Adoption of mobile money drives Nigeria’s banking penetration to record high

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Greater adoption of mobile money is driving growth in account holdings in financial institutions, particularly in sub-Saharan African (SSA) countries like Nigeria, according to a recent World Bank GlobalFINdex 2021 report.

An analysis of the report, titled “Financial Inclusion, Digital Payments, and Resilience in the Age of COVID-19,” showed that the number of banks in Nigeria increased by 15.6 percentage points to 45.3 percent in 2021, the highest level in 10 years, compared to 29.7 percent in 2011.

At 45.3 percent, Africa’s largest economy ranks 18th out of 25 SSA countries.

Further analysis also showed that the proportion of women with bank accounts rose 8.5 percent to 34.5 percent, while the number of men with bank accounts rose 22.1 percent to 55.5 percent.

“Mobile money has become a key enabler for financial inclusion in sub-Saharan Africa, particularly for women, as it drives account ownership and use through mobile payments, savings and loans,” the report said.

The Global Findex database has become a mainstay of global efforts to advance financial inclusion. The database was created with funds from the Bill & Melinda Gates Foundation and has been published every three years since 2011.

Despite the improvement, Nigeria still has a high non-bank ratio at 54.7 percent. The World Bank reports that Nigeria, India and China are among the countries contributing to the global unbanked population.

“Approximately 1.7 billion adults worldwide do not have an account with a financial institution or mobile money provider. Because account ownership is nearly universal in high-income economies, virtually all of these unbanked adults live in the developing world.

“In fact, almost half live in just seven developing countries such as Bangladesh, China, India, Indonesia, Mexico, Nigeria and Pakistan.

The report also highlighted that Mauritius (90.5 percent), South Africa (85.4 percent), Kenya (79.2 percent), Namibia (71.4 percent) and Ghana (68.2 percent) are the five SSA Countries with the highest percentage of banking population are while South Sudan, Sierra Leone, Guinea, Burkina Faso and Malawi are the bottom five with 5.8 percent, 28.9 percent, 30.4 percent, 36.1 percent and 42.7 percent respectively Percent.

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On the improvement for Nigeria, Temitope Omosuyi, Investment Strategy Analyst at Afrinvest Limited, noted that progress is slow and the country still has a long way to go

“In order for monetary policy to be extremely effective in achieving their goals of reducing inflation and ensuring financial stability, they need more people in the financial system,” Omosuyi said.

Data from the Nigeria Inter-Bank Settlement System (NIBSS) and other sources show that the volume and value of electronic financial transactions and some financial services have increased in the wake of the pandemic.

According to NIBSS, transaction volume via mobile devices increased by 128.4 percent to 153 million in the first four months (January-April) of 2022 from 67 million in the same period last year.

“We now have technologies that make businesses better and easier. It is also in line with the Central Bank of Nigeria’s (CBN) plan to advance financial inclusion in the country,” said Ayodele Akinwunmi, Senior Relationship Manager, Corporate Banking Group, FSDH Merchant Bank

Financial inclusion means people have access to basic financial services such as a savings account, credit and insurance. It has continued to gain increasing recognition among policymakers, researchers and development-oriented agencies worldwide.

Its importance stems from the promise it promises to be a tool for economic development, particularly in the areas of poverty alleviation, job creation, wealth creation, and improving prosperity and overall living standards.

A higher rate of exclusion in Nigeria could result in a poorer population as lack of access to credit and insurance puts them at an economic disadvantage.

Therefore, 2012 became the CBN Working with stakeholders, launched the National Financial Inclusion Strategy, which aims to increase inclusion to 80 percent by 2020.

And at 45.3 percent of the bankable population, it shows the country has missed its target. Therefore, the CBN has set a new goal of 95 percent by 2024, which is believed to be achievable by implementing new techniques and policies such as the Payment Services Bank Licensing and Regulation Policies, the Shared Agent Network Expansion Facility and the general deployment of the Enabling regulation explores framework conditions for fintechs to contribute to financial inclusion.

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