Recently, the financial inclusion programme of the Central Bank of Nigeria experienced a boost with the release of the revised guidelines for licensing and regulation of payment service banks in Nigeria. Some have cited the guideline as a refreshing development, with potential to yield the desired financial inclusion results. Ostensibly, the guidelines intend that only entities with the right capabilities will drive the payment service bank sector as it attempts to make the field competitive.
It is worthy of note that the key objective of the regulation is to enhance financial inclusion by increasing access to deposit products and payment/remittance services to small businesses, low income households and other financially excluded entities through high volume low value transactions in a secured technology-driven environment. Previously, the CBN has sought to drive financial inclusion by the introduction of microfinance banking, agency banking and mobile money operators amongst others. However there is still much to be desired.
According to a 2018 report by the Central Bank of Nigeria, 37% of Nigerians do not have access to financial services, and this is at a time when internet penetration and smart phone penetration are on the rise in Nigeria, with 103 million Nigerians using the internet as at May 2018. More aptly, more than 66 million Nigerians do not have bank accounts or lack access to basic financial services. This deficit has led the CBN to introduce various policies to ensure that this number is drastically reduced and more Nigerians are banked. Also, this becomes more pertinent noting the fact that the informal sector contributes to more than half of the GDP of Nigeria.
The payments bank idea/model has been incorporated in various jurisdictions and climes, and is based primarily on the success of Mpesa in sub-Saharan Africa. A study by Bill and Melinda Gates Foundation identified four reasons why Mpesa was hugely successful and was able to reach a level of penetration that banks in Kenya were unable to reach. One of the core reasons was the extremely high cost of transferring cash to the rural areas from the cities, there was also a perception of lack of safety in transferring such monies. Another reason was the high reputation and trust that Safaricom – a telecom company – had garnered over the years by the citizens, arguably more so than Kenyan banks. A third factor that enabled its success, was the fact that Kenyan banks were […]
