Financial Inclusion-Changing the Strategy for Growing Risk Protection

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Monday, September 14, 2020 / 2:00 PM  /By Ekerete Ola Gam-Ikon  / Header Image Credit: Medium


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The 2018 Annual Report of the National Financial Inclusion Strategy of Nigeria revealed that 36.8% of adult Nigerians, even as it aimed to reduce that percentage to 20% in 2020 were financially excluded and more work with identified solutions were required to reach the new target. For the benefit of those that may be uncertain or forgotten about its meaning, financial inclusion is the "provision of a broad range of financial service which are relevant, appropriate and affordable for the entire adult population especially the low income and rural segment of our population" with respect to savings, credit, insurance, payments, remittances and pensions.


The report also stated that less than 2% of Nigeria's adult population of 99.6m (less than or equal to years) at the time had any form of insurance.


This was similar to the report for the other financial services providers including the pensions industry though the National Pension Commission (PENCOM) had released the guidelines for the Micro Pension Plan that year with a view to broadening its user base.


It was easy and apparent to note that the banking industry was doing relatively better and set to surpass its 2020 target after the Central Bank of Nigeria (CBN) had licensed a National Microfinance Bank (NIRSAL) that would leverage the locations of NIPOST in all 774 Local Government Areas to fast track access to credits to MSME and facilitate inclusive economic growth. 


As we review the performance of Financial Inclusion in Nigeria this COVID-19 year, it would be a good time to equally reconsider the aspect of the strategy implementation that seems to exclude other services while banking leaps on.


Banking the Uninsured 

According to the report, the banked population in 2018 was 39.6% of the adult population of Nigeria, a slight increase of 1.3 percentage points from 2016, a situation that called for several regulatory changes to remove or reduce barriers to access financial services like lack of trust, low level of financial literacy and religious and cultural impediments. 


The National Insurance Commission (NAICOM) had responded with the review of the Guidelines on Bancassurance and Microinsurance as well as the Regulations on Takaful, clearly categories of insurance intended to address the needs of people within the informal sector, low income earners and those who desired appropriate regulated level playing field.


"Implementation of the Bancassurance model did not record much traction in 2018" according to the report, which also noted that "Industry data from insurance companies fell short of the survey figures".


Given the status of the insurance segment in the report, which did not surprise some industry analysts, it became even more urgent to consider efforts that could change the story when the next report would be released. So, it was reassuring to observe that CBN Governor, Mr. Godwin Emefiele was advising small business owners to take up Keyman Insurance in view of the access the Bank had given them as part of the COVID-19 Relief Fund.


Also, earlier this year, CBN had announced the mandatory use of electronic Form M by bank customers for imports, a situation that eases the generation of premium income for insurance companies and sure to boost the market development agenda of NAICOM.


A critical strategic gap that however should be addressed is where the banks, using their advantages, now get to open accounts for adult Nigerians that were financially excluded but without any complementary action to make them insurance policyholders. 


CBN and NAICOM need to urgently review this to appreciate that in the spirit of financial inclusion an adult Nigerian who opens a bank account can also have any of the following insurance account: individual life assurance, health, motor, personal accident, education or savings leveraging the same bancassurance model.


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Would it not be a positive score for the financial inclusion strategy to achieve such synergy towards attaining the overall targets for 2020?


In my view, it is a missed opportunity that the Financial Inclusion Secretariat, CBN and NAICOM need to look at as it seems inconsistent with the objectives of the NFIS to bank an uninsured person.


We recognise that the banks also have challenges with getting people who had opened accounts to keep them active and this is another reason I think enabling insurance relationships would be useful.


Any adult Nigerian who opens a bank account and subsequently receives a phone call or short message that the account had an insurance policy, even if it is a Personal Accident for 30 days, will view the whole financial inclusion agenda with hope and greater confidence. Such people might be helped through mobile services or visits by insurance agents to remain financially included and active.


For example, it is my expectation that with better capital base, microfinance banks will attract more of those adult Nigerians, previously, financially excluded and it would be easier to collaborate with microinsurance companies to have this kind of bundled offerings for customers.   


Sometimes when we wonder why the level of financial literacy in advanced economies are higher than ours, we assume that it is because they have higher literacy level, however, it has become clearer that the process of accepting such offerings provided the opportunities for enlightenment and education about what the citizens, in this case, bank account holders, did not know.


Time for Financial Services Salespersons? 

A careful review of the National Financial Inclusion Strategy beyond 2020 will have to consider this question.


I would not be the first person to discuss this as I am aware of the emergence of a new body to undertake this through appropriate professional training but I suggest that the financial regulators consider this seriously.


Typically, Nigerians desirous of having relationships with financial institutions meet marketing and sales executives of numerous companies from different sectors and often, they get overwhelmed and confused only accepting to have the minimum offerings stipulated by certain laws.


An integrated financial inclusion implementation drive, in my view, will get us into a better environment for increasing financial and digital literacy and reaching the targets for the respective segments.


From the insurance industry, NAICOM would need to do more to show that it is working with the Financial Inclusion Secretariat and CBN as well as the National Communication Commission (NCC) to deliver better insurance experience to Nigerians who are gradually becoming digitally empowered. 


Informing Nigerians about insurance inclusion efforts would be necessary now even as we keep engaging with COVID-19 on our minds.


About The Author

Ekerete Olawoye Gam-Ikon, MNIM, CPP, is a management consultant with a specialization in Strategy and Insurance. You can contact him via e:mail and mobile +234-806-648-1111


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