Ibrahim Ahmadu is a farmer who lives in Gujeni community in Kaduna State. He is worried that he cannot go to the bank like his friends in other villages because there is no bank in Gujeni
“Gaskiya, there is no bank here,” Ahmadu said. The location of the bank is far from our village. After selling our farm products, we keep our money at home because of the distance of the bank and also because we don’t understand how the banks operate.”

Ahmadu cannot read or write but he says that his friends who cannot read or write still have bank accounts. “Some of my friends save their money in banks, and they say that there are people who assist them in writing when they go to the bank.” Unfortunately in his case, distance is a is a barrier for because of that Ahmadu and other residents of Gujeni keep their money at home even though it is not safe. “We believe that our lives belong to God Almighty, because of that we don’t think of that aspect. Also we know ourselves in the village; we have never experience theft in the village because we know ourselves.”

As the world celebrated the global money week in March, the problem of including unbanked populations in communities like Gujeni took centre stage. Governments across the world took stock of their financial inclusion initiatives’ scorecards and how such initiatives enhanced people’s access to financial services and engendered grassroots-focused and pro-poor development initiatives. Some banks took actual measures to aim for improved inclusion of the under banked public. Stanbic IBTC Bank for instance, while commemorating this year’s Financial Literacy Day 2018, moved its mobile ATM van from Lagos to Ibadan Grammar School, Oyo State. The school was one of the 31 allocated schools across the country, where senior executives of the bank including its chief executive made presentations to students on financial literacy. Chief Executive of the bank, Demola Sogunle, in his presentation “Money Matters, Matter,” said exhibiting exemplary financial discipline and independence, as adults can only be possible if students and young people inculcate the indispensable fundamentals in financial knowledge early in life.

Similarly, the Group Managing Director (GMD), Skye Bank Nigeria Plc, Tokunbo Abiru, at a one-day seminar held in Uyo, Akwa Ibom State, urged the students to imbibe a savings culture.

According to him, “Children and youth need to receive the knowledge and develop skills necessary to make smart financial decisions throughout life. Financial literacy is an essential life skill that is lacking in our educational curriculum, which should be part of the education that we give to our children to prepare them for the realities of the world out there.”

A cursory appraisal of Nigeria’s financial inclusion policy measures show some efforts over the years at encouraging millions of unbanked rural populace to use banking products and services. For instance, in 1977, the Central Bank of Nigeria (CBN)) introduced a rural banking two-phased scheme spanning 1977-1983 with the aim of achieving one bank branch in each of Nigeria’s local government areas.

Godwin Emefiele
CBN Governor, Godwin Emefiele

Under the first phase of the Programme, implemented from 1977-1980, banks were to open 200 rural branches. By December 1980, 194 branches had been opened and at the end of the second phase in 1983, the banks opened 181 additional branches, representing 68.0 per cent of the target set compared with 94.0 per cent achieved during the first phase.

Apparently determined to upscale the rural banking policy, the fiscal and monetary authorities in October 1989 established the People’s Bank headed by the late Tai Solarin.

Community banks, Microfinance Banks and Development Finance Institutions, followed close on its heels Later on more specific institutional initiatives such as the National Economic Reconstruction Fund (NERFUND) and Family Economic Advancement Programme (FEAP) were introduced to promote the funding and growth of small and medium-scale enterprises (SMEs).

But by far one of the most notable of these initiatives was the incorporation of financial inclusion as one of the cardinal objectives of the Nigerian Financial System 2020 (FSS 2020). Essentially, the FSS is a strategic roadmap and framework seeks to grow the nation’s financial sector and by so doing, position Nigeria as one of the largest 20 economies globally by 2020.

The FSS 2020 document shows that the unbanked public belong to the low and middle-income groups earning between USD500 and USD5, 000 and that from 2000 to 2009, the share of households in this group increased from 68.2 per cent to 80.7 per cent. Experts say no country should ignore such large numbers given the huge potentials of the target group, and the huge resources that can be mobilized and channeled to productive activities in the economy.

The FSS 2020, which identified six stakeholders within the financial sector as critical to the process of financial inclusion, specifically listed four initiatives as germane to sustained national efforts aimed at achieving the key goals of financial inclusion. These include, the development of varied financial products; enhancement of payment processes; development of credit system; and encouragement of a savings culture.

In 2005, the fiscal and monetary authorities launched the National Microfinance Policy, which provided the supervisory and regulatory framework that will not only facilitate the growth of privately owned microfinance institutions but also permit and facilitate the participation of market associations, cooperatives, non-governmental organizations and self-help groups, in the microfinance model.

In June 2011 CBN introduced a new framework for Non-Interest Financial Institutions (Knifes) and granted two operators preliminary licences by the end of that year. By adopting the policy, the CBN had hoped, justifiably, that Islamic bank products would help bring into the banking sector a large number of the country’s population that had hitherto not shown interest in conventional financial services, due to their aversion to interest and interest-based products.

Children and youth need to receive the knowledge and develop skills necessary to make smart financial decisions throughout life. Financial literacy is an essential life skill that is lacking in our educational curriculum, which should be part of the education that we give to our children to prepare them for the realities of the world out there

Other policy measures introduced by the bank to improve efficiency, build confidence in the process and attract more users in the payment system include, introduction of the Cashless Policy which has low-cost branchless channels such as ATMs, Point-Of Sale (POS); the introduction of a national switch platform; the automated cheque payment system; and the introduction of the Nigeria Uniform Bank Account Number (NUBAN); and the Bank Verification Number (BVN), among others.

Despite the commendable steps taken by the CBN and the fiscal authorities to promote banking culture, results on the ground do not seem to be commensurate with the time and resources spent. For instance, a survey conducted by the Enhancing Financial Innovation and Access (EFInA) in 2011 indicated that the average number of customers served per branch of Nigeria bank remained at a mere 4,600, in contrast to 10,800 in Tanzania. The organization, which identified deployment of new infrastructure by the banks as critical to bringing unbanked people into the banking system, noted however that with the increased attention and activity by both the monetary authorities and government, appreciable progress has been made in the efforts at improving the financial inclusion rate in Nigeria.

“The various efforts had shown clearly that large number of persons, especially the people living outside the urban areas (rural and semi-urban areas) do not have access to formal financial services but resort to the costly and insufficient informal sources.” The EFInA said.

Figures released last month at the Nigeria Inter-Bank Settlement System (NIBSS) confirm the 2011 position. The NIBSS report, showed that the total number of bank customers dropped from 61 million in 2016 to 59 million in 2017 while active bank accounts reduced from 65 million in 2016 to 63.5 million accounts in the same period.

However, there was some good news in the NIBSS’ data showed efforts by the monetary authorities to update bank customers’ database through the Bank Verification Number initiative continued to reflect modest progress in the year under review. Specifically, the report showed that linked BVN accounts grew from 26 million in 2016, to 41.3 million in 2017.

Related to the latest figures is also the fact that even when the government, CBN and the banks have sustained efforts to deepen financial inclusion, analysts link the slow integration of more people into the banking system to the high levels of unemployment and poverty in the economy.

For instance, the National Bureau of Statistics (NBS) reported that unemployment rate increased from 14.2 percent in the fourth quarter 2016 to 16.2 percent in the second quarter of 2017 and 18.8 percent in the third quarter.

According to the agency, the number of people within the labor force who are unemployed or underemployed increased from 13.6 million and 17.7 million respectively in the second quarter 2017, to 15.9 million and 18.0 million in the third quarter of 2017. Overall, the Bureau puts the total unemployment and underemployment rate as increasing from 37.2 percent in Quarter two of 2017 to 40.0 percent in the succeeding quarter.

Also, the latest World Poverty Clock report indicated that currently, 82 million Nigerians live in extreme poverty, which is 42.4 percent of the country’s population.

The World Poverty Clock, a brainchild of the World Data Lab, tracks poverty estimates in about 99.7 percent of the countries in the world, using data obtained from the International Monetary Fund, World Bank, United Nations. All of these facts are coming against the backdrop of the recent improvements recorded by the country in terms of GDP growth rate of 1.5 percent at the end of the third quarter of 2017 as well as the country’s improved ratings by global institutions and agency’s on key economic performance indices.

For instance, in its latest Ease of Doing Business Report for 2018 published on 31st October 2017, the World Bank ranked Nigeria in the 145th position out of 190 countries covered in the report.

In the report titled ‘Doing Business 2018: Reforming to create jobs’, Nigeria was reported to have moved up by 24 points from 169th position on the 2017 ranking and also 170th position on the 2016.

According to the World Bank, Nigeria alongside El Salvador, India, Malawi, Brunei Darussalam, Kosovo, Uzbekistan, Thailand, Zambia and Djibouti are the top 10 improved countries worldwide, after carrying out numerous reforms to improve their business environments.

Despite the commendable steps taken by the CBN and the fiscal authorities to promote banking culture, results on the ground do not seem to be commensurate with the time and resources spent

The report also reflected that the country moved from 180th position in terms of getting electricity in 2017, to 172nd position in 2018 ranking while on the Registration of Property ranking, the country moved from 182nd position in 2017 ranking to 179 in the 2018 ranking.

The most cheery news in all of this is that Nigeria made the greatest stride in improving access to credit. The country moved from 32nd position in 2017, to 6th position in 2018.

Shanti community

But rural dwellers like Rhoda Garba, of Tungan Mallam in Niger State say they cannot feel the good news. Garba, who sells ‘Masa’ and ‘Kosai’ (African bean cake) says she is tired of the trouble she faces whenever she wants to get money from the bank. So she only uses it to send money to her children in school.

“The bank is far from us here. I can’t just imagine travelling all the way from Tungan Mallam to Paiko to keep my money,” Garba said. “I do go to the bank once in a month to send money to my son who school in Kontagora, seeing the stress, I don’t want to go through the stress of saving money and going back to collect it again. What I do is ‘adashi’ (Saving/ contribution of money with my peers), so when I need the money I talk to them to give me the money”, she added.

Garba isn’t worried about the attendant risks of this local style of banking as she says it is her safer and less stressful alternative. “If I keep the money with me, I might spend it anyhow, so I prefer keeping the money with my peers since there is no bank in our community.” She said. She wants government to provide banks in her community to solve the problem of travelling by the villagers to carry out banking transaction.

“Also we might be attack by robbers on our way to the bank and even accident on the road, we are pleading to the government to provide a micro bank for us to ease our stress”, she told the magazine.

Garba says the Community youth guard against armed robbery and theft of monies kept in the village, and this is safer than travelling long distances to bank. “We have the youths that guide our community for us, robbery in the community is minimal, at least you will have rest of mind than travelling to a far distance to save your money.’

But when they must go to the bank, the community has found away to pool together and send a few people “For instance, if I am going to the bank tomorrow, I will inform those that might want to send money to their children too, so that I can carry out the transaction for everybody,” says Garba. However when she gets to the bank, she is then faced with the additional challenge of sourcing help to write the teller in the banking hall. “ You need to plead with people to fill the teller for you. So, the government should do something about bringing bank to our community. Then our own people will help us.” She added.

While Garba’s problem is access to a bank, Seyi Durosinmi, a vulcaniser in Owode, Ogun State, says he barely has enough money to feed and so cannot save any. He is even more upset that the government does not support his trade with any financial or policy assistance. “Many of us would have been doing more to contribute to the economy but we are not getting funding support from government. What we go through is this daily harassment by local government officials who demand one levy or tax from us”

Muda Yusuf, Director General of the Lagos Chamber of Commerce and Industry (LCCI), agrees with Durosinmi that hard times are responsible for the drop in bank customers. According to him, the inclement business climate has discouraged entrepreneurship while those who tried to start micro and small businesses had not been able to leverage on their initiatives, forcing many to abandon such entities while others collapsed.

Yusuf linked the sharp drop in bank customers’ number between 2016 and 2017 to poverty levels as well as the indisposition of the banks to grant credit to micro, small and medium entrepreneurs, who are seen as marginal players in the economy.

“Well, you know they talk about this financial inclusion. I think, maybe as a result of the developments in the economy in the past 3 years, things have been very difficult. Quite a number of people who are trying to do small businesses, micro enterprises, many of them have dropped that completely. And again the level of poverty has been increasing. I mean, as poverty increases, you don’t have too much business to do in the banks. In any case, the banks don’t even want poor people around them. They prefer to deal with those who really have the money. In fact, sometimes some banks even define thresholds for depositors. They would say ‘please, anybody coming below this, we don’t want.’ All these have affected the marginal players in the economy”, Yusuf added

Yusuf says improving the public finance system to provide some stimulus for the economy and improve the enabling environment for the private sector, could help increase the number of people in the banking system “We need to look at our policy environment too.

How do we tweak our policies to make sure that these kinds of things don’t occur again. Then, of course, we have talked about the issue of infrastructure, and a good policy around financial inclusion. I think government needs deliberate policies to further deepen financial inclusion in the economy. I think these are the things that government can do”, he said.

David Nwachukwu, a banker and investment specialist says the issue is beyond economic. According to him, in addition to general level of decline in economic activities, recent financial reporting requirements set by the fiscal authorities for banks and other businesses could also account for the sharp decline in bank customers’ number.

Nwachukwu, who is also in the mining industry, believes that with the reforms in the banking system, including introduction of BVMs, many people now rationalize the number of bank accounts they keep because, in the past, those bank accounts were kept for different purposes. “In a very simplistic sum, national income is made up of two components – consumption and savings. If the economy is facing challenges, and incomes drop, the implication is that what people have, as a residual to save, drops. This is because, with inflation, all the other challenges, virtually every earning is consumed. The clear implication is that people’s propensity to save drops drastically. But in our own specific environment, there are other subsidiary factors. One is the new trend about financial reporting. Those who in the past, would want to launder money through the system are wary of the reporting requirements, and to avoid going to former financial institutions to place their deposits.

Nwachukwu hopes that as the Economic Recovery and Growth Plan (ERGP) is unfolded, and many of the challenges are addressed, that people’s welfare will improve” Also, given the information disclosure and other standards being put in place by the monetary authorities to make transactions in banks more transparent, the tendency for bank customers to keep separate accounts will no longer be there and the sector will witness improved transparency and fidelity.

The EFInA access to finance survey (EFInA, 2012) had noted that for cashless policy to have the desired indirect effect on financial inclusion, authorities must focus away from just increasing number of available channel units (ATM, POS etc.) and more towards addressing demand side issues. According to the report, increasing attention should also be focused on merchant’s commitment to connecting and using POS and building consumer interest and confidence to increase demand for electronic payment options.

Similarly, the Roland Berger strategy report published in 2011, disclosed that 77 per cent of Nigerians save for emergency purposes and so any infrastructure that supports ability to withdraw funds quickly and easily would serve the populace, especially rural dwellers, in the country.

The report also identified cash availability as important and as such insufficient funds situation at ATMs and POS must be avoided in order to enhance people’s confidence in such channels. For Ahmadu all of these reforms would make meaning only when he and other rural dwellers are included. “We were told that there are banks that come with their car to villages to collect money and save it for them. If we can get such we will be grateful to government, because travelling on the road to bank is risky and stressful, as we might be attacked by robbers on our way to bank. We hear it is done in some villages. We do not know whether it is the government or banks that offer such services. Our own is if such services will be provided to us, it will be better for the community.”

So while world celebrates and the lectures hold in big cities, Ahamadu waits, hoping that one day, the bank too will come to him. 