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Financial inclusion, a tool for poverty alleviation and income redistribution in developing countries, is seen by analysts to be a major drive to easing poverty in Nigeria.
As inclusive financial systems are of great benefit to poor people and other disadvantaged groups, facilitating broad access to financial services, with-out price or non-price barriers to their use.
“Financial inclusion will be able to ease the level of poverty in Nigeria, in the sense that, when people and small businesses are financially included, they can have access to credit, which will enable them to expand operations, employ more people, and achieve what they would have not been able to achieve prior to when they were not financially included,” Ayo Akinwumi, Head of Research FSDH, Merchant Bank, told BusinessDay by phone.
Analysts who spoke on how financial inclusion can help ease poverty in Africa’s largest economy recommended financial service providers to design community-based financial education and marketing to suit any given environment and also for policymakers in the country to provide successful innovations that can facilitate the benefits of financial inclusion in safe ways.
“Financial service providers should design financial products to suit level of education in any given environment which bothers on documentations as regards account opening, bearable service charge, less cumbersome loan processing with affordable interest rates so as to promote more participation and inclusive financial system, hence alleviate poverty and spur economic growth in Nigeria,” a Lecturer at University of Lagos who preferred not to be quoted, said.
“Without inclusive financial systems, poor people only rely on their own limited savings to invest in their education or become entrepreneurs. Likewise, small enterprises must rely on their limited earnings to pursue promising growth opportunities,” he added.
Nigeria, the most populous nation in the African continent, with about 3.2 percent annual growth rate, is projected by the United Nation (UN) to be the world’s third most populous nation by the year 2050.
Although, over millions of the citizens of Africa’s largest exporter of crude oil subsist on less than $2 a day, and this is as a result of high unemployment rate which was reported by the National Bureau of Statistics (NBS) to be up 18.8 percent in Q3 2017 from 13.9 percent from a year earlier, and the low minimum wage of N18000 per month is another issue that has made the standard of living of the citizens to be much lower than its other developing peers.
This has however, led to the exclusion of about 41.6 percent of the Nigeria populace from the financial circle, reported by EFINA, a financial research organization.
This is following the World Bank’s report which revealed that 59 percent out of the 2 billion adults worldwide, do not have access to a bank account owing to lack of fund as financial services and products remains too expensive for low income earners.
“The major reasons for financial exclusion are hard-core poverty and illiteracy which invariably makes financial exclusion both social and financial phenomena. However, access to financial services by many Nigerians will inevitably accelerate economic prosperity; mobilize financial resources for increased investment which invariably lead to overall macroeconomic growth and development,” an analyst who asked for his identity to be withheld said.
Whereas, in other developed countries, where there are complex and multi-dimensional factors that contribute to financial exclusion; hence, variety of providers, products and technologies that best suits the socio-economic, political, cultural and geographical conditions peculiar to them are introduced, a
developing country like Nigeria, access to formal financial services by the majority poor population remains limited due to inadequate available financial services which include high levels of government debt constrained by access of credit to firms and individuals; high inflation which discouraged savings; poor physical and institutional infrastructure; inaccessibility by most poor people due to lack of collateral or credit records as well as lack of national credit which deter lending.
Financial inclusion or inclusive financing is the delivery of financial services at affordable cost to section of disadvantage and low income segments of society, in contrast to financial exclusion where those services are not affordable or available. Conversely, financial exclusion refers to a process whereby people encounter difficulties accessing or using financial services and products in the mainstream market that are appropriate to their needs and enable them to live a normal social life in the society in which they belong.
Poverty on the other hand is scarcity of dearth of the state of one who lacks a certain amount of material possessions or money, which may be absolute or relative in nature. Absolute poverty or destitution refers to the deprivation of basic human needs, which commonly includes food, water, sanitation, clothing, shelter, health care and education. While, relative poverty is defined contextually as economic inequality in the location or society in which people live in.
Although, the Central Bank of Nigeria (CBN) aims at ensuring 80 percent of Nigerian adults are financially included (have easy and affordable access to financial services and products) while Africa’s most populous nation will have 20 percent of its citizens financially excluded by the year 2020.
As such the lender introduced different policies and strategies that can help achieve this aim and they include; the adoption of the rural banking programme in the late 1970. This was introduced by the CBN in 1977 with the aim of achieving one branch bank in each of Nigeria’s local government areas.
One of the critical initiatives in this same direction was the incorporation of Financial System Strategy (FSS2020). The initiative represents a holistic and strategic road map and framework for developing the Nigerian financial sector into growth catalysts that will enable Nigeria be one of the 20 largest economies by 2020, as compiled from the CBN website.
Meanwhile, in a recent report by the World Bank, in its Global Findex Database, Nigeria was however, seen left behind in the trend of global rising financial inclusion.
According to the report released 19, April 2018 which revealed the slump in the level of financial inclusion in Africa’s largest economy; Nigerian adults who are 25 years and above with bank accounts declined by 5 basis points from 49 percent in 2014 to 44 percent in 2017.
This was not different with account holders over 15 years, as their numbers fell 4 percentage points from 44 percent in 2014 to 40 percent in 2017, as compiled from the latest World Bank’s Global Findex Database.
The data shows that 51 percent of Nigerian males had a bank account in 2017 compared to the 27 percent recorded for females; this brings the gap between the male and female to 24 percentage points.
This is however a bigger than the 20 percentage points gap that was recorded in 2014 when the total male with an account was at 54 percent with females at 34 percent.
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