DepositAssured Breaking barriers to savings by low income earners
Aisha is in her late fifties. She has been engaged in one form of small business or another for over two decades. Her skin is wrinkled and the lines on her face speak of her struggles, of early harmattan mornings spent beside a crackling fire frying beans cake - akara or “kosai” as it is more commonly known. Despite all her years of toil, she has very little to show for it: a few goats, some extra naira in her pocket and just enough to cater for food and school fees for her four kids. Yet, she still has a reputation in her village of being a wealthy woman. She gets very little help from her husband and due to her reputation, she cannot ask anyone for help, rather, she is constantly being approached for assistance.
This is just one story in one village in Northern Nigeria, but the story is much the same across most villages in other parts of the country. The business may be different and the age and the income might vary. But majority of small businesses across the country are helmed by men and women, like Aisha, who manage to make just enough to eke out a living but not enough to save let alone open a bank account.
According to a 2016 report by Ericsson, an estimated 47 percent of Nigerians are unbanked. However, the regulatory and supervisory authorities such as the Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC) are trying to change that statistics, positively. In July 2016, the CBN instituted a “Zero Balance” policy in order to encourage the unbanked population to open bank accounts with zero kobo in the hope that once they open an account, the idea of saving money may gradually appeal to them and they will begin to save.
However, the challenges are many and varied. For Aisha who has no bank in her village, she has to travel by road for nearly an hour to reach the nearest bank which she neither has the time, literacy nor money for. For some people that might make more money than Aisha and who might find the idea of keeping their money in a bank appealing, they will be frustrated by the minimum opening balance of N10,000 (approximately $30). It is rather sad to note that, despite the CBN “Zero Balance” policy, only few, including the old generation banks abide by it.
The recent N5,000 monthly welfare scheme initiated by the present administration for the teeming unemployed youths and other poor individuals to alleviate extreme poverty and increase spending could ultimately help pull the nation’s economy out of recession. Unfortunately, one of the first hurdles the beneficiaries of the welfare scheme face is the opening of a bank account, which ironically costs more than the N5,000 stipend.
Larai is one of many Nigerians who recently tried to get registered as a beneficiary of the N5,000 monthly welfare scheme. She however met a brick wall when she was told that she would not be able to register without a bank account. Larai approached one of the old generation banks but was alarmed to discover that she needed a minimum of N10,000 to open an account. In tears, she went to her aunt’s husband to explain her predicament. He loaned Larai the money which she used to open an account. She then rushed back to register only to have her hope dashed when she was told that the list was full and she would have to wait for the next batch.
However, there is light at the end of the tunnel. The story of Aisha and Larai is the story of Nigeria. It is the story of the tenacious and dogged entrepreneurial spirit of the average Nigerian. It is also the story of a government working hard to come up with creative solutions for its people. This is exemplified in the N5,000 monthly welfare scheme and the introduction of the CBN policy of zero balance account opening. Thanks also to the advent of modern technology that takes banking from the brick and mortar model to the mobile phone as well as the protection of depositors by the NDIC.
For instance, the NDIC offers protection for depositors up to a maximum insured limit of N500,000 per depositor, per deposit money bank (DMB) and primary mortgage bank (PMB) and N200,000 per depositor per microfinance bank (MFB) in the unlikely event of failure of such licensed banks. The Corporation also offers protection to subscribers of mobile money operators (MMOs) such as Paga, Firstmoney and GTMobile Money to the maximum insured limit of N500,000 per subscriber per MMO in the unlikely event of failure of the bank in which the MMO has its pool account.
As technology is continually changing, it is also changing the banking industry and making banking services more accessible. According to the Nigerian Communications Commission (NCC), Nigeria had 149 million active mobile phone subscribers as at May, 2016. These 149 million people can access banking services from the comfort of their own homes, offices or businesses. This means that Aisha no longer needs an internet connection or to visit to a bank to transfer money to her kids, place orders with her suppliers or receive payment from her customers. Instead, by opening an account with an MMO, she can perform any transaction she needs right from the palm of her hands and put aside any extra money as savings. And best of all, she can be assured that those savings are insured by the NDIC.