Nigerian telecom companies MTN and Airtel revealed that the Central Bank of Nigeria (CBN) had granted its approval for the operation of payment service banks. This approval however was in principle and the telecom giants would have to meet exact requirements to receive clear approval for operations to begin.
This move falls in line with the CBN’s aim of improving financial inclusion and reducing the number of unbanked and underbanked Nigerians. Since 2012, Nigeria’s number one has made it a goal to increase access of Nigerians to banking products and services.
With this approval, MTN and Airtel are on the path to providing financial services to Nigerians who do not have access to traditional banking services. Payment service banks (PSBs) can carry out payment and remittance services anywhere in the country. Popular PSBs include Paga and OPay who have a combined total of about 28 million users.
There is a huge market for financial services in Nigeria as a large number of Nigerians are still unable to access simple financial services like savings, payments, credit, insurance, transfers, etc. According to this article published by Nairametrics, over 40 million Nigerians above 18 still do not own bank accounts.
Niyi Ajao, CEO of Digital Finance Solutions revealed that 60 million out of 100 million Nigerians are cut off from financial services, and only about one-third of 50 million BVN holders (Bank Verification Number) in the country actively carry out banking transactions. With the population of adult Nigerians at 105 million, it can be inferred that about 55 million Nigerians have no bank accounts. Simply put, 55 million Nigerians still have no way to receive, send and save money despite the 22 commercial banks operating in the country.
Commercial banks in the country have failed to tackle the issue of financial inclusion despite concerted efforts by the CBN. One of the biggest hindrances to opening a bank account is the lack of documentation required by the banks. In this study by the Bill & Melinda Gates Foundation, only 79 per cent of Nigerian adults have the required documents to open a bank account.
Another hindrance to financial inclusion is the lack of close-proximity service points. 48 per cent of Nigerians live in rural areas where they do not have banks or ATMs within proximity. Access to this would require long trips into city centers and towns.
These inclusion problems can be easily solved by mobile telecom companies. With MTN and Airtel having the largest subscribers in the country at 67.5 million and 42 million respectively, they have more access to Nigerians in remote communities than traditional banks ever will. While they might not be able to offer complete financial services like loans, they will offer deposits, transfers, remittances, and savings – which can serve as the foundation to introducing Nigerians in rural areas to financial services.
There are a lot of things required for holistic financial inclusion to be achieved in Nigeria and payment service banks might not be able to provide all the answers. With the rising poverty rates in the country, this goal becomes more difficult to accomplish as it is one thing to have access to financial services and a different thing to have the finances to consistently use the services. However, payment services banks will provide Nigerians in rural areas with the option to do so.
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