What is Financial Inclusion?
Financial inclusion is the provision of a broad range of high quality financial products, such as savings, credit, insurance, payments and pensions, which are relevant, appropriate and affordable for the entire adult population, especially the low income segment.
An inclusive financial sector is characterized by the diversity of financial services providers, the level of competition between them, and the legal and regulatory environments that ensure the integrity of the financial sector and access to financial services for all.
Evidence worldwide shows that access to financial services contributes both to economic growth and wealth creation and is therefore key to tackling the ‘poverty’ trap in Nigeria. It is critical for regulators and policy makers to create an enabling policy environment to actively promote both the demand for and the supply of financial services to the unbanked and under-banked.
Financial Inclusion in Nigeria
Many Nigerians, for numerous reasons are unbanked and lack access to formal financial services.
Many Nigerians, for numerous reasons are unbanked and lack access to formal financial services. The results of the EFInA Access to Financial Services in Nigeria 2012 survey showed that 34.9 million adults representing 39.7% of the adult population were financially excluded. Only 28.6 million adults were banked, representing 32.5% of the adult population.
Billions of Naira circulate through the informal sector and this has a negative impact on the country’s economic growth and development. The EFInA Access to Financial Services in Nigeria 2012 survey revealed that 23.0 million adults save at home. If 50.0% of these people were to save N1,000 per month with a bank, then up to N138 billion could be incorporated into the formal financial sector every year.
The impact of financial exclusion
High levels of financial exclusion pose two major threats to economies:
- Losing opportunities for business growth: In the absence of finance, people who are not connected with the formal financial system lack opportunities to maximise their income and expand their businesses.
- The country’s economic growth could be stifled: Vast unutilized resources, in the form of money in the hands of people who are in the informal sector could limit a country’s economic growth potential.
The opportunity for the private sector
Providing financial products and services to the low income population represents a large business opportunity for the private sector. Providers of financial products and services should develop innovative products and services that better suit the needs of the low income unbanked and under-banked population.