PSBs, Financial Inclusion & the Missing Links


Bank branches  in small towns and villages is gradually becoming  history owing to armed robbery incidences. Several bank branches have been closed  in the last six years.  Rural dwellers now travel several kilometres to withdraw, transfer or safe money with the banks.

The success of Federal Government’s cash transfer programme initiated by the National Social Safety Nets Project (NASSP) at the presidency is hampered by absence of banking infrastructure in most rural areas . The presidency is unhappy, and as such; the management of the Central Bank of Nigeria (CBN) is under pressure to reverse the ugly trends.

The CBN’s plan to achieve 80 per cent financial inclusion by 2020 is becoming a pipe dream. Two years to the deadline, Nigeria has achieved only 41.6 per cent financial inclusion . The apex bank is desperate to succeed. But the bank-led and independent schemes mobile money services that ought to be the bedrock of financial inclusion scheme has not delivered its promises.

Meanwhile, the telcos have invested in subtle campaigns for MNOs to be allowed to provide financial services. They argued that the slow growth of the financial inclusion was because they are excluded from the mobile money schemes. The telcos took their case to Aso Villa  and were able to convince people that matters of their suitability and readiness to held extend financial services to the under banked and unbanked.

You may also read: CBN Issues Payment Service Banks Regulation…Telcos are Eligible

Uncomfortable that the telcos may eat their dinner if they were allowed to provide financial services, the Bankers’ Committee created the Shared Agent Network Expansion Facilities (SANEF) initiative to boost financial inclusion. SANEF entails aggressive rollout of 500,000 agents to offer basic financial services. These are cash-in, cash-out, funds transfer, bill payments, airtime purchase, government disbursements and remote enrolment on BMS Infrastructure (BVN) to an estimated 50 million under-banked Nigerians.PSBs

Though SANEF is beginning to add the numbers, the telcos are undeterred. Driven by the desire to hit the 80% financial inclusion goal, the CBN  had no choice than to grant the telcos’s prayers. Hence, the introduction of the Payment Service Banks (PSBs).

The five telcos  immediately pledged to deploy over one million agents for PSBs in Nigeria while leveraging their mobile base, integrated identity systems and distribution network to offer financial inclusion services to Nigerians with the assurance to reach 90 million people with financial services by 2020.

To this end, they would engage other stakeholders and government to ensure the telecoms sector contributes 80 per cent to financial inclusionand 70 per cent to formal financial inclusion goal by 2020.

However, the PSBs may not be able to deliver a comprehensive financial inclusion mandates because of numbers of the non-permissible activities imposed on by CBN. PSBs cannot grant any form of loans, advances and guarantees (directly or indirectly); insurance underwriting amongst others.

As such, PSBs would be able deliver three out of six pillars of financial inclusion. The six pillars are provision of universal access to banking, basic bank account with over draft facility, credit guarantee fund, micro-insurance, micro-pension scheme and financial literacy programme.

Most people are of the views that  CBN shouldn’t bog the PSBs down with “must do” and “must not”. PSBs should be about having a separate kind of banking institution to address the people at the very bottom.

According to Professor Muhammad Yuns, founder of Grameen Bank in Bangladesh, which provides small loans to entrepreneurs: “Today, there’s only one kind of financial institution, which are banks for the rich? You are asking the banks for the rich to lend to the poor. The very system is designed in a completely different way.

“This machine doesn’t work for them. The way to really address the problem of the rejected people from the financial system is to create a new financial system, financial inclusion. What does that new system look like? Like a Grameen bank. It’s a bank for the poor and it doesn’t lend money to the rich.

“The bank for the rich doesn’t lend money to the poor. That’s a simple division,”he argued.

For a business model that is based on high volume and low value transactions , the regulatory requirements on CRR and on investing 75% of demand deposit in eligible government securities or treasury bills should  be totally expunged”.

A bank cannot be built on thin margin. This is one of the missing links in PSBs DNA.

  The bankers to the poor must be rewarded for their efforts just like the bankers for the rich.

PSBs should be allowed to invest their deposit in other instruments. This is how the CBN must view the PSBs. The bankers for the poor with all the powers to do everything the bankers for the rich is doing. This is another big missing links in the PSBs.

However. PSBs would benefit from a complete technology backbone to enable consent, cashless payments, paperless and presence-less verification.

The financial services already have one of the global best game-changing e-payment systems that enable cashless economy. Our instant payment infrastructure is reputed as the best in the world.

Besides, PSBs would enjoy BVN and NIN for KYC.

NIN, the unique digital biometric ID would become operational in January 2019. The industry and public infrastructures would enable robust eKYC authorizations and authentication. PSBs can partner with growing number of developers and Fintechstartups to deliver new products and solutions for the PoB.