Identification Management: The Key to Digital and Financial Inclusion in Nigeria

Sunday, June 14, 2020 / 9.00AM / MTN/ Header Image Credit: Efina & EIU

Back in 2012, theCentral Bank of Nigeria (CBN) published the National Financial InclusionStrategy, setting the financial inclusion target to 80% by 2020, due to theinadequacies within the financial system, in 2019, the apex bank revised thetarget to 95% by 2024.

Since then, the CBNhas taken several steps to boost the industry and encourage the shift todigital payments, including introducing charges on large cash-basedtransactions to reduce the amount of physical cash.

To achieve this daringtarget, Musa Jimoh, CBN's director of payment system management highlightedFintechs to be major stakeholders in driving financial inclusion objectives inthe nation.

Globally, 'fintech' isamong the fastest-growing and more appealing sectors for investors looking forthe next wave of disruptive innovation. Digital "neo-banks" are expanding theirmarket share, especially among younger consumers, while bespoke apps andplatforms are taking once-elite financial services, such as stock marketinvesting, into the mainstream. Total investment activity globally-combiningventure capital, private equity and merger and acquisitions-reached a peak ofUS$120bn in 2018, up from US$51bn in 2017.

Nigeria, Africa'slargest country by GDP and one of the world's youngest population is among thecontinent's fintech leaders alongside Kenya and South Africa, who host somelively start-ups and a growing bouquet of digital offerings from mainstreambanks. Fintech revenues are forecast to reach an estimated US$543m by 2022 inthe country, driven by increasing smartphone penetration and its unbankedpopulation.

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In a report titled 'Stateof Play: Fintech in Nigeria' by The Economist Intelligence Unit, sponsoredby MTN Nigeria and Mastercard, examined key trends in the fintech sector inNigeria and assessed both industry drivers and impediments to growth in thesector.

A major impediment to thegrowth of techs in the country is the unavailability and quality ofidentifiable data for a large number of the population that remain unbanked andfinancially excluded.

Despite the influx ofdigital financial services by many fintech over the years, and improvements inthe numbers of the financially included, over 36% of the population wereunbanked by the end of the year 2018.

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To remedy thisshortage of data, Usoro A. Usoro, MTN Nigeria's general manager for mobilefinancial services said "It will take a lot of collaboration across allsectors within the financial system to get credible data, at the moment, thereis a lot of data that can be integrated, the banks using the BiometricVerification Number (BVN), mobile operators using the SubscribersIdentification Module (SIM) registration, and the government with the NationalIdentity cards.

To meet the financialinclusion target of 95% by 2024, set by the CBN, it is imperative to have anaccurate and robust database of the population to onboard them first, into thefinancial system and then to digital platforms." Usoro added.