Home to over 200 companies in just a few years, the Nigerian fintech space has become widely known for developing and delivering innovative value propositions across the financial service value chain to meet the needs of customers. Innovations such as mobile payments, digital lending platforms, savings, wealth management, and much more, seem to be transforming the financial service industry fundamentally, to challenge models of traditional institutions and infrastructure.
This coupled with a youthful population and increasing smartphone penetration are contributing to the overall fintech growth. Whilst these innovations are notable, there is still the question of how to deepen access to these solutions; simply put, how do we dramatically increase the rate of financial inclusion in Nigeria? In reigniting the economy post-pandemic, the role of financial inclusion has become ever-more important.
Understanding financial inclusion
The World Bank defines financial inclusion as a situation where individuals and businesses can access useful, affordable, and timely financial products and services that meet their needs and are delivered responsibly and sustainably. Driving financial inclusion has been highlighted as a key booster in enabling prosperity for the Nigerian economy.
Following the Central Bank of Nigeria’s (CBN) National Financial Inclusion Strategy (NFIS) which was launched in 2012 and aimed to achieve 80% financial inclusion of adults at the end of 2020, a new report released by Enhancing Financial Innovation & Access (EFInA), shows that Nigeria has missed this target by 16% having achieved 64% financial inclusion by the end of 2020.
Advancing financial inclusion through digital transformation
Digital financial solutions need to be easily and quickly available to the financially excluded and underserved. Our insights at Branch International reveal that, particularly in remote parts of Nigeria, this goal is elusive, due to high infrastructure deficits in these areas. We further identify that technology can help leapfrog some of these deficits.
Further digital transformation in the financial services sector will benefit both newer fintech players and the incumbent banks. Overall, the customer wins, and this will further drive financial inclusion and address some of the deficits the “included but underserved” are facing. EFInA in its 2020 report, endorses innovation enablement, digital ID and credit infrastructure, and technology talent, as actions that could further lead to a higher rate of financial inclusion in Nigeria.
At Branch International, our primary area of impact is with underserved customers – those who lack a full suite of adequate financial service options. According to a 2017 KPMG report, this challenge plagues about 98% of Nigeria’s financially eligible population. Removing the barriers is a priority for a company like Branch International as we offer a wide range of affordable and timely products and services to meet the financial needs of customers accordingly.
The ultimate solution (if there is indeed one) to the financial inclusion problem in Nigeria lies with both the public and private sectors. The financial services regulators must continue to enact enabling policies, and the industry players must continue to innovate solutions to the deficits we face – infrastructure, education, security.
Looking to the future
There are optimistic projections that the financial inclusion progress rates could grow faster with the implementation of favorable policies by regulators to encourage digital transformation within the sector.
Opportunities abound to innovate on business models that increase affordability, reinforce trust and expand capacity for financial services to be built and tailored to the Nigerian market. There is also an untapped space by partnering telcos, retailers, and other financial technology firms to provide services to those who are excluded and underserved. Ultimately, the regulatory landscape needs to grow the capacity and expertise to enable the digital space which in turn will support and widen the horizons of financial inclusion.