Nigeria aims to have 80% financial inclusion by 2020. That is, 80% of Nigerian adults will have access to and use formal financial services within the next 24 months.
It’s a bold goal.
After several engagements with industry stakeholders, and years of studying the digital financial services landscape in Nigeria, we do have an idea of some of the things that are required to achieve this.
Having analysed the demand and supply sides as well as the institutional frameworks running the nation’s digital financial services ecosystem, here are 10 things we’re hoping will happen as soon as possible in 2018.
Digitise government payments.
Government should mandate the direct and indirect settlement of all government payments through alternate digital channels like mobile money. Government payments include employee salaries, allowances for National Youth Service Corps (NYSC), Social Investment Programmes (SIPs) and so on. This initiative will require amendments to government payments guidelines and reduce costs. We even have a technical paper explaining how effective this would be in driving financial inclusion efforts.
Improved collaboration between the Central Bank and all related institutions, Nigerian Communications Commission (NCC) included.
Since the CBN has regulatory oversight of the national financial inclusion strategy, we would like to see increased synergy between the apex bank and all other regulatory bodies like NAICOM which covers insurance, PENCOM for pensions, SEC for investments and securities, and and Nigerian Communications Commission (NCC) for the technology underlying digital financial services. The benefits of this would be immense. For example, we could start seeing immediate redress for all consumer transactions below a certain threshold; while the operators resolve the issue separately.
More Fintechs doing what they do best, and more.
In addition to the telcos extending their role beyond infrastructure, we also hope to see more independent financial technology (fintech) actors in the ecosystem providing a myriad of financial solutions using technologies and business models unavailable to banks. So whether it’s the likes of Flutterwave facilitating payments, Paylater offering credit, FINT with their person-to-person (P2P) lending solutions or SureRemit and their blockchain remittances, we would like to see more.
An effective consumer dispute resolution system.
Efforts toward widespread financial inclusion must be complemented with checks and balances that ensure a responsible provision of financial services and products. Some of these checks include:
- provisions in the complaints management and dispute resolution guidelines that empowers Agents to handle first-level complaints without reverting to the DFS provider. Such complaints can thereafter be escalated.
- a financial services ombudsman, mediation services, arbitral organs and courts that finalise consumer complaints within 21 days.
- provision of cost-free consumer complaints resolution services, such as toll-free telephone lines (this one is a no-brainer).
Agents should represent all financial institutions.
If we couple this with a market-led approach to pricing financial services (subject to regulation), prices of financial services at the last mile would race to the bottom, and more people will be able to afford formal financial services. While we’re on the topic, let’s also have a guideline defining a unified interface for agents serving multiple operators.
Introduction of legislation on data protection.
The proposed data privacy and protection legislation would effectively prohibit hacking, malware and other forms of unauthorised access. It will ensure there are stiff penalties for disclosure, sale or unauthorised use or handling of customer data. In addition to legislation on data privacy and protection, an agency with enforcement powers and education of the judiciary and other law enforcement agencies are also necessary.
Secure National infrastructure.
The significant investments in telecommunications infrastructure combined with insecurity hampers the reliability of transactions and financial services. The scourge of damage and theft of telecommunications installations requires the assent of the National Critical Infrastructure Bill that criminalises damages.
Enhance rural infrastructure development.
Mobile telecommunications networks are a critical part of the DFS ecosystem. And it costs lots of money to expand telecommunications infrastructure to rural and remote areas. That’s why it is necessary to facilitate access to the universal service provision fund (USPF) and Nigerian Information Technology Development (NITDEV) Fund. These funds should be actively deployed to fund enhancement of rural telephony by stipulating catchment areas for telecommunication companies and other infrastructure providers up to Ward levels, and promoting compliance through incentives. This access to funds to rollout infrastructure will not be complete without the implementation of the 2013 National Executive Council (NEC) resolution on right of way (RoW).
Local and embedded content promoting financial inclusion.
While we celebrate the successes of the Nollywood industry and its local movie productions, we would also love to see more local endorsement of digital financial services and financial inclusion. With celebrities signing endorsement deals with various financial institutions, why not focus some of that star power on promoting financial inclusion? Can we see the likes of D’banj promote DFS like he did for Koko Garri? Can there be messaging in our Nigerian languages like Igbo, Hausa and Yoruba? Will we have embedded content and games promoting financial inclusion?
Allow Telcos to (finally) provide mobile money services.
Was there ever any doubt that this would make our list? Ever since the advent of mobile money in the Nigerian financial services ecosystem, telcos have been excluded from leading mobile money operations. Only independent MMOs and banks have been given that license.
But what if all that changed in 2018? It would morph the entire mobile money landscape completely. Given their already extensive and well established airtime distribution agent network, the process of converting airtime into a store of value would be the only thing stopping telcos from giving the DFS ecosystem the much needed boost it needs.
We hope to see some (or all) of these wishes granted this year as we believe they would move the financial inclusion needle significantly in the right direction.
Here is to a more inclusive 2018.
Written By: Olayinka David-West & Ibukun Taiwo, members of the Sustainable and Inclusive Digital Financial Services Initiative at the Lagos Business School