strong> The Director General/Executive Director of the Financial Institutions Training Center (FITC), Chizor Malize, during a media interview with GEOFF IYATSE, talks about the need for financial technologies (fintech) as tools to deepen the financial inclusion, reducing the number of unbanked and reducing poverty.
How are technologies and innovations changing the world around us?
The advent of technology and its subsequent worldwide adoption have changed the way we live for the better. From transportation and education to health care, technology has improved service delivery and improved ease of access in many facets of our daily lives. This is particularly true in the case of financial services.
Today, thanks to financial technology, one does not need to be physically present at a bank, for example, to initiate transactions or receive funds. Services like eWallets and other payment infrastructures that make it easy to send and receive money, along with tools for activities like budgeting, investing, micro-lending, insurance and much more, mean that individuals and businesses can participate in actively and conveniently in the global world. economy.
It is no longer news how the various fintech companies like Paystack, Flutterwave, Piggyvest, Remitta and Kuda are disrupting the Nigerian financial industry. While the rise of fintech has not been fully embraced in the country, especially by older generations, who still trust our traditional banking system, trust in fintech is growing among lower-income segments, with 51% of youth and masses. market customers (according to Mckinsey). SME owners also say they increasingly trust fintechs for their speed of operations.
How is this disruption driving financial inclusion?
Fintech has democratized access to banking and financial services, bringing more Nigerians benefits beyond savings and payments. More importantly, fintech is helping to bridge the gap that currently exists for the unbanked.
According to a 2020 EFInA report, more than 35% of Nigerian adults are excluded from financial services. Simply put, more than 40 million Nigerian adults do not have access to any kind of financial services, from savings and payments to pensions and insurance. Conversations about financial inclusion for the unbanked, as well as its importance for economic growth, are not new. The World Bank has declared that financial inclusion is a crucial tool for poverty eradication and economic growth, especially for those at the bottom of the economic pyramid. This is particularly the case in emerging economies like Nigeria, with significant income inequality across socioeconomic classes.
However, the financial services landscape is rapidly changing as a result of the disruption and innovation introduced by fintech, anyone with a phone with internet access can access a host of financial services, from payments to insurance, all with just touch a button. This means that a significant number of Nigerians can participate in the digital economy. Businesses and opportunities have emerged that would not have been feasible just a few years ago, thanks to the rise in fintech adoption. All of this points to significant growth in the volume of transactions within the financial services sector, as well as consequent gains in economic activities.
Furthermore, the entry of telcos into the financial services sector means that they can take critical financial services to the last mile simply by leveraging their existing infrastructure, especially in rural areas. This has also significantly changed the landscape of financial services, along with many other benefits, such as the creation of many jobs.
Financial inclusion is one of the objectives of the World Bank. The Central Bank of Nigeria (CBN) is targeting 80 percent inclusion by the end of this decade. Are these goals achievable with fintech adoption?
Fintech contributes to meeting the objectives of both the World Bank and the CBN in several ways. The first is through solutions such as SMS banking and correspondent banking, which expand the reach of financial services, especially in rural areas. These services not only take financial inclusion to the last mile, but also create jobs, which in turn contribute to nation building and economic growth.
In addition, fintech allows SMEs to connect to the digital economy, with tools not only to access capital, but also to manage and manage their businesses and operations. These services and tools support business processes, enabling efficiency and profitability.
All of this points to significant growth in the volume of transactions within the financial services sector, and consequent gains in economic activities. It can be said with confidence that fintech has significantly expanded the reach of the financial services sector beyond its traditional service offerings. Therefore, it can be said that the growth of the fintech space in Nigeria is directly related to an increase in economic activities and wealth creation, which invariably adds to the objectives of both the World Bank and the CBN.
What would you say is the impact of financial inclusion on economic growth and stability?
Interestingly, while financial inclusion can have both positive and negative influences on financial stability, the positive influence and impact it has on economic growth and stability cannot be overemphasized. These include diversification of bank assets, greater stability of the deposit base, and greater transmission of monetary policy. On the other hand, a decline in lending standards, reputational risks for banks, and inadequate regulations are some of the most common negative influences.
Exclusion from financial services severely limits economic participation and hampers an individual’s ability to increase wealth and lift themselves out of poverty. In developing economies like Nigeria, the people who are normally excluded from financial services are, ironically, the ones who most desperately need financial inclusion and the benefits it offers. These are the people at the bottom of the economic pyramid.
It is striking that they represent a significant percentage of the population: almost 40% of adults, in the case of Nigeria, according to 2021 data from EFInA. With such a high percentage of our population excluded from access to financial services, the economy and GDP suffer as a result. In fact, we are leaving money on the table, so to speak, when nearly half of the adult population is unable to contribute significantly to GDP.
What efforts are companies in your space making to support upskilling to catch up with the speed of change?
As an innovation and technology driven organization, FITC continues to be the leading provider of knowledge solutions for consumers, traders and investors within the financial services sector and other sectors of the economy. Our mandate remains to equip our clients with skills and knowledge relevant to business performance, organizational growth and success. Through our advisory services, executive education, board leadership and custom programs, as well as our thought leadership conferences, research and industry reports, FITC provides insights and actionable insights to players and operators in the financial services sector, and in particular within the fintech space. .
To realize the vision of a financially stable economy, the FITC has remained committed to supporting all players in the financial services industry with the relevant knowledge and skills to meet the challenges of a rapidly evolving industry. We have designed programs and workshops to specifically address all identified gaps. These programs help regulators understand the fintech space: the opportunities, the associated risks, and how to create frameworks to protect consumers while allowing operators to remain innovative and profitable.
For example, the FITC designed the Risk-Based Supervision for Fintech program to enable regulators to effectively address the risks and challenges inherent in the growth of the fintech subsector in Africa. This program focuses on the most vulnerable areas and the risks associated with fintech operations. It also addresses the financial stability of the industry, as well as key principles and methodologies for building supervisory frameworks. The first edition of the program was launched in February in Rwanda and the second in Dubai with participants from central banks from across Africa.