2018 Year of Landmark Financial Inclusion Policies and Initiatives – CBN

Governor of Central Bank of Nigeria (CBN), Mr. Godwin Emefiele

After a dip in the financial inclusion headline figure in 2016, the biannual financial inclusion survey number shows a marginal increase from 58.4 per cent in 2016 to 63.2 per cent in 2018, the Central Bank of Nigeria (CBN) has disclosed in its National Financial Inclusion Strategy 2018 annual report recently.

The measurement also disaggregated financial inclusion data on a state-by-state level for the first time.

While the data showed significant improvement in the North West and North East zones, the two zones remained more disproportionately excluded than any other zone at 62 per cent and 55 per cent respectively.

The Southwest remained the only region to have surpassed the targeted 20 per cent exclusion rate by 2020 with 19 per cent exclusion rate in 2018.

The report also described 2018 as a very important year that has brought a massive shift in financial inclusion policy approach.

The National Financial Inclusion Strategy was revised to address changes in the regulatory and technology landscape with a view to accelerating the achievement of the strategic objective of 80 per cent Financial Inclusion by the year 2020.

The core of the Revised National Financial Inclusion Strategy (NFIS 2.0) focused on a first principle approach with two overarching principles; creating a level playing ground and adopting a risk-based approach and encouraging stakeholders to play in the area of their core strength or comparative advantage.

The strategy also seeks to leverage Digital Financial Services (DFS) to drive financial inclusion by enabling Digital ID, expanding agent network, focusing on business cases that would drive Government to People (G2P) and People to Government (P2G) payment amongst other priority areas

As a direct offshoot of the revised strategy, the CBN issued a Payment Service Bank (PSB) licensing and regulatory framework.

In line with the NFIS 2.0 principle of providing a level non-traditional player like the telcos, fast-moving consumer good companies (FMCGs) and all entities with a large distribution network to leverage on their existing structure and provide financial services for the unbanked.

According to the policy trust promoters of PSB would have 25% of their presence in the excluded areas.

One issue that has bedevilled the penetration of Financial Services to the underserved area is insufficient fixed location agents.

To achieve the financial inclusion target of 80% by the year 2020, Nigeria requires 62 agents per 100,000 adults of which as at December 2017only 28.2 agents per 100,000 adults had been recorded.

To address this issue; the Body of Bank Chief Executive Officers (CEOs) and the CBN set up the Shared Agent Network Expansion Facility (SANEF), which has amongst other objectives, the mandate to increase agent network by half a million by the year 2020.

Most of the agents would be located in areas with a high unbanked population like the North West and North East regions.

In order to ensure the presence of at least one financial services access point in all 774 local government areas, the CBN has licensed a National Microfinance Bank (NIRSAL) to leverage the locations of NIPOST in the 774 local government areas and deepen financial inclusion has been proposed.

This is intended to fast track access to credits to MSMEs and facilitates inclusive economic growth.

In the same vein, the Alliance for Financial Inclusion (AFI), at its annual Global Policy Forum which was held in Sochi Russia in September 2018 issued the Fintech Accord for Financial Inclusion.

The Accords seeks to leverage Fintech for Financial Inclusion.

Nigeria is a signatory to the Accord. Similarly, Nigeria was recognized on the global stage for its sustained country commitment to financial inclusion.

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In this regard, the CBN was awarded an AFI Medallion for its lead role in the AFI network as a provider of in-country knowledge exchange on the implementation process of the NFIS.

To improve pension penetration to the informal sector, the National Pension Commission (PENCOM) published the guidelines for the Micro Pension Plan in September 2018.

The major change in the financial services sector occurred in 2018 occurred in the Microfinance sector where a recapitalization exercised occurred. The exercise is focused on strengthening Microfinance Banks and making them more efficient.

The Macroeconomic Environment in 2018 was Favourable to Financial Inclusion

These policies and initiatives were rolled out against the backdrop of a relatively stable macroeconomic environment, steady increase in foreign reserve balance, and the impact of sustained implementation of the Economic Recovery and Growth Plan (ERGP).

Others are the social and developmental initiative like the Conditional Cash Transfer Programme, the TraderMoni initiatives, and the Anchor Borrower Programme of the Central Bank of Nigeria. The stable macroeconomic environment together with these activities provided a conducive environment for financial inclusion in the year 2018.

Addressing MSME Credit Gap through Development Finance Interventions

Based on the objective of Financial Inclusion in Nigeria, to achieve 80 per cent Financial Inclusion, it is expected that credit penetration should be at 40 per cent by the year 2020.

Unfortunately, credit penetration is still at 3 per cent as of 2018. Lack of collateral and high-interest rates among under challenges has hindered availability of credits, especially to MSMEs.

To address this gap, the Bankers Committee in April 2018 launched the Agri-Business Small and Medium Enterprise Investment Scheme (AGSMEIS). The scheme seeks to provide access to credit to MSMEs at a concessionary rate, with no collateral.

Electronic transactions volumes across all digital channels with the exception of NEFT continue to increase. In total electronic transaction volume went up by 38.41 per cent in 2018 compared to 2017.

Transaction volume in 2018 also went up by 34 per cent when compared to 2017.

Various Initiatives were embarked on in 2018 to improve Financial Inclusion

One key bottleneck for the implementation of the NFIS strategy is the lack of sufficient funds to carry out major activities.

To tackle this challenge, the National Financial Inclusion Steering committee approved the implementation of a Financial Inclusion trust fund.

60 per cent contribution to the funds would come from Regulatory institutions who are members of the Steering committee while 40 per cent would come from other members.

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Another major highlight of the year 2018 is the approval obtained by the National Identity card Management Commission (NIMC) to commence the ID card ecosystems project.

The initiative seeks to decentralize and simplify National ID card capture while consolidating the disparate implementation of various government ID ecosystems in Nigeria.

This is a major initiative as digital identity is one of the key priority areas of the revised National Financial Inclusion Strategy.