This is partly due to the fact that developments in technology and the scope of digital financial services offered by banks and institutions have only developed vastly over the last 10-15 years.
Typically, individuals who live too far away from the closest bank available, either store money in cash or engage in community banking and other local solutions.
In March 2018, the Central Bank of Nigeria shared its vision to achieve at least 80% financial inclusion by 2020.
The goal was to engage the estimated 60 million unbanked and under-banked Nigerians, by building an extensive network of 500,000 agents, known as the Shared Agent Network Expansion Facilities (SANEF), in collaboration with Banks and select licensed mobile money operators, to extend basic financial services to underserved areas.
There is no doubt that in Nigeria today, a great percentage of the population is financially underserved, but despite the success of mobile money in some countries in Africa, it is yet to reach extensive penetration in Africa’s most populous country.
Currently, there is an estimate of 21 licensed mobile money operators operating to varying degrees of success, but the Telcos are beginning to push to be licensed, citing the success of MPesa, the most successful mobile money operators in Kenya.
However CBN is yet to be convinced this is the answer to making measurable impact on financial inclusion, especially for rural and remote areas around Nigeria with large populations and has been cautious in permitting Telcos to run mobile money services.
Only 9 years ago, Paga was the first licensed mobile money platform to exist in Nigeria.
While other platforms such as Teasy, Cellulant, Etranzact/Pocketmoni, FETS, Readycash and add-on bank services like GT Mobile Money have emerged in the market, Paga has made the most impressive progress, recording a milestone of 8,000,000+ users at the end of 2017 and a sum total of 42.7 million transactions till date, with a total value of over N660 billion, largely due to their 15,000+ growing agent network.
It comes as no surprise that the CBN has now adopted the strategy to aggressively build agent networks, as this has proved to be an effective approach to gaining the trust of the largely uneducated and highly suspicious target market.
Generally, the highest transacting agents are usually already existing pillars in said communities; they already have small to medium enterprises and have built a reputation based on reliability.
Targeting these sorts of individuals as the middleman, fast tracks the process to gaining the trust of consumers who have never heard of mobile money, have a mistrust for technology, and may not have access to the internet to transact on their own.
This FI/bank led strategy has proven to be extremely successful in India, where PayTm is the largest mobile money operator, valued at $10bn, with over 250 million registered users.
The inclusion of Telcos in the mobile money space has been widely debated, with pushback from both sides.
Telcos insist that they have the network to generate quicker results and greater market penetration, but similar to South Africa, Nigeria is keen to avoid banks being overridden by Telcos as has occurred in Kenya, where Mpesa now records more accounts than banks.
There is no denying the role that Telcos have to play in this scheme. NCC recorded an estimated 98 million internet users by the end of 2017, and according to the Jumia Mobile Report, there are 21 million smart phone users and 84% mobile phone penetration in Nigeria as of 2017.
The success of this scheme will involve all the relevant players, but to what degree? If Telcos have the license to run their own mobile money schemes, what is to prevent them from frustrating the efforts of the existing players who have operating USSD codes that are powered by the same Telcos?
As competitors, it would be in their best interest to ensure that offerings from other providers through their channels are unreliable which would of course be impossible to prove.
While the Telcos have a vast distribution network due to mobile network penetration, there is no evidence that accessing these existing customers will improve the state of financial inclusion.
Will the average recharge card seller have enough floating cash to carry out transactions like withdrawals?
What percentage of mobile users is unbanked or underbanked? What percentage does not own a bank account?
What about the consumers in remote areas that cannot afford mobile phones or do not have service in their area? If existing operators are already accessing mobile phone users through USSD codes, then what will the Telcos do differently?
It is obvious that no matter how it is analyzed, the answer continues to be agent networks – a human face on technology, the face to face interaction and education, and the legwork to access customers in remote areas.
If Paga’s success is used as a benchmark, this SANEF initiative by CBN may just prove to be the push needed to accelerate the growth of financial inclusion.