Economic Confidential

Convinced that banks may not be able to perform their catalytic role of providing access to financing unless the majority of citizens use their services, the Nigeria Deposit Insurance Corporation (NDIC) recently gathered over 100 financial correspondents and business editors including NDIC staff from across the country in Dutse, Jigawa State for its 2012 edition of annual workshop to brainstorm on how to ensure financial inclusion in the economy.

By its very nature, the Nigeria Deposit Insurance Corporation (NDIC) exists to provide financial inclusion within the economy. With a mandate to guarantee a refund of guaranteed deposits in distressed banks, the NDIC provides assurances to citizens that it is safe to do business with banks and go to sleep with their eyes closed.

Despite that effort and reinforcements from the Central bank of Nigeria (CBN) and other agencies of government however, over 39.2 million adults are still excluded from formal financial services. A breakdown of the data showed that 80.4 percent of the excluded adults reside in the rural areas with 54.4 percent of them being women and 73.8 percent under 45 years of age while 34.0 percent are those without formal education.

With the economy being dominated by small and medium enterprises in the informal sectors this statistics means that access to essential funding needed to grow their businesses may never be forthcoming.

Returning to Dutse for the second consecutive year, participants examined the objectives of NDIC and the various ways that will guarantee financial inclusion.

An inclusive financial sector is characterised by diversity of financial service providers, level of competition between them, legal and regulatory environment to ensure easy access to financial services for all, integrity of the sector, as well as, adequate information and knowledge of available products/services.

Financial literacy, which is “the ability to make informed judgment and to take effective actions regarding the current and future use and management of money” was generally agreed to be an important tool in ensuring inclusion.

Managing Director/Chief Executive Officer, NDIC, Mr. Umaru Ibrahim, fired the first salvo in his welcome address when he declared the grossly uneven distribution of micro finance banks (MFB) in the country is frustrating the country’s financial inclusion strategy. He noted that of the 869 MFBs in existence, 346 (39.81 per cent) are located in the South-west, 162 (18.64 per cent) in the South-east, 158 (18.8 per cent) in the North Central, while only 63 (7.5 per cent) and 32 (3.68 per cent) are located in the North-west and North-east respectively. He stated that one way monetary authorities have further devised to improve inclusion is the promotion of all-women micro-finance institutions.

Speakers after him for the remaining two days harped on the dangers of financial exclusion and tools of financial inclusion, which include microfinance, non-interest/Islamic banking, and advances in technology and innovation (mobile phone banking, stored value and pre-paid cards, and e-banking), appropriate and efficient delivery model, strong collaboration among banks, technical service providers and other stakeholders.

Aspirations of financial inclusion are economic growth; financial deepening & stability through inclusive growth; financial discipline; asset accumulation and more effective government policies and planning, economic empowerment of the poor.

However, poor income, hurdles to customers’ physical access, inadequate infrastructure, lack of adequate, financial literacy and transparency of service providers have combined to serve as barriers.
It was agreed that financial literacy, a sine qua non to inclusion includes the ability to understand financial choices, plan for the future, spend wisely and manage the “financial literacy is not an absolute state, it is a continuum of abilities that is subject to variables such as age, family, culture and residence.
The structure of bank branches that is upscale and expensive has also not helped issues while the mini branch concept is yet to become widespread thus justifying the decision to establish the agent banking model.

A particular speaker described the Nigerian economy as an enigma, coasting along at an enviable growth rate of 6.5 per cent in the last five years, yet lacking the basic structures necessary for such phenomenal growth as access to finance, which is a critical component for economic growth is very limited.
He said though a global scourge, financial exclusion has become an endemic problem in Nigeria. It was an admittance of this fact that informed the direction of poverty alleviation programme being geared towards reaching the grassroots with financial services.

“While government is battling to reach the grassroots with financial services, millions living above the poverty line still do not have access to financial services. A 98-year-old-man died in my village in October 13, 2012. When the children went to evacuate the body to the mortuary, they found the sum of N200,000 under his mattress.

“Ironically, by turning his mattress into a banking vault, the late old man had all along been robbing the economy of vital sums of money that could have been lent to the deficit arm of the economy for productivity, which could have accelerated the nation’s economic growth”, he declared.
Even educated Nigerians suffer the pains of financial exclusion as they cannot access pension schemes despite the fact that the Pension Act of 2004 makes it mandatory for any employer of more than five persons to operate a contributory pension scheme that would serve as fall-back for workers during retirement.

Another speaker insisted that maintaining macro-economic stability and enhanced mobile payment will help improve the nation’s financial inclusion. He also identified growth in channels of payment through Authomated Teller Machines (ATM), Point of Sales (PoS) and agents, saying those elements of financial infrastructure that will increase the use of financial services.

But unless bureaucratic and judicial constraints are removed, efforts of regulators and monitors in promoting financial inclusiveness may yet come to naught. For instance, close to 10 years after Societe Generale Bank and Savannah Bank closed shops, depositors have not been settled due to legal loopholes.

Mrs. Christianah Arike, a poultry farmer and petty trader in Abuja lamented that this has affected her trade as all her life savings were trapped in one of the banks and life has net been the same since then. It will take a lot of convincing, she declared to bring her back into the banking system.
In the same vein, very many Nigerians lost huge amounts of money in the 2008 capital market crash and is preventing them from returning despite the campaigns.