Financial Inclusion and Cashless Policy

Kabiru Umar

On assumption of duty as the Governor of Central Bank of Nigeria (CBN), Mr Godwin Emefiele made financial inclusion a major plank of his monetary policy. In the Revised National Financial Inclusion Strategy of 2018, the CBN clearly stated that financial inclusion is achieved when adult Nigerians have easy access to a broad range of formal financial services that meet their needs at affordable costs.

Financial inclusion is generally defined as the availability and equality of opportunities to access financial services. It refers to a process by which individuals and businesses can access appropriate, affordable, and timely financial products and services. These include banking, loan, equity, and insurance products. Financial inclusion efforts typically target those who are unbanked and underbanked, and directs sustainable financial services to them. It is also understood to go beyond merely opening a bank account. It is possible for banked individuals to be excluded from financial services. Having more inclusive financial systems has been linked to stronger and more sustainable economic growth and development and thus achieving financial inclusion has become a priority for many countries across the globe, Nigeria inclusive.

In 2018, it was estimated that about 1.7 billion adults lacked a bank account. Among those who are un-banked, a significant number were women and poor people in rural areas and often those who are excluded from financial institutions, face discrimination and belong to vulnerable or marginalized populations.

Due to the lack of financial infrastructure many under-served and low-income communities suffer. Specifically, the lack of proper information can be detrimental to low-income communities and expose them to financial risks. For instance, payday loans target low-income persons who are not adequately informed about interest rates and compound interest. They become trapped and indebted to these predatory institutions.

For the CBN, it is a policy designed to cut across the social strata and gender, issues that have remained knotty in spite of the best efforts of institutions and experts who strive strenuously to ensure that no one is left behind in the plan to bring everyone into the financial net. To achieve this, some policies which include the revised national financial inclusion strategy, the Strategy for leveraging agent networks for women’s financial inclusion, the national fintech strategy and the payment system vision (PSV) 2025 were put in place. Others are, the Nigeria financial services maps and the CBN regulatory sandbox.

It needs to be recalled that from 2012 to date, over 59 policies and initiatives have been implemented by stakeholders to achieve the objectives of financial inclusion. These policies and initiatives cut across the banking sector, the insurance sector, the capital market sector and the institutions responsible for infrastructural development for financial inclusion in Nigeria.

In the process of implementing these policies, it is germane to call to mind the determination of monetary policy initiators, in particular the Central Bank of Nigeria under the leadership of Emefiele who, in his deliberate effort to achieve inclusivity, prioritized financial inclusion through an invention for over four million smallholder farmers and Small and Medium Enterprises (SMEs) and creating over two million jobs at that level of the nation’s economy. It is expected that by the end of 2024, the aim of attaining 95 per cent rate of financial inclusion in Nigeria will hopefully be achieved.

It is noteworthy that Nigeria, as an emerging market economy is, indeed, at an important tipping point for financial inclusion. Even more significant is the situation that brings to the fore the relevance of the Nigerian economy in driving financial inclusion. Obviously, at no time has there been a prevalence of an enabling regulatory environment, proliferation of digital technology, innovation and collaborative platforms between the public and private sector – all strategic levers required to scale financial inclusion in Nigeria than now.

From the point of view of analysts, policymaking in advancing Financial Inclusion in Nigeria has continued to play critical role in ensuring that set goals are achieved within reasonable time frame.

Specifically, financial inclusion is recognized internationally as key to reducing poverty and boosting prosperity. According to the World Bank, being able to have access to a transaction account is a first step toward broader financial inclusion. In its Universal Financial Access Initiative which concluded in 2020, it maintained the stance that ensuring that people worldwide can have access to a transaction account will continue to be an area of focus.

The World Bank stated that great strides have been made toward financial inclusion and pointed out that 1.2 billion adults globally have gotten access to an account between 2011 and 2017. As at this date, it is recorded that 69 per cent of the world’s adults had an account. The beauty of this development is that digital financial services, including those involving the use of mobile phones, have now been launched in more than 80 countries, including Nigeria with some reaching significant scale.  

The Central Bank of Nigeria, on its part, has pursued this policy directed at ensuring that individuals and businesses have access to useful and affordable financial products and services that meet their needs in the areas of transactions, payments, savings, credit and insurance with a single-minded determination to expand and consolidate the financial space. Furthermore, the policy direction is focused in such a manner to ensure that these products and services are delivered in a responsible and sustainable way.

The financial inclusion policy has been greatly enhanced by a subset of this monetary policy, that is to say, the introduction of the cashless policy. Experts’ study indicates that nearness of financial products and service outlets to rural settlements, ease of digital financial transactions and reduced visits to banking halls aided by access to cashless payment mediums has enhanced financial inclusion in Nigeria.

It also emerged that efficiency of cashless payment channels does not significantly reduce the use of financial products and services, hence financial inclusion. It is significant to point out that cashless payment channels have enhanced equal access and use of financial products and services in Nigeria.

Umar is a Kano-based economic affairs’ commentator