The British High Commission to Nigeria and EFInA (Enhancing Financial Innovation & Access), last week, convened an interactive session tagged Powering Financial Inclusion Through Fintech, to discuss furthering financial inclusion in Nigeria with key fintech stakeholders.
According to the EFInA Fintech Landscape Report 2018, which was unveiled at the event, there are currently 210-250 fintech companies operating in Nigeria across different subsectors from digital retail payments, lending payment infrastructure and savings to digital retail trading and insurtech. Cumulatively, the fintech sector in Nigeria has received over US$250 million in funding since 2014. Yet, 36.8% of Nigerian adults are still excluded from the formal economy and basic financial services, even though they have access to mobile phones.
According to the Central Bank of Nigeria’s Head of Digital Financial Services, Stephen Ambore, the number of financially included (formally and informally) in Nigeria was 60.3% in 2012. Under the National Financial Inclusion Strategy (NFIS), the Central Bank has set out to increase this number to 80% by 2020. According to Ambore, the NFIS has identified five gaps that, if tackled dedicatedly, will bring the country closer to its 80% financial inclusion target by 2020. These gaps include regional (the northwest and northeast are the most financially excluded in Nigeria), gender and age (18-25-year-olds are the most financially excluded), and urban-rural. Six out of nine strategy areas developed by the Central Bank to address these gaps are points of focus for Digital Financial Services.
During the event, Ambore urged fintech stakeholders to present their concerns to the apex bank to ensure that regulators are creating relevant policies that provide an enabling environment for the fintech sector to continue to thrive and drive financial inclusion.
EFInA’s Head of Innovation, Dayo Ademola, went on to present the 2018 Fintech Landscape Report. As part of the research that went into developing its EFInA Fintech Challenge Grant, whose winners were announced at the end of the event, EFInA partnered with the Boston Consulting Group to create a report looking at the sectoral landscape in Nigeria through a global lens. Globally, over US$ 100 billion has been invested in fintech. Funding in Nigeria, at just over US$ 250 million, is just a fraction of the global whole. The report shows four main technologies in the fintech sector that have seen success over the past several years: Application Programming Interface (API), Artificial Intelligence (AI), Biometrics and Distributed Ledger Technology (DTl). APIs were found to be the most dominant.
Of the number of key success factors for fintech as highlighted by the report, Ademola says having the right physical to digital mix is particularly important for the success of the fintech industry in Nigeria.
“When it comes to financial inclusion, you still have to reach customers where they are,” she said.
And while a cumulative funding of over US$250 million might seem like a substantial amount of money, Ademola says there is still a lot to be done in terms of funding to achieve desired financial inclusion results in Nigeria hence the creation of the EFInA Fintech Challenge Grant.
L-R: Yele Bademosi, Director, Binance Labs; Dayo Ademola, Head of Innovation, EFInA; Stephen Ambore, Head of Digital Financial Services, CBN and Esaie Diei, CEO, EFInA
Esaie Diei, EFInA’s Chief Executive Officer, in his opening remarks earlier, said the objective of the fund is to facilitate increased provision of financial services especially to low-income segments.
Some of the key fintech trends from the report include the rise of microlending and micro-savings platforms, telco participation and partnerships, especially as traditional banks open up their APIs to financial technology companies to help service delivery.
From the report, gaps in funding, regulation, information, strategic partnerships and corporate governance still pose threats to the success of the sector. More involvement from legacy financial institutions, increase in micro-credit access, enacting effective regulation and an affinity for innovative yet simple financial solutions are some of the recommendations that will help bridge these gaps and drive financial inclusion in Nigeria towards the desired target.
During an enlightening Q&A segment, a panel session comprising Dayo Ademola, Stephen Ambore, Esaie Diei and moderated by Yele Bademosi, Director of Binance Labs, answered questions ranging from how to target women in the drive for financial inclusion to how fintechs can circumvent poor infrastructure and poor internet penetration to maintain affordability.
One interesting outtake from the panel was the Fintech Sandbox, an initiative from the Central Bank that drives innovation while mitigating risk and raising trust from legacy institutions. In their advice to fintechs, panelists urged entrepreneurs not to take their eyes off the customers while coming up with solutions.
Laure Beaufils, British Deputy High Commissioner to Nigeria
In her remarks, Laure Beaufils, British Deputy High Commissioner to Nigeria reiterated the British government’s commitment to enabling growth in the UK-Nigeria fintech ecosystem adding that it makes both a strong business and development case to continue to do so.
During lighting rounds, industry actors took 15 minutes to share ideas on the intersection between the activities of their organisation and inclusion.
Eghosa Omoigui, Founder and Managing Partner of EchoVC Partners, stressed the need for open APIs for all the many participants in the sector in Nigeria. Adia Sowho, Managing Director and VP at Mines.io, highlighted emerging misconceptions in the lending industry, stressing the need for more deliberate education especially for end users. Microtraction Partner Dayo Koleowo called for a unified, easy-to-access identification system that is inclusive, while Bademosi briefly shed light on the use of blockchain technology in lending transparency and urged participants to use the ideas presented to think about how better to grow the ecosystem in Nigeria. By popular vote, Emeka Mbah Kalu of NaijaCowry presented a short pitch explaining how his company is using blockchain to help users exchange value in micro quantities.
To round up the event, the winners of the US$2 million Fintech Challenge Fund were announced. They include Credpal (Crednet Technologies Ltd), Extramile Africa and SmartTeller in the startup category, and Social Lender (Solend Limited), Finance Life Technology (Riby) and Capricorn Digital Ltd. in the growth-stage category.
Watch the highlights from the event: