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Thursday, November 1, 2012

National Financial Inclusion Strategy of Nigeria - Summary Report

What is the meaning of "Financial Inclusion"?

Financial Inclusion is about providing financial services such as loans, savings, money transfers, insurance and pensions in adequate measures to the disadvantaged and low income people of the society.

The basic premise of Financial Inclusion is this: Banking and Payment Services is considered as a public good. Much like any other public good, Banking and Payment Services also need to be made available to everyone without any discrimination. Making public goods available to all without any discrimination is the core objective of public policy.

Therefore, the Central Banks around the world are adopting Financial Inclusion as one of their important strategies to create an efficient society. Nigeria is no exception now.

The Central Bank of Nigeria (CBN) has recently launched the National Financial Inclusion Strategy in a launching ceremony held in Abuja between 23-24 October 2012.

U.N. Secretary General’s Special Advocate for Inclusive Finance for Development Her Royal Highness Princess Maxima of the Netherlands and other dignitaries have graced this occasion.

What is this strategy all about? 

The strategy, designed with assistance from Roland Berger Consultants, can be seen as a foundation laid with an optimistic expectation of improving the financial landscape of Nigeria.

The Strategy starts with defining the purpose of financial inclusion for Nigeria and how it is continues to be relevant for CBN . The most important part of the strategy document is setting of the targets for the nation in general and CBN and other stakeholders in particular. These targets are expected to be accomplished by the year 2020.

The strategy also goes a step forward in formulating operating models for rolling out the strategy, identifying the stakeholders and defining their roles in implementing the strategy.

What are the Targets for Financial Inclusion? 

The strategy acknowledges there were no targets in the past and therefore, the best-in-class countries' data are used as benchmarks in order to set targets for Nigeria. According to the draft report (available on CBN's website), the following are the targets:

Targets for increased financial inclusion in Nigeria
Targets 2010 2015 2020
% of total adult population Payments 36% 53% 70%
Savings 24% 42% 60%
Credit 2% 42% 60%
Insurance 1% 21% 40%
Pensions 5% 23% 40%
units per 100,000 adults Branches 6.8 7.5 7.6
MFB branches 2.9 4.5 5.0
ATMs 11.8 42.8 59.6
POS 13.2 242.7 381.7
Mobile agents 0 31 62
% of population KYC ID 18% 59% 100%

What is in it for the Common Man?

The Strategy promises quite a lot for the common man. 
  1. Many people, including those that never had access financial services, could benefit from increased access to financial services.
  2. The common man will have choice of products from several institutions. The products being Payment services (money transfer), savings, loans, insurance and pensions.
  3. There will be more ATMs coming up, and several more POS (Point of Sale) devices for making transactions safer and faster. 
  4. Common man may likely witness a more regulated and efficient financial landscape in Nigeria.

Concluding with a Caveat 

The strategy depends on efficient implementation in a corrupt-free environment. All said and done, "implementation" is the keyword for success of any strategy. Those who think that the good days are back with the launch of this strategy, think again, you may have to gauge the implementation to make a judgement on this strategy.

Promises are made. Promises are broken. Some are indeed made to break. Only few sustain. What will be the fate of the Nigeria's Financial Inclusion Strategy? Will this strategy also break its promises? We would anyway know the result of its success or failure by 2020. Would you want to wait till then or use your prudence to predict it now? Tell us what you think about this.

We have also launched polling on this issue in our Polling Corner. (Reducing financial exclusion rate to 20% by 2020. Is it achievable?)

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2 comments: on "National Financial Inclusion Strategy of Nigeria - Summary Report"

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