Financial Inclusion…Time to spread banking to the grassroots
Sterling Bank MD Yemi Adeola
Fidelity Bank MD, Reginald Ihejiahi
Obinna Chima writes on the implication of financial services to slum dwellers in Makoko, Lagos State
In recent times, financial inclusion which generally refers to people being able to get access to banking services at an affordable cost, has become the buzzword in Nigerian banking system.
Today, all Nigerian banks boast of products that support financial inclusion initiative which is being driven by the Central Bank of Nigeria (CBN).
Financial inclusion targets the delivery of banking services at affordable cost to the vast section of the disadvantaged and low-income groups. Globally, this is a social problem attracting greater attention.
Low-income consumers are at greatest risk of financial exclusion and this has also been identified as one of the reasons for the high poverty rate in the country.
In Nigeria, as part of efforts to address the problem of low level of financial inclusion, the central bank last year inaugurated a National Financial Inclusion Strategy, which is designed to increase the number of Nigerians that are included in the formal financial sector to 70 per cent by the year 2020.
Regrettably, the financial inclusion crusade has largely remained in the urban centres, with little attention is being paid to the vast majority of rural poor scattered all over the country.
In fact, most financial inclusion campaigns by banks and other stakeholders have been focused on the use of Point of Sale (PoS) machines and other devices at places such supermarkets, schools, cinemas and restaurants, with complete neglect of those in the hinterlands. Riverine communities such as Angalabiri, Sampou, Agbere and Agbidiama, all in Bayelsa State; Itun Agan and Makoko, both in Lagos State; and many more slums scattered all over the country do not have access to financial services.
That is why Sterling Bank’s recent extension of its financial services, through the agent banking model to Makoko, a slum area in Lagos, has attracted a lot of attention.
Agent banking refers to the delivery of financial services outside conventional bank branches. It entails the use of non-bank retail outlets that rely on technologies such as PoS terminals, mobile phones, amongst others. The device introduced by Sterling Bank is biometric and voice enabled and the PoS machine recognises fingerprints.
Banking agents serve as an expansion of bank networks and its advantages range from: increased access by banking agents to communities hitherto unbanked; increased trust in the financial service being provided as it is provided in most cases by local agents familiar to the customers; low cost of servicing the customers as agents usually already run local stores and banks do not need to incur the extra cost of building new infrastructure and the use of biometrics which serve as a means of identification to help in mitigating the cumbersome requirements by banks to open an account.
Bridging the Gap
To the CBN Governor, Mallam Sanusi Lamido Sanusi, the move by Sterling Bank would go a long way to bridge the gap of the unbanked population. According to Sanusi, the central bank had over the years recognised certain barriers to achieving inclusion to include distance to bank branches, cumbersome account opening requirements, lack of awareness of financial products and services amongst others.
He explained that the need to provide access to affordable financial services and products for every Nigerian was what led to the extension of agent banking scheme to the area by Sterling Bank, even as he commended the move by the bank.
Sanusi, who spoke to the market women and villagers through an interpreter, said agent banking eliminates barriers to financial inclusion.
“Whether you are poor or rich, whether you speak English or not, whether you have a car or not, whether you live in a town or village, you have the right to banking services. What we are doing today, by the time you see how this machine works, the only thing you need to open an account, is your finger which God has given you.
“It is a finger which nobody can take from you and God who created us gave each of us fingers that nobody in the world has. You put your finger on the machine and they open account for you and very soon we shall combine this with your telephone,” he explained.
Continuing, he said: “Financial inclusion has been defined in various ways around the world but the essence of inclusion is tied to economic development and providing a better way of life for all Nigerians.
“In 2012 the Financial Industry along with other stakeholders decided to make Financial Inclusion a top priority and launched a National Financial Inclusion Strategy.”
The strategy has a target to help reduce the number of adult Nigerians who are excluded from formal financial services from 46.3 per cent in 2012 to 20 per cent in 2020 with specific targets for payment, savings, credit and insurance. In addition, it is largely believed that sustaining Nigeria’s development hinges on ensuring that at least 80 per cent of the adult population has access to affordable financial services as well as the right environment within which to flourish economically.
Sanusi said as a regulator, the central bank had also recognised the challenges deposit money banks face in trying to reach the underserved communities which include; the cost incurred by the banks in catering to lower valued accounts and the cost of expanding their branch networks to excluded communities.
The CBN, he stated, has taken a stand to ensure that such barriers are broken down and several steps to address these constraints have been taken.
“Sterling bank has decided to take the agent banking approach to include the millions of the unbanked Nigerians in the financial system and by so doing, empowering them to become economically viable.
“I hereby encourage all other banks to actively make financial inclusion high on their agenda as well. In countries like India and Brazil, agent banking has expanded rapidly with India having over 50,000 banking agents and Brazil with over 150,000 agents as at 2011,” Sanusi added.
Features of the Sterling Bank’s Scheme
Some of the features of Sterling Bank’s Financial inclusion scheme include the engagement of pre-qualified individuals in different locations that are predominantly financially-excluded to serve as agents to the bank under the CBN approved agent banking model; the use of Biometrics-enabled PoS with a well-tested application that has been successful in India that shares some similarities with Nigeria; and the use of agents were carefully selected and authorised to carry out certain transactions such as the enrolment of new customers in line with the CBN Level 1 KYC requirements, deposits, withdrawals, airtime top-up and bill payment and funds transfer
The Managing Director/Chief Executive Officer, Sterling Bank, Mr. Yemi Adeola noted that presently, more that 70 million Nigerians live below the poverty line. According to Adeola, it was not enough for banks to only embark on corporate social responsibility without deliberately tackling poverty.
“Every now and then, plans to eradicate poverty and bring financial services are discussed with much hype and promise, but in reality, no real action is taken. But this time around, I am pleased to announce that this is a reality initiated by the CBN and propelled by Sterling Bank.