Fintech and Financial Inclusion in Nigeria


Thursday, May 27, 2021 / 11:35 AM / by Straplan Advisory / Image Header Credit: Straplan Advisory 

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Financial Inclusion: a tool for driving an inclusive economic growth, reducing inequality, eliminating systemic poverty and improving communal welfare


Studies have shown a strong correlation exist between financial inclusion and economic development

  • A study by the World Bank in 2017 revealed that there was a strong positive correlation between account penetration of various countries and their Gross Domestic Product (GDP) per capita.
  • Research has also shown that high-Income Countries with approximately 100% of account penetration posted GDP per capital ranging from $25,000 above while Sub-Saharan African Countries with less thank 65% account penetration in most cases recorded GDP per capita less than $10,000.
  • A study carried out by Bruhn and Love (2014)  showed that after a rapid opening of bank branches in Mexico,  an increase in access to finance led to an increase in income among low-income individuals.
  • In  a similar study by Bugressand Pande(2005), a decrease in poverty level was recorded in rural areas in India after the expansion of bank branches to rural areas


Credit is more about enabling transactional exchanges.


Digital technology has now made it easier to reach more people and enable more transactions. The critical mass that is financially excluded are also excluded in form of welfare and capacity development. Therefore, there is need for an integrated digital economy approach that is tech-led and directly engages the bottom of the pyramid.


While financial inclusion is not an end in itself, it serves as a vital means to an end: eliminating systemic poverty and improving communal welfare.


More importantly, digital technology has of recent shown the capacity to serve as a platform for enhancing all life activities. However, the emergence of fintech companies in Nigeria has not fully impacted the underserved


Fintech Landscape in Nigeria


Over 200 Fintechsare currently operating in Nigeria.


Generated about $560mn USD in investments in the last 3 years


Major services rendered by these firms include:

  • Payments
  • Lending
  • Savings
  • Insurance


FinTechshave accounted for ~10% of direct investment into Nigeria from 2017-2019 and can contribute pre-COVID -19 estimates of up to $3bn - EFinA2020


FinTechscould add up to $3bn through investments into the economy and $1bn in additional revenues to the financial services industry in the long term - EFinA2020.

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Growing penetration of smartphones and mobile technology and a combination of unmet needs have created the opportunity for Fintechs to drive financial inclusion

  • Smartphone penetration have witnessed rapid  adoption since 2014 and projected to reach 143 million By 2025
  • Fintechs globally have focused majorly on Consumers and MSMEs
  • The use of digital channels  and agents can be leveraged to reach the underserved and unbanked in rural areas
  • Fintechs are leveraging the use of smartphone data and BVN to provide loans to customers.
  • Telecom-led mobile money operations in Kenya have driven financial inclusion over 80%

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Adoption is relatively growing but still comparably low

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  • The youth and middle segment have seen early activity due to the low hanging opportunity arising from many unmet needs (e.g. credit) and the higher propensity to switch to digital alternatives.
  • Gaps still remain at bottom of pyramid as very few commercially viable use cases have been developed to serve this segment. The MSME segment beyond payment has also seen limited activity.
  • There has been increasing focus on the mass segments particularly in lending & payments as players have been attracted by the size of the segment and regulatory focus on financial inclusion. 


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Making finance work for the bottom of the pyramid and the less privileged

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