Nigeria: Achieving Financial Inclusion Through Agency Banking

13 February 2020

In order to achieve the 20 per cent reduction target of financially excluded adult Nigerians in year 2020 by the Central Bank of Nigeria, some licensed agent banking platforms are beginning to roll out multiple financial services.

Nigeria's journey towards financial inclusion started after the federal government through the Central Bank of Nigeria (CBN) adopted the National Financial Inclusion Strategy (NFIS) in 2012.

The strategy articulated the demand side, supply side and regulatory barriers to financial inclusion, identified areas of focus, set targets, determined key performance indicators (KPIs) and established the implementation structure.

The NFIS was built on four strategic areas of agency banking, mobile banking/mobile payments, linkage models and client empowerment. Four priority areas were also identified for guideline and framework development namely, tiered know-your-customer (T-KYC) regulations, agent banking regulations, national financial literacy strategy and consumer protection.

The strategy defined a set of targets for products, channels and enablers of financial inclusion. The KPIs were defined, based on the various dimensions of financial inclusion, including access, usage, affordability, appropriateness, financial literacy, consumer protection and gender.

The NFIS proposed strategies for each of these elements, which included a comprehensive set of policy and regulatory changes as well as suggested business models.

In the implementation of the strategy, the targets were further tailored to reflect the needs and challenges of individual financial service providers (FSPs).

The revised strategy also recognised the imperative for prioritising the foundational constraints, the importance of innovation and the need to create an enabling environment to promote financial inclusion.

Despite the current implementation challenges, there are some emerging opportunities that enhance the prospects of remarkably increasing financial inclusion in the next years. These include: Signing of an MoU in 2018 between CBN and the Nigerian Communications Commission(NCC) on digital payment systems; collaborative efforts between the CBN and Nigeria Inter-Bank Settlement System (NIBSS) to create a regulatory sandbox for innovative financial services; partnership between the Committee of Bank CEOs and the private sector to roll out a 500,000-agent networks nationwide, among others.

However, some major goals of the revised strategy, which include the need to reduce the proportion of adult Nigerians that are financially excluded to 20 per cent in year 2020, are beginning to play out with the renewed campaign and launch of multiple financial services across the country by licensed agent banking platforms in order to meet the country's financial inclusion target.

Today, emphasis has shifted in favour of mobile money and bank agents in view of the fact that the various licensed agent platforms are bringing financial services closer to the people and also providing platforms for offering simple diversified low cost financial services across the broad spectrum of the excluded Nigerian adult population.

Extending cash-less to telcos

Despite the achievements recorded in the country's cashless policy initiative, which is currently bank-led, telecoms companies (telcos) have been agitating to be part of the process, and they are of the view that the CBN should reverse the policy from its current bank-led initiative, to telcos-led initiative, as obtained in other regions of the world, where cashless policy has been successful like the M-Pesa of Kenya.

Having listened to the agitations of the telecoms operating companies, the CBN, last year, granted Approval-in-Principle (AIP) to Money Master PSB and 9PSB, which belong to Globacom, 9mobile respectively. They were given AIP to operate as Payment Service Banks, to drive the financial inclusion strategy of the CBN. The Director of Payment System Management at the CBN, Mr. Samuel Okojere, told THISDAY that the apex bank would not license more PSB operators until it certifies that the two telecoms operators that got the approval in principle were able to meet up with the requirements at the end of the six-month window given to them.

He said nine companies, including telecoms companies, applied to CBN for the PSB licence, but only two telcos and a third PSB operator were granted AIP.

Okojere said the CBN decided to extend the PSB licence to the telecoms operators to test their capabilities and claims that they could drive financial inclusion through their nationwide telecoms infrastructure.

"Telcos cannot play directly in the financial payment space but because they have the network, CBN allowed them to work with institutions that are licensed to offer financial services so that they can be properly regulated and CBN can withdraw the licence when they perform below expectations," Okojere said.

He, however, explained that CBN gave the telcos that were granted AIP some basic requirements that they must meet within a period of six months from the October 2019 date that AIP was granted, before they would be given full commercial licence to operate as PSB.

THISDAY investigation had showed that the telecoms operators were doing everything possible to meet up with the CBN's requirements in order to grab the licence and go full commercial.

Some of the requirements sighted by THISDAY in a CBN document include: "An application that must be accompanied with a non-refundable licensing fee of N2 million only in bank draft payable to the Central Bank of Nigeria; Certified True Copy (CTC) of Certificate of Incorporation of the bank; Evidence of location of Head Office (rented or owned) for the take-off of the business; Schedule of changes, if any, composition of the Board and shareholding after the grant of AIP; Evidence of ability to meet technical requirements and modern infrastructural facilities such as office equipment, computers, telecommunications, to perform the bank's operations and meet CBN and other regulatory requirements; and comprehensive plan on the commencement of the bank's operations with milestones and timelines for roll-out of key payment channels."

The role of agency banking

In order to drive financial inclusion, designed to reduce physical cash handling for most financial transactions, the CBN licensed some agent banking platform, with a mandate to drive agency banking in rural, undeserved and unserved communities across the country. One of the licensed agent banking platforms, 'The BaxiBox', penultimate week, kicked off a rave of campaign with the aim of creating national awareness for its multiple financial services across the country. BaxiBox is the financial platform arm of Capricorn Digital Limited.

Speaking during the formal launch of the campaign in Lagos, the Managing Director of Capricorn Digital Limited (CDL), Degbola Abudu, said the launch of the campaign became necessary in order to avail Nigerians of the unique and innovative services available on the Baxi Platform.

According to Abudu, "We have created a one-stop-shop payment ecosystem aimed at providing everyday financial access and solutions to our agents and customers while creating core services that directly impact their daily lives. At the heart of the company is innovation and technical excellence, which drives the business to strive to find new ways to create economic value for our agents and customers."

Abudu, stated that the adoption of a multi-channel distribution approach that includes devices such as BaxiBox, BaxiPos, and BaxiMpos, web (BaxiPay), Mobile App and API (Business-to-Business) services are tailored to meet the needs of a wide variety of stakeholders including agents, customers and corporate clients.

CDL is a super-agent licensed by CBN and is a member of the Shared Agent Network Expansion Facility (SANEF) programme, a project powered by the CBN, deposit money banks, NIBSS, Chartered Institute of Bankers of Nigeria(CIBN), licensed mobile money operators and shared agents, with the primary objective of accelerating financial inclusion in Nigeria.

Having rolled out different financial service channels to drive financial inclusion in Nigeria, Abudu said: "As a business, we are dedicated to consistently delivering value to our clients through the use of our technology which is a safe, secure and easy way to complete transactions.

"We aim at simplifying the buying experience for the end consumer, providing speed, convenience, and confidence for the users".

Abudu explained that an important part of the company's value proposition was the technology platform, which he said could aggregate and integrate into a wide range of digital products and services, and also serves as a means to empower the immediate community to access financial services that will further drive financial inclusion in Nigeria.

The use of digital products

The mission of some of the licensed supper agents is to bring a wide bouquet of digital products and services to grassroots and mass market consumers through innovation, technology and a world class retail distribution network that is driven primarily by agents and merchants.

BaxiBox for instance, has created a one-stop-shop payment ecosystem aimed at providing everyday financial access and solutions to its agents and customers while creating core services that directly impact their daily lives. The company has been involved in several innovative and technical services that drive the business to strive to find new ways to create economic value for its agents and customers.

Speaking about the features of its digital products, Abudu explained further that products such as the BaxiBox and BaxiPos, were multifunctional android based devices, powered by Baxi's payment solution with one-stop-shop software built in capabilities to enable an end-user to pay for a multitude of digital products and services including electronic airtime, data bundles, utility bills, pay-TV bills, money transfers, withdrawals and more.

Also, BaxiMpos is a pocket-sized point of sale device that performs the function of a cash register or a point of sale terminal when connected to Baxi's mobile app.

Another innovative product from the Baxi Platform includes BaxiPay, an online payment that is accessible through the website or mobile app.

He explained that Baxi mobile app is a technology platform on the mobile device, compatible with android and IOS, and that with the aid of Mpos people can carry out ATM card transactions.

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