Talking About CBN’s Latest Attempt at Financial Inclusion

Financial inclusion has continued to be a conversation for a while in Nigeria. Its indispensability derives from the fact that it is an important tool for economic development; especially as it aims to minimise poverty rates, reduce financial illiteracy, help in the development of infrastructure in the interiors of the country, minimise the higher cost of funds and administrative expenses – also enhance the flow of financial services to rural areas.

According to Enhancing Financial Inclusion Inclusion and Access (EFInA), 2008 saw that about 53% of Nigerians were excluded from financial services. Another survey has been conducted for 2018 and it states that 39.5 million adults (39.7% of the adult population) have a deposit money bank account. EFInA also notes that 36.8% of the adult population is financially excluded.

That is a significant reduction in the percentage of financially excluded adult Nigerians. But the question remains if the aim of financial services for intentional inclusion is achieving its aim.

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Examining the question

Financial inclusion in Nigeria includes both upsides and downsides. 60% – or more – Nigerians still live below the poverty line, with research indicating that being poor, rural and illiterate are all barriers to inclusion. It will take a while convincing people in rural areas or the uneducated in urban areas about the efficacy of all-round robust financial services.

The Nigerian government launched the National Financial Inclusion Strategy in 2012 to reduce the financially excluded to 20% by 2020. It is a few days to 2020 and we are not yet sure that number can be achieved.

As of 2018, Nigeria alone has 3.4% of the 1.7 billion adults that the World Bank says are unbanked and financially excluded worldwide. And Nigeria accounts for 2.6% of the world population.

Yet, financial inclusion holds much promise and benefits for all. A study by Mckinsey Global Institute estimates that financial inclusion has the potential of boosting world GDP by $3.7 Trillion by 2025 (6% growth), $4.2 Trillion in new deposits, $110 Billion annual reductions in government leakages, and $2.1 Trillion new credits/loans.

Stakeholders in the financial services industry have adequately responded to financial inclusion stumbling blocks. We have the government and the private sector creating empowerment initiatives including vocational training and improved access to loans will help attract those who complain of irregular or no income.

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For bank branches, the banking industry has embarked on the Shared Agency Network Expansion Facility (SANEF) project, so we have more bank agents set up close to homes and offices. This creates job opportunities to individuals and retail businesses who meet the minimum banking criteria. There are also formal and informal literacy programmes for the uneducated, provided in communities. There are also attempts at reducing costs of financial services and access as well.

CBN’s latest initiative

Central Bank of Nigeria and the Bankers’ Committee has started the Bank Verification Number (BVN) classification (BVN 2.0) plan that allows both the rich and poor in rural areas to access financial services.

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Governor, CBN, Godwin Emefiele, announced this at the end of the 11th Bankers’ Committee retreat in Ogere, Ogun, explaining that Bank Verification Number (BVN) will now be classified into two, BVN Premium and BVN Lite.

Go Deeper: BVN Premium covers customers that can provide the 18 basic requirements for a complete BVN enrolment. While BVN Lite requires minimal documentations like name and phone number for bank customers, especially those in rural areas that do not meet the full requirements.

The BVN 2.0 classification scheme will help bring more people into the financial system and reduce the financial exclusion rate.

Know Your Customer (KYC) scheme is part of what will be migrated into the BVN Lite. However, there are people who are currently financially excluded, like people in our rural communities that carry phones, but not having financial services. With the collaboration of NCC, we are putting this BVN arrangement to allow them conduct minimal financial services.

 “It should be possible for us to migrate this people into the BVN lite arrangement where they can conduct minimal financial services, not just banking services, but minimal financial services, insurance and anything you want to conduct in terms of finance, e-payment, or anything, you can do it with the aid of your phone. Bringing them into financial system will help to increase the rate of financial inclusion and reduce the exclusion rate,” he said. 

This entails, for instance, to reclassify and segregate transactions that could be done on BVN. We have two classifications. The existing BVN that we have in the system has about 18 lines of information. If you are on BVN lite there is a limit to the kind of transactions you can do in terms of deposit and in terms of loans,” he added.

We seriously hope this is not just another attempt at financial inclusion.

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