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Accelerating the Provision of Financial Services to Rural Areas in Nigeria, By Inyang John

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A viable mobile money platform in Nigeria would trigger a tremendous growth in the country’s financial system as can be seen in Kenya where the service provides an outlet for financial institutions to give out loans which encourage start-ups and the growth of small enterprises…

Financial Services, in simple terms, can be said to be the provision of economic products and services through various financial instruments. On a global level, the financial services industry plays a key role in accelerating economic development. The importance of a viable financial services industry in any society cannot be overstated, its benefits to the general populace are direct and immediate, as it improves the standard of living, promotes investments, triggers the growth of small and medium enterprises, while ensuring the speedy growth of the general societal economy. In countries where we find noticeable economic growth, we also find the presence of a healthy financial services industry. Nigeria, like other developing countries, operates what I can only refer to as a “developing financial services industry”, where a large percentage of our population are unbanked and have no access to any kind of financial services and products. K.Y. Amoako (Former Executive Secretary of the Economic Commission for Africa) in 1997 during the Sixth Session of the Conference of African Ministers of Finance had the following to say about Africa’s economy:

“Our economies are becoming more complex as development progresses, new infrastructure increases internal trade, and new information and communication systems permit faster transmission of market knowledge. However, our financial systems, particularly our banking systems, often are still centered on large urban areas and big enterprises, largely ignoring the huge potential savings and investment finance needs of most of our citizens and the promising small-scale and informal sector of these economies”.

A decade after this remark, the problem of the lack of financial institutions in rural areas has continued to serve as a stumbling block to the development of many economies in Africa, although Kenya has made good effort in addressing this issue through its M-PESA mobile money framework, as it has been able to extend financial services to rural areas in a very strategic and cost efficient manner.

Let us look at the issue within the Nigerian context. Between November 2014 and April 2015, I was part of a financial access point survey instituted by the Central Bank of Nigeria. The findings of the survey were quite profoundly shocking! I was responsible for covering the whole of Akwa Ibom State, and out of the thirty one (31) Local Government Areas of the State, I discovered that financial institutions existed in only eight (8) of the councils, leaving the remaining 23 Local Government Areas with no access to financial services. The case is not different in other parts of Nigeria. This serves as a major setback for economic development in Nigeria and urgent steps need to be taken to address the challenge. As a concerned citizen, I would suggest we structure our mobile money framework.

Mobile Money Mechanism

According to the Business Dictionary, mobile money is the use of a mobile phone in order to transfer funds between banks or accounts, deposit or withdraw funds, or pay bills. An article in the Economists.com says paying for a taxi ride using your mobile phone is easier in Nairobi than it is in New York, thanks to Kenya’s World-leading mobile money system, M-PESA. This goes to show how far mobile money has developed in Kenya. The service has gone from just serving as a money transfer mechanism to a full fledge financial service provider, where customers are able to carry out savings, withdrawals, acquire loans and pay for services through the platform. According to the Boston Consulting Group research of 2016, mobile phones and increasing connectivity in Africa will give rise to a new market in mobile financial services, creating explosive opportunities for businesses on the continent.

Apart from traditional rulers, we can also have school heads to serve as agents, where parents can send money to their wards in school without having to travel long distances. This can be very useful for those in boarding houses and tertiary institutions that are located far from urban areas.

Mobile money has also been introduced in Nigeria but its growth has been limited by a host of factors (chief among which is insecurity and lack of trust). During the financial access points survey I conducted in 2015, all mobile money service providers in Akwa Ibom complained of the lack of trust of customers as being the major reason why the service has failed. We can address this issue. One of the reasons why mobile money is hugely successful in Kenya is the Agent selection methodology employed by Safaricom, which was very stringent. Safaricom also employed some banks with extensive branch networks to serve as “Superagents” responsible for assisting the mobile agents manage their accounts. Nigeria is a unique country with peculiar structures and issues, and we need to employ this peculiar structures to tackle our challenges; in the selection of mobile money agents, we should look out for personalities who are easily trusted and respected in our society to either serve as agents or hosts for agents. Such personalities include traditional rulers and school heads.

Every Nigerian village community has that one individual who is a traditional ruler, and whose office commands respect from the people and wields considerable influence on them. As Nigerians, we hold our traditional rulers in high esteem, which is why we keep talking about giving them constitutional roles to enhance their profile. We can get these leaders to serve as hosts for agents in their palaces and also encourage their people to take advantage of the platform. This will not only bridge trust gaps but also provide a credible avenue for individuals residing in urban areas to send money home to their relatives. In the past, we have seen how traditional rulers have been successful in mobilising their people for various programmes, such as for immunisation, national census and community development. Developing our mobile money should also be seen as a matter of urgent national importance to drive home the needed effect.

Apart from traditional rulers, we can also have school heads to serve as agents, where parents can send money to their wards in school without having to travel long distances. This can be very useful for those in boarding houses and tertiary institutions that are located far from urban areas.

Conclusion

A viable mobile money platform in Nigeria would trigger a tremendous growth in the country’s financial system as can be seen in Kenya where the service provides an outlet for financial institutions to give out loans which encourage start-ups and the growth of small enterprises; also a good mobile money system will reduce the pressure on commercial banks and help keep them in check as the competition would not allow customers to be charged outrageous banking fees. Nigeria as the giant of Africa must follow the Kenyan model and apply the peculiarities of our environment to solve the country’s mobile money problem.

Inyang John, a graduate of the Ahmadu Bello University, Zaria, can be reached through nyangj34@gmail.com.

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