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Leveraging Non-Interest Finance for Financial Inclusion

Data & Financial Inclusion	1979 VIEWS
Data & Financial Inclusion
1979 VIEWS

Wednesday, December 2, 2020 / 9:58 AM / Bukola Akinyele-Yisau for WebTV / Header Image Credit: WebTV

The Central Bank of Nigeria Financial Inclusion Secretariat with key experts in the Noninterest Finance Markets, hosted a webinar on closing the Financial Inclusion Gaps workshop series which explores "Leveraging Non-Interest Finance for Financial Inclusion".

Associate Head, Financial Inclusion Secretariat, Central Bank of Nigeria Dr Paul Oluipke speaking on closing the financial inclusion gaps, the role of noninterest Finance.

Dr Paul Oluipke started the conversation on why noninterest finance is key in closing the gap to financial inclusion in Nigeria. According to him, for several years the Central Bank of Nigeria have implemented the National Financial Inclusion Strategy which targeted five demographic groups such as the following;

Women, because financial inclusion is higher among men than women,
Secondly rural areas as there have lower financial inclusion levels than urban areas,
Thirdly MSMEs which are less financially included compare to large businesses.
The North East and North west are financially excluded zones in Nigeria which they are acute poverty and lack access financial services.
The youth from 18-25 age are the least included demographic among all age groups in Nigeria which is a very vibrant and dynamic segment our Nigeria population and yet they are mostly outside formal financial services, which means we are losing a lot in terms of creativity and innovation in the financial sector of Nigeria.

In 2018, the strategy was revised due to the five key gaps that was identified in the revision, these include;

The regional gap where only 32% of adult in the north east and north west combined are financially included, for the north west there is 70% inclusion and 62% of exclusion in the North east. As 2010, there 46. 2% exclusion which has reduced to 41.6% in 2018 and the target is 20% by 2020 as it is stated
He said, another gap identify is age gap. 53.5% exclusion of the young Z group is the least included which is huge numbers of youth are excluded.
Also, there is the formality gap where majority of Nigerians are within the informal sector in terms of interacting with financial services.
According to him, 47% of women are excluded from formal financial services and
Rural gap of 52% where they live in rural communities and cannot access formal financial services. He was of the view that all the issues need to be addressed. The total Deposit Money Bank credit facility to MSME as at 2016 was 0.07%, while informal inclusion is higher for women than men. Financial inclusion is lower in rural than urban areas while informal inclusion are lower in rural area than urban areas.

Looking at the Central Bank of Nigeria Revised national Financial Inclusion Strategy which includes: North, Youth, Women, Rural, & MSMEs are the key gaps to close and deepen financial inclusion.

North: There is need for Noninterest Finance in the North, Agent Banking, Special Models, Traditional Channels, Digital Products and Financial Literacy in order to identify the gaps.

Youth: There is need for Financial Literacy, Digital Products, School Reach-out programs, Empowerment Schemes in order to educate people and increase awareness on financial services and safety measures to take online.

Women: There is need for Tailored Products, Database on Women, Digital Products, Financial Literacy and Empowerment Schemes.

Rural: There is need for Agent Banking, Digital Products, Financial Literacy, Microfinance Institutions and Products, Mobile Money which will help in the rural areas by solving the problem.

MSMEs: There is need for Collateral Registry, Specialized Institutions, Digital Products, Financial Literacy, and increased Credit Schemes.

According to him, Nigerians are very innovative and creative, but they need a little push to be able to do better in what they do.

Speaking further he said the Bank targeted to reach 6.4m women by the end of 2020.

"There are 6.9m in the rural areas, north east (2.2m), north west (4.8m), north central (2.9m) and youth (3.7m). The CBN is working hard to achieve a wider inclusion and provide a foundation for 8.3m people included in 2019 and by 2020 16m people which is a deficit have since 2018 included which will allow the CBN objective to reach 20% by the end of 2020" He said.

The CBN official said, the focus of the bank's initiative should be north where there is a large demographics in need of financial services, and the Non-Interest Financial Institutions are well placed to boost financial inclusion because it is asset backed and has zero interest.

On the efforts of the Central Bank of Nigeria, he cited the fact that the CBN Management seeking to bridge the financial inclusion gap gave a directive at its 537^th Committee of Governors (COG) meeting dated Wednesday 13^th December 2017, that all the Bank's intervention funds should be incorporated into a non interest window, which has paved a way for eleven non-interest finance initiatives.

Also, in recent times the CBN issued and reviewed guidelines for the operation of non-interest financial institutions such as Accelerated Agricultural Development Scheme (AADs), Textile sector Intervention fund, Agri-business Small and Medium Enterprises Investment Schemes (AGMEIS) Micro Small and Medium Enterprises Development Fund (MSMDF), Non-Oil Export Stimulating Facility (NESF), 50billion Targeted Credit Facility (TCF) amongst others.