Wednesday, July 17, 2019 / 10:00AM / Cowrywise
As of July 7, 2019, the official website of the Nigerian Interbank Settlement System showed that over 38 million Nigerians have been captured under the bank verification number (BVN) project. This figure, when compared with how financially included Nigerians are, tells an even more depressing story. To explain this, we can refer to an article written by Mrs. Oghogho Osula, in February 2019.
The article stated that over 70% of BVN holders are still underserved; particularly in the areas of investing. For example, less than 400,000 Nigerians invest in the Nigerian mutual funds market. With mutual funds being one of the simplest investment vehicles, one can conclude that the story won’t be anywhere close to pretty for other investment options.
Understanding The Inclusion Challenge
Currently, the benchmark for financial inclusion focuses majorly on access to bank accounts. This shallow measure clouds the measure of progress on this journey. It leads us to ignore the following:
1. Use of financial services.
2. Quality of impact. How do these services impact users?
Commenting on this, Razaq Ahmed, CFA, the CEO/Co-founder of Cowrywise said, “It is important not to delegate access to financial service to the background. It is the most important measure, as people cannot use what they cannot access. With the hurdle of access crossed, it is equally important that financial service providers commit heavily to creative education on benefits, workings of products, and of course consumer protection. A number of people today have access to bank accounts but still won’t use them beyond receiving money and making payments”.
Razaq Ahmed’s firm helps thousands of Nigerians access automated investment options with as low as NGN100. The firm started with pooling automated savings from users. These savings are then simultaneously invested in treasury bills and government bonds to earn users competitive returns.
“Our choice to start with those who already have bank accounts was built on the realization of exclusive access to investment options”, he said. He went on to state that in itself represented what can be termed as secondary exclusion; in which people have left the primary stage of exclusion but cannot still access /use options that will actually lead to quality impact. This is based on the fact that funds kept in regular savings accounts are subject to the woes of inflation.
Building An Integrated Solution
Edward Popoola, who is also a Co-founder of Cowrywise, stated that the biggest challenges people face with actually using products that help with investing are complexity, trust, and the absence of affordable advisory services. “To tackle common challenges, we committed quality time to build a platform that communicates with the everyday user in plain language. One that does not distract the user but helps them focus on the necessary action points. We haven’t slowed down on this as it is a continuous process for us.”
On tackling the issue of trust, Edward shares how the firm partnered with Meristem Trustees right from the start. “We wanted to create a platform that will provide users with a strong sense of security as pension funds, and we made that happen”, he said. Recently, in line with Edward’s take on ease, the firm also on-boarded mutual funds from top investment managers. This innovation allows the everyday person to invest in mutual funds from top fund managers with as low as NGN100.
Marketing The Solution
Speaking on how it has been able to effectively market its solutions, Razaq points to continuous investments in educational campaigns. “When we got into the market, there was a lot of misinformation on how investments work. Where the information was right, it was complex for the everyday person to understand the concepts. So, we built a system that combines the use of events, automated advisory, and simple money guides that even 10-year olds can understand”, he explained.
Overall, this has paid off significantly in the area of engagement. “We have not just been growing, we have been able to maintain a high and stable level engagement with our user community. This is a clear pointer that we have gone beyond just democratizing access to actually driving usage and quality of impact”, said Ajetomobi Feranmi who serves a brand engagement strategist at Cowrywise.
What Does The Future Hold
Within the first two weeks of launching mutual funds, Cowrywise claims it was able to introduce 3,000 first-time investors to the formal investment space. In the next 7 years, they are committing to introduce 10 million first-time investors. A noble goal that will significantly impact the Nigerian investment space.
In the past, Cowrywise has introduced products such as the Life Goals that help with a number of important long-term goals such as parents planning and investing for university fees of children. Also, it has extended its inclusivity drive to allow for ethical investment options making it possible for everyone including Muslims to invest with ease.
Rounding this up, we would lend the words of Razaq Ahmed, “In the nearest future, we do not just want to create an inclusive space for first-time investors, we want to do something bigger. We are looking to pioneer a pan-African investment project, making it possible for Africans to access investment options across various regions of the continent with as low as 25 cents.”