Articles
Financial Inclusion in Nigeria
Articles
Financial Inclusion in Nigeria
Attributes of Financial Inclusion
Until fairly recently , a major constraint to financial sector development in Nigeria was the lack of accurate and credible data about access to and use of financial services . But with the periodic assessments and tracking of consumer trends based on nationally representative samples , the picture that has emerged especially since 2008 is both encouraging and daunting . Current estimates , based on the results of the Efina access to finance surveys , are that 39.5 % of Nigeria ' s adult population of 93.5 million , approximately 36.9 million , is financially excluded . In 2008 , it was considerably higher at 52.5 % ( 45.4 million ) although by 2010 , it had fallen to 46.3 % ( 39.2 . million ).
Against this background , the National Financial
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Inclusion Strategy has helped to clarify the multiple mandates and some of the critical actions that will be crucial to transforming Nigeria into a high financial access economy . It should be pointed out that there is no universally agreed definition of financial inclusion . This is understandable because of the wide-ranging contexts in which the term can be used . Nevertheless , by explicitly stating that financial inclusion is achieved when “ adults have easy access to a broad range of financial products designed according to their needs and provided at affordable costs ” and coupled with the stated target that by the deadline of 2020 , 80 % of adult Nigerians will have access to and use at least one formal financial product , it is clear that the attributes of financial inclusion , which the National Strategy concentrates on are access to formal financial services , usage and affordability by all adults rather than a narrow emphasis on addressing the needs of specific target groups .
Background Previous measures to increase access to and uptake of financial services mandated financial institutions especially banks to open branches in rural locations . It was the establishment of the People ' s Bank ( PBN ) in 1989 that first signalled the segmentation of financial services through the introduction of formal microfinance . The PBN was 100 % government-owned and funded with a mandate to provide credit to those with low incomes who could not provide collateral security . In 1997 , it was joined by a separate government-funded agency , the Family Economic Advancement Programme ( FEAP ), which similarly served the market at the bottom of the pyramid . But with the establishment of community banks in 1990 , formal microfinance provision began its shift from the public to the private sector . In 2000 , the PBN and FEAP were merged with the Nigerian Agricultural Credit Bank to form the Nigerian Agricultural Cooperative and Rural Development Bank and the latter was subsequently renamed the Bank of Agriculture in 2010 .
The impetus for the introduction of the first National Microfinance Policy ( NMP ) in December 2005 was the limited gains achieved after more than two decades of the segmentation approach . According to the CBN , banking density at that time was only 1:32,700 inhabitants and in the rural areas , it was 1:57,000 with the result that less than 2 % of rural households had access to financial services . The NMP endorsed a radical departure from the localized unit bank approach pioneered under community banking . By emphasizing the need for adequately capitalized , private sectorowned financial institutions that could either operate as unit banks serving specific communities or regional banks serving a cluster of communities , the NMP aimed to quickly bring
1 . The Nigerian Sustainable Banking Principles also include a commitment on financial inclusion ( Principle 5 ). These Principles are binding on all deposit money banks ( DMBs ).
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