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Financial inclusion: Why 40% Nigerians shun banks, keep their money at home

Emeka Okoroanyanwu and Babajide Okeowo

Financial inclusion has continued to assume increasing recognition among policy makers, researchers and development oriented agencies across the globe. Its importance derives from the promise it holds, as a tool for economic development, particularly in the areas of poverty reduction, employment generation, wealth creation and improving welfare and general standards of living.

It is a policy enunciated by Nigeria’s Central Bank (CBN), which aims at reducing the percentage of adult Nigerians that are excluded from financial services from 46.3 per cent in 2010 to 20 per cent by 2020. The number of Nigerians included in the formal sector was estimated to increase from 36.3 per cent in 2010 to 70 per cent by 2020.

A survey conducted in Nigeria in 2008 by a development finance organisation, Enhancing Financial Innovation and Access, revealed that about 53.0 per cent of adults are excluded from financial services. The global pursuit of financial inclusion, as a vehicle for economic development had a positive effect in Nigeria, as the exclusion rate reduced from 53.0 per cent in 2008 to 46.3 per cent in 2010.

Encouraged by the positive development, the Central Bank of Nigeria in collaboration with stakeholders launched the National Financial Inclusion Strategy on October 23, 2012 aimed at further reducing the exclusion rate to 20 per cent by 2020.

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Specifically, adult Nigerians with access to payment services is to increase from 21.6 per cent in 2010 to 70 per cent in 2020, while those with access to savings should increase from 24.0 per cent to 60 per cent and credit from two per cent to 40 per cent, insurance from one per cent to 40 per cent and pensions from five per cent to 40 per cent, within the same period.

The channels for delivering the above financial services were equally targeted to improve, with deposit money bank branches targeted to increase from 6.8 units per 100,000 adults in 2010 to 7.6 units per 100,000 adults in 2020, microfinance bank branches to increase from 2.9 units to 5.5 units; ATMs from 11.8 units to 203.6 units, POSs from 13.3 units to 850 units, mobile agents from zero to 62 units, all per 100,000 adults between 2010 and 2020.

Financial inclusion is achieved when adult Nigerians have easy access to a broad range of formal financial services that meet their needs at an affordable cost. The services include, but not limited to, payments, savings, loans, insurance and pension products.

The strategy has gained ascendancy since its launch in 2012. This is so because banking, which used to be an elitist pastime in the country some years ago, has now opened its doors to lots of economically active Nigerians.

It has also, in the process, extended the corridors of financial literacy in the country to the extent that students, artisans, market women, trade associations and even farmers are not only financially included but can now do most of their transactions from the comfort of their homes and businesses.

Why over 40% of Nigerians still keep their money at home – Reports

Despite the advent of modern banking in the country, many Nigerians still keep their money at home. The Nigeria Inter-Bank Settlement System (NIBSS) in a report also revealed that as at June, 2018 there are about 72,696,254 active accounts in a country of about 180 million people.

Mrs. Bukola Awe, a trader in Lagos, advanced several reasons she preferred keeping her money at home rather than in the bank.

“I prefer keeping my money at home because it is easier to access at home whenever I want to use it. To save the money is a serious thing; when it is time to withdraw the money , it becomes a tug of war, as you will spend so many hours on the queue before you can withdraw. Also, if you want to use the Automated Teller Machine, ATM, it is another kettle of fish. So, tell me what do I really get from going to save money in the bank? she asked. She also said the various charges by banks were another reason she preferred to keep her money at home.

In the opinion of Mr. LekanOladimeji, Nigerians keep their money at home to avoid what they describe as “unnecessary and high charges not clear to them on their accounts.’’

He also ascribed the trend to bank’s poor services, especially at the ATMs. “Getting money from the ATMs can be frustrating. Aside from the queues, you may not even get anything while your account will be debited,” he said.

How to arrest the trend- Expert

A financial expert, Mr. John Ajisafe, said some of the policies of the banks should be reviewed in order to arrest the trend. He urged banks to reward customers, who were loyal and consistent in their savings habit with higher interest rate and also reduce bank charges on depositors’ accounts.

“A major way to address this issue is to increase the interest rate given to customers at the end of the month to encourage people to take their money to the banks. Banking my money has become very insignificant because of dwindling interest rates. If there are incentives, people will be willing to take their money there. Also, everything that discourages customers from taking their money to the bank should be discouraged. How do you explain that I put my money in the bank and gradually the money is removed till nothing is left?” he asked.

CBN rolls out strategy

In a bid to arrest the trend and to ensure that at least 80 per cent of Nigerians have access to banking and other financial services, the Central Bank of Nigeria (CBN), recently rolled out the National Financial Inclusion Strategy.

Mrs. Aisha Ahmad, the CBN Deputy Governor on Financial System Stability, made the presentation at the National Financial Literacy Stakeholders’ Conference in Abuja, recently.

According to her, the country’s apex bank has also released new policy frameworks on consumer protection, financial literacy and financial education.

“Adequate consumer protection is critical to sustaining the long term viability of the financial sector because consumer protection is a necessary precursor to building and maintaining trust in the formal financial sector.

“An essential pillar of any consumer protection regime is consumer education, which is founded on financial literacy.

“The benefits of a financially literate population are immense. Consumers are better equipped to make optimal choices in the use of financial products, pose lower credit and default risk.

“As we seek to boost the number of consumers in the financial industry through the Financial Inclusion Strategy, it is important that we establish policies, structures and programmes that would engender confidence among the general public.

“This is even more imperative, considering the fact that we are only just recovering from a financial crisis that brought the financial system on the brink of collapse.

“All the efforts at strengthening the financial system would be fruitless if there are no concerted efforts to restore trust and confidence among consumers,” he said.

DMBs too

Similarly, Deposit Money Banks, DMBs, in the country are also intensifying their efforts in the area of retail banking to capture millions of unbanked citizens.

A few days ago, the management of Heritage Bank Plc. expressed the bank’s commitment to focus more on retail banking, while availing low-income earners and rural dwellers the opportunity to be financially included.

The bank’s Chief Executive Director, Mr. IfieSekibo, while making the disclosure, emphasised that one of the ways the bank intends to grow is by catering to the specific needs of its customer base across segments; including those in need of retail banking and the unbanked.

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The bank CEO also stated that Heritage Bank Plc. aimed to be more consistent with its growth strategies in 2019 by building an enduring and resilient banking franchise in the country.

According to him: “We are very optimistic that the Heritage Brand will continue to soar over the current economic tide through its collective efforts to remain an enduring institution.”

Meanwhile, other banks in the Nigerian banking industry have also stated their commitment to focus more on retail banking this 2019.

Zenith Bank’s Chief Executive Officer, Mr. Peter Amangbo, stated earlier last week that the tier-1 bank plans to intensify effort in the area of retail banking in 2019. The bank will do this by lending more to SMEs and households, and at affordable interest rates too.

Amangboemphasised the bank’s commitment to retail banking, noting that they are being aggressive about it because “we believe that it is an area with a lot of potentials; we are looking at individuals, households, small businesses.”

In the same vein, Sterling Bank’s CEO, Abubakar Suleiman, recently disclosed his bank’s plans to open more branches across the country, especially in rural areas. The idea is to target more customers in need of retail banking, whilst also actualising financial inclusion for rural dwellers.

Services available in banks

Nigerian banks have picked up the gauntlet to bring in the unbanked into the banking net. They had at various times launched products that are designed to penetrate the nooks and crannies of the country. The initiative has brought the hitherto unbanked into the banking net. The banks have equally gone ahead to launch various e-banking products that are at present making waves in the market.

Some of the channels on offer include the Mobile Banking App, a smart phone application, which gives users direct access to their bank accounts, such as savings, current and domiciliary accounts on their mobile devices. The App is tied to the users’ SIM card and phone number for additional security. Customers using this app can register in two ways, Internet banking users and non Internet banking users.

The first are customers, who have Internet Banking PIN and hardware token while the second are customers, who do not have Internet Banking PIN and hardware token. The Apps are available on only smart phones and can be downloaded from the app stores.

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Internet banking

This is another of banks’ financial inclusion strategy aimed at reaching the hitherto unbanked at the push of a button. Internet Banking Platform is a payment option that enables individual account holders carry out their banking transactions online from the comfort of their homes or offices.

Corporate internet banking

Corporate I-Bank is a web-based electronic banking solution that empowers corporate account holders of the banks to carry out their banking transactions from the comfort of their homes or offices.

Zenith Bank’s USSD and the *966#

One of Zenith bank’s fast growing product is the Unstructured Supplementary Service Data (USSD) and the *966# Easy Banking Customers.

Zenith Bank’s USSD was introduced to ensure that the masses, especially those that do not have smart phones, are not left perpetually financially excluded. USSD is a Global System for Mobile (GSM) communication technology used to send texts messages between a mobile phone and an application programme in the owner network.