Over the last decade, financial inclusion has been a target pursued across the world.
We are seeing significant progress, as globally, there are 3.8 billion people (69% of all adults) with a bank account or mobile money provider, up from 62% in 2014, according to Global Findex.
About 1.2 billion adults across the world have obtained some sort of formal financial account since 2011, when the rate of global financial inclusion was just 51%.
Africa is not left out of this growth – for example, in Kenya, with the introduction of M-Pesa, which reformed the country’s financial system, the number of financially-served individuals in the country has risen significantly to its current rate of 82.5%.
In spite of these giant strides, 1.7 billion people around the world remain outside the formal financial system, with more than half of them living in Asia & Africa.
The inclusion gap between high-income economies, like the United States and Austria, and developing economies like Nigeria is vast: an average of 94% of adults in developed countries have bank accounts, compared to an average of only 63% in the latter.
Taking a look at Nigeria in isolation, only 38.3% of the adult population is banked, and 40.1 million are financially-excluded (41.6% exclusion rate).
The situation is even more dismal when you consider that the country’s population is made up of over 42% of people who are under the age of 18, which will likely increase the number of unbanked adults even further. Even worse, the exclusion rate has been on the rise over the last few years – between 2014 and 2017, the percentage of banked adults dropped by almost 4%.
When compared with global standards, such as the United States’ 7% average exclusion rate, it is clear that there remains a lot to be done. There has been much discourse, policy development, and investment into financial inclusion.
But why is it important to push for financial inclusion? Because it is the smart thing to do. Studies have shown a positive correlation between access to finance and sustainable economic growth.
This is not surprising, as countries with higher income levels have higher levels of inclusion, and hence lower poverty rates. The United States, for example, had a 1.3% extreme poverty rate in 2016, and an average exclusion rate at 7%; Nigeria, on the other hand, has a nearly 50% poverty rate, and a 41.6% exclusion rate.
Financial inclusion helps to improve the standard of living of citizens, especially those at the bottom of the pyramid, who are mostly neglected by deposit money banks.
Access to financial services, beyond the usual deposits and withdrawals, such as credit and insurance, will equip these individuals to start and expand businesses, invest in education and health, manage risk, and weather financial shocks, and ultimately improve the overall quality of their lives.
Nigeria has a large informal sector and a lot of the funds they receive and earn do not enter the formal financial system. If brought into the system, they will increase the funds available for loans and other financial services that have the potential to benefit many.
Increased access to capital allows for rapid expansions, which will, in turn, create more jobs. This will eventually lead to better overall economic output levels.
The World Bank’s stated goal is to achieve Universal Financial Access by 2020; in Nigeria, the CBN set a target of reaching 80% inclusion by 2020. Imagine what a more financially-inclusive Nigeria could look like.
One where Nigeria is no longer the poverty capital of the world because citizens can afford basic necessities; where SMEs are scaling up because they have access to finance; and more importantly, one where anyone, irrespective of geography, gender and income level, is able to access useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit and insurance – delivered in an affordable and sustainable way.
This impact of such a feat will undoubtedly be far-reaching and felt by every single Nigerian.
