The words, ‘financial inclusion’, have been bandied around in recent years among policy makers in government and in the financial sector. Financial inclusion, in the real sense of it, has become an important lexicon and a topic of keen interest in the last few years, as new technology makes it possible for more people, especially in the rural areas, to progress from purely cash-based economy to the use of more diverse financial channels for payments.
Financial experts defined financial inclusion as having an increasing access to formal financial services such as having a bank account and using credit and savings facilities of banks. On the other hand, financial exclusion occurs when access to financial services is hindered by constraints (such as distance to financial institutions), despite the exceeding marginal benefits over the marginal cost from using these services.
Financial inclusion continues to gain prominence among policy makers and multilateral institutions. An inclusive financial system, which allows broad access to financial services without price or non-price barriers to its use, is especially beneficial to the poor and other disadvantaged groups.
It must also be noted that in Nigeria, the spread of bank branches is informed by profitability of the location rather than improving access of bank services to the financially excluded. This explains why more of banks’ branches are concentrated in profitable urban locations than rural settlements. However, financial inclusion is going beyond physical branches as ICT is revolutionising the access to and use of bank services, globally.
Experience has shown that the successful experiences with financial inclusion reported in developing countries are associated with the use of ICT-based, branchless banking. Explicitly, the fact that ICT-based network is responsible for delivering financial services to tens of millions of poor people in Brazil and India is instructive in this regard.
Financial inclusion brings with it, many benefits to the citizenry and to the development of a country. Among such benefits are poverty reduction and decrease in the level of inequality, as well as enhanced private investments. Financial inclusion also enhances the attraction of remittances, as it eases the transfer of funds to another bank account owner and from abroad.
Following the benefits from financial inclusion, countries are beginning to develop strategies to increase individuals’ access to financial services. In Nigeria, some of the strategies recently developed by the Central Bank of Nigeria to reduce the 46.3% adult population currently excluded from financial services include: enhancing bank–customer relationship, electronic banking, public enlightenment about financial services and the introduction of credit enhancement schemes.
However, it must be noted that financial inclusion alone cannot bring about economic growth, but will contribute a quota to it. It is, therefore, vital to the growth of an economy, as it opens up doors for people to access credit that they would otherwise not be able to accumulate from their savings. Banking services represent a bulk of financial services and are the crux of financial inclusion in an economy. It leads to the emergence of more entrepreneurs and rise in employment.
In Africa, the example of Kenya is often cited. Experts say that Kenyans have witnessed a big shift in financial inclusion, thanks to the success of M-Pesa, a simple, easy-to-use mobile money service that delivers financial inclusion without the need for a formal
account.
Until recently, Nigeria operated a cash economy. Up till now, millions of Nigerians above the age of 15 years have no bank account while a significant percentage of people with an account has made no deposits or withdrawals in the past one year. Also, millions of Nigerians still use cash to pay for food, utilities and school fees. In most of the states, cash accounts for more than 90 percent of all consumer transactions.
But, thanks to the introduction of Automatic Teller Machines which have enabled bank account owners in Nigeria to make payments for many of their purchases in the cities.
Multi-function ATMs act like a ‘mini branch’ where customers can conduct many transactions as they often do in their bank
branches.
