FinTech

How Telcos will Promote CBN’s Financial Inclusion Strategy

ADEWUMI OJO

Across the globe, technology is regarded as a major force in driving key initiatives and policies that aids holistic development for economic growth.

With the simplicity, convenience and innovative solutions its offers, it has become a solution to complex situations.

As Nigeria is embracing the optimal approach needed to leverage new, innovative technology to deliver financial services to its people particularly in pushing for financial inclusion, the role of telcos in penetrating the unbanked and underbanked cannot be over emphasized.

According to the World Bank’s 2017 Global Findex database, mobile money drove financial inclusion in Sub-Saharan Africa.

The report stated that between 2014 and 2017, there was a significant increase in the use of mobile phones and the Internet to conduct financial transactions which contributed to a rise in the share of account owners sending or receiving payments digitally from 67 per cent to 76 per cent globally, while developing countries recorded 57 per cent to 70 per cent.

Data by Nigerian Communications Commission (NCC) shows that the total number of subscribers per individual telecoms operator as of August 2019 stood at 176.89 million.

This suggests that the rollouts of Information and Communications Technology (ICT) could stimulate economic growth and financial inclusion.

Nigeria’s quest to give financial access to 80 per cent of its citizens has been largely driven by its bank-led financial inclusion model, but the largest economy in Africa has lagged its Africa peers who adopted the use of technology. Hence, the question of whether the country can reduce its high exclusion population without the telcos.

Most recent data by EFInA put Nigeria’s financial inclusion rate at 63.2 per cent, meaning that as much as 36.8 per cent adults still lack access to financial services.

Data by the International Monetary Fund (IMF) shows that the correlation between average real GDP per capita and mobile penetration is positive in Africa. Similarly, the correlation between financial inclusion and mobile penetration is positive.

“The results confirm that ICT, including mobile phone development, contribute significantly to economic growth in African countries. Part of the positive effect of mobile phone penetration on growth comes from greater financial inclusion,” IMF said.

“Fulfilling the financial infrastructure gap in Africa, by using branchless banking services such as mobile financial services, is seen as a promising way to increase financial inclusion,” the International lender of last resort said.

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On the reason for the aforementioned, the Washington-based Fund said it is because mobile telephony allows expansion and access to financial services to previously underserved groups in developing countries.

“It reduces transaction costs, especially the costs of running physical bank branches. The increasing use of mobile telephony in developing countries has contributed to the emergence of branchless banking services, thereby improving financial inclusion,” Peter Allum, a division chief at IMF said.

In the quest to achieve a 20 per cent exclusion rate by 2020, the central bank on the 5th of October 2018 released an exposure draft guideline in which it proposed Payment Service Banks (PSB) aimed at deepening financial inclusion.

Since inviting Telcos and other industry players to apply for the mobile money licence over a year ago, the industry regulator has only granted Approval-In-Principle (AIP) to Hope, Money Master, and 9PSB to operate as payment service banks.

“Nigeria has a large mobile market, and the huge number provides an opportunity to use it in deploying easy-to-use technology that can improve access to financial services,” Oghogho Osula, financial expert and former MD/CEO of Coronation Trustees Limited said.

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With high number of Nigerians excluded in the financial net, the CBN needs to leverage on telcos reach of over 176.89million of the Nigeria population by creating a formidable collaboration that will instigate thoughtful policies and initiative.

The cloud of fear cycling the financial sector especially from the traditional banks that granting telcos financial service licence may chip them out should be peddled down.

The CBN and the Nigerian Communications Commission should collectively introduce a framework that will provide a level playing ground for both the financial service providers and the telcos for corporate growth and economic development.