How FirstBank Use Tech to Reach the ‘unbanked’

Ceyla Pazarbasioglu, Vice President for Equitable Growth, Finance, and Institutions at World Bank, once said that there can’t be a world free of poverty without having financial inclusion.

Pazarbasioglu added that unless finance is expanded in such a way that it reaches those at the bottom of the pyramid, it has the potentials to back fire.

In 2017, 1.7 billion adults in the world were without an account at a financial institution or a mobile money provider, according to the latest Global Findex database published by the World Bank. While this has improved since 2014, when 2 billion people were classified as “unbanked”, it still represents a huge mountain to climb.

According to a 2018 report by EFINA Access to Financial Services survey, 36.8 pecent of the adult population in Nigeria are financially excluded or unbanked.

This translates to a population of 36.6 million adult Nigerians who are excluded at the moment, with 44.1 percent male and 55.9 percent female.

Also adding to the gloomy numbers is that less than 6 percent of people use their handsets to transact using mobile money, compared with 73 percent of Kenyans, where more than two-thirds of adults have a bank account, according to the World Bank.

The term “underbanked” generally refers to people that rely on cash to manage their finances rather than bank accounts or credit cards.

Experts have attributed the financial exclusion gap in Nigeria to low income as over 60 percent of a population of 200 million live on less than 1.90 percent a day.

Expectedly, unemployment rate spiked to 27.10 percent in the second quarter of 2020 from 23.10 percent in the third quarter of 20018, according to a recent report by the National Bureau of Statistics (NBS).

A lot of artisans and farmers, who form the large chunk of the informal sector, are disillusioned that they queue up for an indeterminate period of time, and most times, they leave the banking halls disgruntly disappointed.

According to the International Monetary Fund (IMF), the Nigerian informal sector accounted for 65 percent of Nigeria’s 2017 GDP.

In a country where 35 percent of its populace are illiterate, with no form of education, meeting banks’ requirements for opening an account is insurmountable herculean task for farmers in the rural areas.

Consequently, the rustics prefer to starch cash at their backyards, to pave the way for them to have access to money whenever they it to pay suppliers or meet their immediate obligations.

Yet traditional Nigerian institutions such as Firstbank of Nigeria, through its Firstmonie ( Money Mobile Service), are removing barriers in an effort to lure previously overlooked customers.

With over 50,000 agent locations in 754 local government areas across all states in Nigeria including the Federal Capital Territory (FCT), Abuja, Firstbank’s Firstmonie processes over 1.4 million transactions daily, according to Fintech Africa.

With more than 50,000 agent locations, Firstmonie has eclipsed the leadership of Equity Bank of Kenya, which has 40,000 agents countrywide.

Interestingly, Firstmonie is an effective platform that is pivotal to Central of Nigeria (CBN)’S cashless policy, as the last resory has said it will achieve 80 percent financial inclusion by 2020.

The Firstmonie Agents are bringing financial services closer to the unbanked and underbanked segment of the society by empowering exiting businesses with the communities to deliver these services.

The Firstmonie Agent is the Firstbank ‘Human ATM’ empowered to reduce the reliance on over-the counter transactions while providing convenient personalized services. The Firstmonie agent is equipped to carry out the following services – Account Opening, Cash Deposit, Airtime Purchase, Bills Payment, Withdrawals and Money Transfer.

Adesola Adeduntan, Chief Executive Officer of Firstbank, who was a keynote speaker at the 2019 University of Edinburgh’s Sustainable Business in Africa Forum, shared insights on the future of financial inclusion in Africa and how financial institutions can steer the continent to achieve greater inclusion.

With the United Nations (UN) forecasting that between 2015 and 2050, Africa will add 1.3 billion people, more than doubling its current population of 1.2 billion, Adeduntan opined that the future is African and gave a positive message for an easy financial inclusion penetration in Africa; which is a catalyst for equitable development and sustainable inclusive economic growth.

Adeduntan prefers to use the phrase ‘financial deepening’ when talking about the unbanked, ‘financial deepening’ occurs when financial inclusion starts playing an important role in economic development.

“It’s about layering additional products on the current agency banking network – services such as micro-credit, micro-insurance and micro-pension,” said Adeduntan.

The central bank is also in the forefront of narrowing the financial inclusion gap, as it has formulated and supported policies that will help bring those outside the financial ecosystem into the banking net.

The apex bank has introduced the non-interest credit facilities, a system whereby banks do not charge interest on loans given to customers. It has also mandated banks to lower or reduce charges on transition so that customers are encouraged to deposit their money.

Experts have identify ways of deepening financial inclusion in the county, as they warn that a country without an effective financial system that accommodates all customers of eligible age may find it difficult to attain the desired economic growth.

Managing Director/ CEO of Shared Agent Network Expansion Facility ( SANEF), Ronke Kuye, identified the following major service areas that are required in order to deepen financial inclusion in the country.

These are the provision of sustainable job opportunities, stronger bank operation, reduction of inequality, creation of empowerment programmes, reduction of formal financial services and a boost in financial security and operation.

Some Sub-saharan African countries are also using mobile banking and the proliferation of mobile phones to bring financial services to the doorsteps of people living in the remote areas.

For instance, Kenya has successfully used M-pesa- a mobile banking application owned by Safaricom- to reduce unemployment and spur economic growth as farmers in the rural areas have seamless access to the market just by dialling their phones.

More than 80 per cent of Kenyans now have access to financial services — defined to include those offered by banks, microfinance providers and mobile money providers — up from 27 per cent in 2006, according to a survey published this month by Kenya’s central bank. In the capital Nairobi, financial inclusion is as high as 96 per cent.

Morroco, a east African country, is also shrinking the financial exclusion gap.

Interestingly, approximately 41 percent of Moroccan adults use a formal financial product or service.this places Morocco well above the average level of financial inclusion in the Middle East and North Africa, as well as above the average level in lower middle income countries (18 percent and 28 percent, respectively).

Bu the coronavirus pandemic could widen the financial exclusion gap in Nigeria as some workers could lose their jobs since the lockdown imposed by government disrupted the demand and supply side of the market.

Also, analysts have warned that the country could slip into another recession in just less than five years.

The International Monetary Fund (IMF) has announced that the Nigerian economy would witness a deeper contraction of 5.40 percent and not the 3.4 percent it projected in April 2020.

Culled from BusinessDay 

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