September 25, 2020

Over the years, financial inclusion has emerged as an important global issue for governments, developmental institutions, academics and the organized private sector. Stakeholders have seen and discussed it mainly from the perspective of corporate social responsibility that is not capable of generating any form of returns or economic development. As a result, providing products and services for the unbanked has been viewed as unproductive and not viable. Due to this reason, the effort and commitments over the years to achieve a full financial inclusion has proven abortive.

However, according to a research conducted by Accenture and Care in 2017, the global market value for financial inclusion in emerging economies is about 380 billion dollars with Nigeria being about five billion dollars. This clearly shows a viable market for any institution that can leverage on technology and a good business model to develop the right products and services.


Financial Inclusion

Financial inclusion as a term came into limelight in the early 2000s. It came out from extensive research findings that poverty is a direct consequence of financial exclusion, therefore,  the aim is to ensure that all qualified adults in any society have unrestricted access to a wide range of financial services and products. It also refers to the process of making formal financial services accessible and affordable to all.

Financial services do not mean the provision of payment alone, but all other services, especially savings, insurance and remittance facilities. It is seen by many scholars as a feature of financial development, a process that makes improvement in efficiency and quality financial intermediation, which generates savings locally that improve productive investment. However, once this inclusiveness is not achieved by financial development, especially when it is lopsided towards the rich or wealthy, it weakens economic growth and development.

However, even with relative steady increase in Gross Domestic Product (GDP) over the years, a lot of Nigerians are still excluded from the financial system; this exclusion has resulted to increased inequality. Sanusi, the former Central Bank of Nigeria (CBN) governor stated that economic growth and development would be achieved at a faster rate, if large majorities of the population have access to financial services and products. An estimated 1.7 billion adults worldwide do not have a basic bank account ,and in Nigeria according to Enhancing Financial Innovation and Access (EFinA) report in 2012 34.9m Nigerians were financially excluded, while 2018 survey  puts the figure  at 37m people.

CBN and other major stakeholders in the financial and related sectors have been trying their hands on different approaches to promote inclusion. The CBN for instance,  is a signatory to the Maya Declaration, which is a global initiative for sustainable and responsible financial inclusion with a mandate to reduce poverty and ensure financial stability. This led to the formalization and launch of a dedicated National Financial Inclusion Strategy (NFIS) in 2012, which is committed to reducing the number of adults excluded from the financial system to 20% by 2020.

Source: Apis Partner



In Africa, just like most emerging regions, Fintechs in collaborations with commercial and Central Banks have emerged as major drivers of financial inclusion. Organizations like  Interswitch in Nigeria, Celullant in Uganda, 4G Capital in Kenya among others;  have been enabling inclusion by developing products and services for the under-banked and unbanked.


Financial Technology Firms (FINTECHs)

Financial technology firms popularly referred to as “Fintechs” have emerged as major drivers of financial inclusion in Africa and other emerging regions. They leverage on different technologies such like Blockchain, Machine Learning, Artificial Intelligence, Mobile Payment Systems etc to develop products and services for their customers. They are  described as companies that unite financial services with modern, innovative technologies. According to Yoshihiro Kawai it’s “a technologically-enabled financial innovation… giving rise to new business models, applications, processes and products … which have a material effect”.

Fintechs over the years have played key role in promoting financial inclusion by:


Providing Access to Credit

In Africa and Nigeria in particular, there is a huge gap in lending, a large percentage of the adults do not have access to formal credit and many small businesses face the same problem as well. This is another area that Fintechs in Nigeria are trying to ensure average Nigerians have access to these needed credit facilities. In Nigeria where vast majority of the population are unbanked majorly because of low income and no credit history as they have never dealt with a financial institution, companies like Paylater, Zedvance, QuickCheck, KiaKia and others are using mobile technologies, big data, machines learning, credit scoring and risk assessment to provide either direct loan or peer to peer lending depending on their business model or strategy. Instead of using traditional data to determine whether an individual is a good payer or not,  they use the above listed technologies to establish one’s identity and creditworthiness. These products allow customers to apply for loans online without collateral using advanced technologies.


Regulatory Sandbox And Innovation Hubs

Regulatory sandbox is framework set up by CBN to allow Fintechs and other innovators to conduct live experiments in a controlled environment under a regulator’s supervision, CBN is finalizing plans to introduce it. The apex organization hopes it will help to make innovation, customer protection, competition promotion and a reduced time-to-market for Fintech products possible. This innovation and other similar approaches allow Fintechs to offer innovative solutions within a controlled environment, without compromising on financial stability, integrity and consumer protection mandates.

Till now, a total of 20 countries including emerging market economies such as Indonesia, Malaysia, Fiji and Sierra Leone have introduced the use of sandbox. Flourish,  a venture capital firm in collaboration with EFINa, launched a multi- year grant with the sum of 250m. It is a community of innovators backed by the Nigeria Inter-Bank Settlement System (NIBSS) and the CBN. It aims to lower entry barriers into the fintech space with regard to regulation and licensing.


Digital Identity Management

It’s a known fact that an effective identity management system will go a long way in scaling financial inclusion anywhere in the world especially in Sub-Saharan Africa. Over a billion people from which most of them reside in Africa lack any form of legal identity and this has discouraged a lot of unbanked people from opening accounts. Fintechs all over the continent are leveraging on digital biometric identification to help solve this problem while also addressing key issue of cyber security. For instance, Kenya with the help of National Digital ID Infrastructure is a leader in this aspect, while Bank Verification Number by Nigeria Inter Bank Settlement System (NIBSS) has also reduced the problem with identity management in Nigeria.



Payment Systems Development

Safe, fast and reliable retail payment systems are a conduit for financial inclusion. Fintechs have been innovating in enhancing payment;  for instance Systemspecs, developers of Remita payment platform  and  Cellulant, a pan-african Fintech and Agritech , have gone into partnership  to provide secure, convenient and easy to use  payment service  for their customers in every part of Nigeria even in remote areas .The collaboration will promote financial inclusion  by enhancing the ability of the unbanked and underbanked in neglected areas  across the country to access financial services.


Fintech can also help by promoting financial literacy as a way of giving orientation to the children, youth and women on financial inclusion, improving the agent network to expand financial access points in the country by deploying some of their platforms to agents in remote areas, and deploying biometrics through the BVN to reach out to the unbanked population in the country


Impact Investment

Financial inclusion has been recognized as a major promoter of about 40% of the Sustainable Development Goals (SDGs), as a result,  government, international and developmental institutions and impact investors consider it a key enabler to reducing extreme poverty, boosting prosperity and economic development across the globe.  The Global Impact Investing Network (GIIN) defined it as ‘investment made with the intention to ensure or generate measurable, positive, environmental and social impact alongside a financial return’

Fintechs are major stakeholders when it comes to promoting financial inclusion For instance, 4G Capita a Financial Technology company in Kenya and other East Africa countries that offers loans to excluded women and this has enabled a lot of micro enterprises to grow in that region through the disbursement of micro credit using Machine learning and predictive analytic to enhance financial inclusion. The organization also, provides financial literacy training blended with working capital credit in order to promote financial inclusion. The organization uses machine learning algorithm which evaluate historic transactional and repayments behavior of customer predictive assessments. This helps the firm lend what a clients’ business can afford to repay, and keep the targets aligned with their trajectory, as a result the firm has been able to lend to low incoming earners, especially women with a payback rate of about 94%.


Just like in renewable energy, agriculture, financial inclusion is major objective of some impact investors. For instance, according to the Oikocredit Impact Report of (2019) 76% of the investment according to the sector is on financial inclusion, while agriculture is 16% and 5% for renewable energy. About twenty years, the UK’s Social Investment Task Force, stated that in order to unlock funding for social entrepreneurs there is need for financial innovation similar to what happened to  venture capital that has  unlocked funding for high-tech entrepreneurs. Fintechs can help achieve this by leveraging on technologies available to them, this will help direct the needed funding from impact investors all over the world.






Razak Alli


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