FinTech

Six Opportunities for Fintechs in Emefiele’s Vision 2024

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SOLA FANAWOPO

What is in it for me? This is the most important question businesses have been working to unravel since Godwin Emefiele; Governor of the Central Bank of Nigeria (CBN) unveiled his second term agenda, aptly termed Vision 2024.

I recall that Emefiele shared similar agenda on his first five-year term on June 5, 2014 following his assumption of office as Governor of the CBN. Then, while speaking to financial correspondents, he outlined his vision and policy thrust for the next five years.

Emefiele spoke about his efforts to promote price and monetary, exchange rate and financial system stability and plans to spur growth through development finance interventions.

Emefiele’s latest agenda touched on almost all the facet of Nigeria’s economy such that many players in diverse sectors can draw their immediate, medium and long term plans for the next few years.

However, from Emefiele’s vision 2024, I have identified six opportunities for Fintech firms:

  1. Robust Payment System Infrastructure

According to the CBN governor, an efficient payment system is vital to the effectiveness of monetary policy interventions. It helps to reduce the cost involved in payment for goods and services.

Emefiele assured that the Payment Services Management Department of the CBN will work to enable the buildup of a robust and secure payments infrastructure in Nigeria that is reliable and easy to access.

Emefiele said: “We will reinvigorate our efforts at driving the cashless initiative across the country, due to the immense efficiency gains that will be derived from it, and the impact it could have on our financial inclusion drive.

“Given Nigeria’s large size, and the cost involved in building bank branches across the country, the payment system department would support the spread and utilization of digital modes of transactions, so that every Nigerian will have access to financial services.”

You will agree with me that the reinvigorated cashless scheme is a great opportunity for Fintech firms to show what they can do either through collaboration with the banks and or offering financial services to digitize the payments in agriculture, transportation, retail and e-commerce, logistics and other services. fintech

  1. CBN Regulatory Sandbox

Emefiele specifically disclosed that the apex banks will work with Nigeria InterBank Settlement System [NIBSS], the banks and Fintechs to develop a regulatory sandbox.

“The sandbox will enable us to test financial innovations by Fintechs and the banks in a controlled environment in order to assess its impact on the growth and safety of our financial system,” he declared.

However, the importance of regulatory sandboxes to Fintech cannot be overemphasized. Sandbox helps to align compliance and regulation with the rapid growth of Fintech companies without drowning them in rules, but at the same time, without compromising on customer security. 

Another goal is to attract the attention of different players like the banks, private equity and venture capital funds in the hopes of securing investment.

Fintech startups participating in regulatory sandbox initiatives can therefore potentially convince investors who previously have been hesitant to invest, that they are working on both their regulatory obligations as well as their product or service innovations.

Regulatory sandboxes benefit customers, Fintech startups (innovators), regulators and investors.

Companies get the opportunity to work with regulators while testing their products in a live market. Regulators, on the other hand, can develop more appropriate regulatory policies through greater visibility into new innovations.

Customers get better protection, firstly because company products are tested in a controlled environment before official rollouts, and secondly, because regulatory bodies are able to implement more focused policies.

Finally, banks and other investment funds are afforded more confidence in an entity’s ability to comply with regulation while still being able to develop truly disruptive products and services

  1. e-Commerce platforms for Anchor Borrowers Programme

Emefiele spoke about his pet project in the agriculture sector, the Anchor Borrowers Programme. According to him the programme and other intervention programmes geared towards supporting the growth of agriculture and manufacturing sectors, and in keeping with the recent Presidential Directives, would be boosted.

“Our intervention programs will strengthen the linkage between farmers and agro-processors/manufacturers by ensuring that the output of farmers is purchased by agro-processors/manufacturers.

“This linkage with agro processors is necessary in order to prove that farmers are creditworthy individuals with bankable contracts. It will also help to unlock private capital flows from financial institutions to farmers, in order to enable farmers meet orders from agro processors,” he explained.

He noted that to complement the progress made so far and the lesson learnt from the conduct of previous programmes, the CBN will strengthen the capacity building arm of the Anchor Borrowers Programme, which will help to support better farming practices and higher outputs for farmers.

“Through the credit bureaus, we will also leverage technological tools such as analytics in identifying and supporting farmers that have exhibited good credit behavior, in repayment of their loan obligations. This measure will improve their ability to source for financing from commercial banks.”

The opportunities for Fintech firms in this area are endless. For the linkage of the ecosystem in symmetric manners, Fintech firms can build an e-commerce platform. Fintechs can also become the primary integrators of partnerships and thus reduce the scale of investment and complexity of execution of the Anchor Borrower Programme.

In this case, the Fintech provides an end-to-end financial and business services support for farmers through a cloud-based platform.

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  1. Financial Inclusion

Over the next five years, through initiatives and policy measures such as the Shared Agent Network (SANEF) and the payment service banks, the agenda explained that Emefiele will broaden access to financial services to individuals in underserved parts of the country.

Emefiele’s his ultimate objective is to ensure that 95% of eligible Nigerians have access to financial services by 2024.

The opportunities for Fintech firms in the financial inclusion area are exceptionally capacious if they apply the right mix of technology and social behavioural metrics to build their financial solutions for the low ends of the market.

  1. Unique Identification

In order to ease the constraints poor identification has on the availability of credit to prospective banking public, the CBN will support an aggressive enrollment of prospective banking customers in the informal sector onto the Bank Verification Number [BVN] system, Emefiele said.

Emefiele promised that the current enrollment of 38 million unique banking customers will be expanded to 100 million in the next five years. Ongoing partnership with National Identity Management Commission [NIMC] will enable integration between the two databases.

The effort will improve the comfort level on the banks in providing services to an expanded customer base. It will also aid the development of a credit profile for banking customers, which will assist in improving access to credit for creditworthy borrowers by the banks.

Huge unique identification database is a huge resource for Fintech firms to expand their addressable markets.  Besides, some Fintech firms would be involved in the business of BVN enrollment which will bring additional cash flow to the business.

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  1. Consumer Credit

Today, less than 10% of adult Nigerians who have a bank account utilize financial products offered by the banks such as credit cards, personal loans, mortgage loans, auto loans and consumer durable loans.

Consumer credit is critical to the growth of our economy as it will help to boost consumer spending to accelerate improved investments by businesses who seek to meet the demand of the consumers.

Improved consumer spending and investments by businesses will ultimately help to spur the growth of our economy and support our job creation efforts.

To spur lending to the consumers, Emefiele disclosed that  a lending framework will be announced by the CBN, under which large departmental stores, automobile companies, equipment leasing companies, in partnership with financial institutions and the credit bureaus will be able to provide credit facilities at reasonable interest rates to consumers. This will help to spur consumer spending and aid efforts at driving the growth of our economy.

According to Emefiele, the framework under development will support the emergence of a digital, less burdensome process for consumers who seek to access such facilities.

“Credit patterns of consumers will be shared with credit bureaus to assess repayment patterns and credit histories of customers. This will also enable financial institutions to provide additional credit to creditworthy borrowers.

“Financial institutions will also be mandated to disclose to the consumers the upfront charges involved in accessing such credit facilities to prevent the consumers from being abused by the money lenders,” he said.

The development presents a huge opportunity for Fintech firms to work with large departmental stores, automobile companies and equipment leasing companies to drive the lending processes.

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