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The Central Bank of Nigeria (CBN) may want all banks to be active in financial inclusion and providing service to the poor at the bottom of the pyramid, but it is usually not a profitable business.
This is because a lot people do not have access to the basic amenities such as good roads, electricity, and water. Banks do not give credit to the poor because they don’t have collateralize assets.
Also, the fact that these people do not have steady stream of income hinders them from opening an account.
Many experts have argued that without economic inclusion, deepening financial inclusion will continue to be a herculean task.
Many rural dwellers complain that banks are too far from where they stay and to exacerbate the already anaemic position of these people is the cumbersomeness of the requirements for opening new accounts.
An industry expert who doesn’t want his name mentioned said that to overcome these obstacles banks will have to introduce multiple products to one person.
Banks in the country are carrying about 26 million dormant accounts in their books, representing over 30 per cent of their total customer account base.
According to the banking industry customer accounts data of the Nigerian Inter Bank Settlement Scheme, NIBSS the total bank accounts in the records of the various banks in Nigeria last year were 85 million, of which 59 million were active.
About 112 million Nigerians (representing 67.1 per cent) of the country’s total population of 167million are living below poverty line, according to a recent report by the National Bureau of Statistics (NBS).
Africa’s most populous nation, regulators may have to change their rules to ensure flexibility.
For instance, in India, the former head of the Reserve Bank of India (RBI), Raghuram Rajan, said the country needed to continue fine-tuning rules on collateral and interest rates to ensure financial institutions have enough incentives to keep lending to the poor.
This means there is an urgent need to reduce the ceiling rates for loans provided by microfinance banks.
In Nigeria, microfinance banks and other financial institutions lend at an outrageous rate to small businesses to the detriment of economic growth and development, as the informal sector is the highest employer of labour.
Micro-finance industry provides small loans to individuals arranged through a pay group or organisation.
Policy makers in Nigeria have to introduce or formulate policies that will deepen FI as the country lags behind its fellow sub-Saharan Africa peers in making more people use financial institutions.
An enlightening Brookings Institution report recently ranked 21 developing countries on their support for fostering access to financial services and Nigeria was disappointingly not among the top five countries. The top five countries were Kenya, South Africa, Brazil, Rwanda and Uganda.
The issue of FI is a global phenomenon, as 38 percent of the world’s adults- more than 2 billion people have no bank accounts or savings or borrowing capacity, according to the World Bank. According to the Central Bank of Nigeria (CBN), 65 percent of Nigeria’s population of 180 million people do not have access to the services of financial institutions. That means 63 million people are shut out of banking sector services.
The apex bank is working assiduously to ensure that more people are banked and recently introduced the Agency Banking (AB) model. The AB is expected to provide services such as cash withdrawal and deposit, bill payments, payment of salaries, funds transfer and balance inquiry.
BALA AUGIE
