Under-banked Nigerians
The Central Bank of Nigeria (CBN) recently lamented the low penetration of financial services to various categories of Nigerians. The bank said that the rate of access to banking services was lower than that of South Africa (at 68 per cent), and Kenya (at 41 percent). Out of a total of 39.2 million adults, 46.3 per cent have no access to financial services. Women are among the most deprived, at 54.4 per cent, while out of those classified as ‘’uneducated’’, 34 per cent have no access.
The apex bank attributed this disparity to lack of services to ‘’lower levels of economic activity in rural areas’’, which limits profit levels for financial institutions.
The figures were much more pointed four years ago, when the nongovernmental organisation Enhancing Financial Innovation & Access (EFInA) said that about 130 million Nigerians did not have bank accounts.
Access may have improved but, as the CBN figures prove, this is only marginally.
The location of banks in urban capitals - even though they were not sites of production for main export crops and minerals, a throwback to colonial era, has deepened the ‘’lower levels of economic activity ‘in rural areas.
Moreover, the urban-based banks have several unwholesome practices that tend to lower their attraction, although these have been minimised in recent times, thanks to bank reforms. Their emphasis on big depositors, and requirements of huge amounts as first deposits, exclude vast numbers of potential customers. Some, for instance the United Bank for Africa (UBA), have introduced a policy of ‘’zero deposits’’ to overcome this challenge that small depositors face. There had been some issues though. The initiative was dealt a serious jolt in some state where groups of canvassers toured rural communities and collected money from villagers to open banks accounts in their names, but ended up defrauded them. Their success, however, contradicts claims that ‘’uneducated’’ people are not willing to use banking services.
The CBN’s lament fails to creatively deal with the fact that 80.4 per cent of those who are fully excluded from formal and informal financial services live in rural areas, as its records indicate. Its positive record of offering inducements to deposit money banks has yielded a paltry number of 21 of them with 6,000 branches and 10,000 Automated Teller Machines (ATMs) for a vast market of 84.7 million of the adult population. To address some of the lapses, CBN needs to abandon its top-down approach to policy development and implementation in this vital area and encourage commercial banks to engage community associations, work-teams among youths; age-groups and market women’s associations; butchers, leather-workers, tailors, barbers and fishermen as guilds. Such a strategy must avoid stifling bureaucratic structures which in the past doomed community banks and the so-called ‘’peoples’ banks’’ to embezzlements and fraud by its manager. The CBN must ensure that village-level communities own financial services too.
One advantage of such bottoms up approach would be to lessen a deep lack of confidence by Nigerians in banks as incidents of bank robberies are often associated with bank officials having lucrative links with men of the underworld and other criminals. Reports of leading figures in society owning safes for denominations of 1,000, 500 and 100 naira notes and foreign currencies in their homes as a strategy for evading anticorruption agencies and oiling patronage networks, undermines the status of banks in the eyes of the public.
The CBN’s commitment to reducing Nigeria’s unbanked population by 20 per cent before 2020 would be a hard target unless efforts are made to improve people’s confidence in the operations of the banks and their officials. This financial inclusion strategy would engender greater participation in the nation’s financial sector by an increasing number of the population, and this in turn will have redounding effects on the overall economy.