To drive its vision of 80 percent financial inclusion as stipulated in its National Financial Inclusion Strategy, Nigeria’s Central Bank Governor, Godwin Emefiele said the apex bank would eventually license telecommunication companies (Telcos) to provide mobile money services.
Emefiele said this while delivering the keynote address at the BusinessDay and Bill and Mellinda Gates Financial Inclusion Summit held yesterday, December 8, at the Eko Hotels and Suites ,Lagos. He did not however give a timeline .
Currently, Nigeria’s mobile money market is bank-led, which means only lenders are licensed to operate in the space, while the telco-led model, which licenses mobile network operators, seems to be delivering gains at a faster pace in neighbouring African countries such as Kenya and Ghana.
Kenya’s financial inclusion is as high as 75 percent, according to World Bank data, and although Ghana’s inclusion is at 40 percent, it is a long way up from the 29% it stood in 2012, thanks to the growth in mobile banking driven by telcos, which is tipped to further boost inclusion in the coming years.
“Eventually, we will adopt a telco-led mobile money service,” said Emefiele.
“Our current model is bank-led because we were keen on averting any sort of financial loss but today we see the need for collaboration between the telcos and financial institutions to achieve our target of 80 percent financial inclusion within the next four years.”
Top mobile operators like MTN have already expressed interest in acquiring mobile money licenses in Nigeria.
Nigeria’s financial inclusion is at 44 percent, according to the World Bank, higher than sub-Saharan Africa’s average of 34 percent, but compares poorly with South-Africa’s 70 percent.
Only two percent of Nigeria’s adult population of 99 million have mobile money accounts, according to World Bank data. This compares poorly with Kenya’s 70 percent. In Tanzania and Uganda, a third of their population use a mobile-money account.
The debate of whether to have a bank-led or telco-led mobile money market has been unending, but its success in Kenya, with the M-Pesa owned by Telco- Safaricom, has often been the benchmark used by financial experts in advocating for telcos to be licensed as financial services providers.
“Today, you can pay for virtually everything, using your M-pesa account,” said Njuguna Ndungu, the former governor of the Central Bank of Kenya, who also spoke at the financial inclusion summit.
“If Nigeria adopts a model that works, mobile money could boost inclusion and help the government with revenue collection and administration, even as it provides a better environment for monetary policies to thrive because more money will be captured within the formal financial system,” Ndungu added.
In Nigeria, 80 percent of cash in the economy is not deposited in a bank, according to data by global research and advisory firm, Mckinsey.
“If telcos were not so limited in offering financial services in Nigeria, all that cash would not be outside the financial sector,” said Elly Ohene-Adu, former head of banking in the Bank of Ghana, who now plans to set up a micro-finance bank.
“In Ghana, we allowed telcos lead the mobile money market, although we asked them to create independent subsidiaries that would focus solely on providing financial services,” Ohene-Adu said, “And it worked. Currently, cash in and out transactions and money remittances make up almost the total of transactions executed using mobile banking.”
Currently, 13 percent of Ghanaians use mobile banking and while this is similar to South Africa and sub-Saharan Africa’s average figure of 14 percent and 12 percent respectively, it is much higher than in Nigeria, which stands at only two percent.
“We have the ingredients to bake the financial inclusion system in Nigeria,” said Uzoma Dozie, CEO of Lagos-based Diamond Bank. Nigeria’s mobile money market is dominated by mobile apps owned by the commercial banks like First Bank, Guaranty Trust Bank and tier-two Diamond Bank.
“Nigerians have mobile devices but it is putting those ingredients together that is the main issue,” Dozie said. “It took two years to double our customer base and most of these customers are at the bottom of the pyramid. And these exercises were done electronically.”
Government can also drive financial inclusion at the civil service level, according to Manzo Maigari, Kaduna State Commissioner, Agriculture and Forestry, who said his state started having more people banked during a salary verification exercise which made it mandatory for many civil servants to open an account.
“We used vouchers for fertiliser distribution. We have renovated 200 schools mandating 6,000 labourers who do not have a bank account to open one. Under the Keep Kaduna Clean Campaign, 27, 500 women were only paid through the BVN,” said Maigari.
Maigari also observed that creating jobs for vulnerable Nigerians could boost financial inclusion in the country.
“Those with little disposable income save less and that it is only by creating jobs that these people can earn more and save,” Maigari said.
Susan Lund, Partner McKinsey Institute and Company and Leader of the McKinsey Global Institute said the right investment in digital infrastructure would help reduce financial exclusion, adding that government needs to create a conducive environment for business to thrive.
“People in the rural areas find it difficult to reach the bank branch because of the distance,” said Lund.
Digital banking has been a boon to some Fast Moving Consumer Goods Firms (FMCG) as they are able to leverage technology to reach out to more customers, reducing costs and boosting bottom lines in the process.
Adeola Adetunji, the managing director and CEO of consumer goods giant Coca Cola said with internet banking his company has been able to reach 50 percent of his customers, up from 40 percent in the last few years.
“The use of internet banking has helped reduce distribution costs as we don’t need to go and meet customers for payment. Customers use mobile apps to make payment. You can imagine the security risk and cost of logistics of getting paid. You can cut those inefficiencies in 24 hours by having internet banking,” said Adetunji.
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