indicator developed by Global Partnership for Financial Inclusion (GPFI), an inclusive platform for all G20 countries, interested non-G20 countries and relevant stakeholders to carry forward work on financial inclusion.
The indicators include number of commercial bank branches per 1,000 square kilometres, Automated Teller Machines (ATMs) per 1,000 square kilometres, percent of age 15 and above having accounts at formal financial institution, percent of age 15 and above who secured loans from a financial institution in the pest one year, per cent of SMEs (5 – 99 employees) will an outstanding loan or line of credit. Others are proportion of SME loans requiring collateral and Point of Sale (POS) terminals per 100,000 adults.
The contrast of financial inclusion is financial exclusion, where financial services are not available or affordable to the lower income group, a situation which leads to pauperism.
As financial inclusion remains a mainstream topic, the World Bank has estimated that 2.5 billion working age adults are excluded globally, while the G20 identities an enabling environment in the respective economics, as a critical factor that will determine the speed at which financial access gap will be closed for the financially excluded.