In the dynamic landscape of Nigeria’s financial sector, the clarion call for financial inclusion resonates as a key driver of sustainable economic growth. Financial inclusion which has to do with accessibility and availability of financial services for all irrespective of income levels, holds the potential to revolutionize the economic fortunes of individuals and the nation at large.
As Nigeria strives for economic diversification and increased global competitiveness, the importance of integrating all citizens into the formal financial system cannot be overemphasized. The World Bank Group considers financial inclusion “a key enabler to reduce extreme poverty and boost shared prosperity.”
One of the important benefits of financial inclusion is the empowerment of marginalized communities. Providing access to basic financial services such as digital wallets, Point-of-Sale (POS) solutions and microcredit to individuals in rural and underserved areas, can break the shackles of poverty.
This empowerment is a catalyst for entrepreneurship, thereby fostering the growth of micro, small and medium-sized enterprises (MSMEs) that are pivotal to the nation’s economic fabric. As more Nigerians gain access to financial resources, a national entrepreneurial spirit is kindled, leading to job creation and a more resilient and diversified economy.
In June this year, the Central Bank of Nigeria said it had achieved 64.1 per cent financial inclusion. This was made known by the Assistant Director, of Financial Development, of the Central Bank of Nigeria, Paul Oluikpe. He also said the Apex Bank was targeting 95 per cent inclusion by 2024.
Initially, the CBN launched the National Financial Inclusion Strategy in 2012 with the aim to reduce financial exclusion to just 20 per cent of the adult population by 2020. This meant a target of 80 per cent inclusion. Unfortunately, Nigeria is yet to achieve that feat.
Recognising the need and opportunity for advancing financial inclusion in Nigeria through digital finance, in 2018, the Central Bank of Nigeria (CBN) introduced a new type of banking license, – Payment Service Banks (PSBs). With PSBs, the CBN aims to leverage the strengths of businesses such as mobile network operators while maintaining a bank-led rather than a telecoms-led banking model. This move is a testament to the relentless commitment of the regulator in driving financial inclusion.
The PSBs and Agency Banking outfits have a major role to play in penetrating rural locations to drive adoption of banking services among the underserved and unbanked especially the MSMEs.
The role of these MSMEs cannot be over emphasized. According to a report by National Information Technology Development Agency (NITDA), it states that MSMEs contribute about 43% to the national GDP and it is expected to grow by 26% if their services are digitized, thereby contributing about $53bn to the nation’s economy. It is critical for these economy drivers to be empowered to scale. It is important for their transactions and businesses to be captured within the formal economy and these can be achieved through digitization and continuous innovation.
My experience working with a technology and digital payment solutions company has shown that the increased adoption of innovative solutions such as Buy Now Pay Later (BNPL) services, digital wallets and Point-of-Sale (POS) solutions are necessary to deepen financial inclusion in the country and even across the continent.
Innovations such as Buy Now Pay Later (BNPL) services, digital wallets and Point-of-Sale (POS) solutions will avail entrepreneurs opportunities to expand their customer base, reach new markets, and participate more actively in the formal economy, contributing to job creation and economic growth.
Empowering entrepreneurs through cutting-edge solutions as these will open new avenues for expanding customer outreach, tapping into fresh markets, and fostering active participation in the formal economy. This dynamic integration not only fuels job creation but also propels economic growth, reinforcing a future where innovation becomes the cornerstone of sustainable progress.
At Interswitch, where I have plied my trade as an enterprise growth marketing professional for three years, our commitment to digital payment solutions is a pivotal step towards fostering financial inclusion and unlocking opportunities for every citizen. By harnessing the transformative power of digital transactions, we aim to bridge economic gaps, empower the unbanked, and catalyze sustainable growth. Through our innovative approach, we envision a financially inclusive continent where digital payments serve as a catalyst for prosperity, creating a more accessible and equitable financial landscape for all.
Furthermore, as Nigeria positions itself as a regional economic powerhouse, the importance of an inclusive financial system cannot be overstated in attracting foreign investment. A robust and inclusive financial sector signals to global investors that Nigeria is committed to creating an environment conducive for economic growth.
The importance of financial inclusion in driving the growth of Nigeria’s financial industry is not just a matter of economic policy but a bedrock for sustainable development. As the nation strives for economic prosperity, ensuring that every citizen has access to and can participate in the formal financial system is critical.
However, to achieve the desired outcomes of a more inclusive Nigeria, payment industry players will do well to channel measured and deliberate efforts towards improving digital financial literacy regionally, upgrading digital infrastructure, deploying digital solutions based on relevant use case, and working closely with regulators to create policies that provides an enabling environment for digital payments to thrive pan-Nigeria.
This article is contributed by Ikechukwu Ugwu.
Ikechukwu Ugwu is an Enterprise Growth Marketing professional with over 15 years of marketing experience across several sectors such as FMCG, Technology, Consultancy.
He is the Founder of Youths for Fintech, a non-profit organisation dedicated to training, mentoring and helping young people start and navigate their fintech careers.
Ikechukwu Ugwu writes from Lagos, Nigeria.