How the Nigerian Capital Market Can Foster Financial Inclusion –

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Market costs, investor education, product diversity, technology activation, and strategic partnerships are key ways capital markets can drive financial inclusion through innovation and growth. access, according to a recent report by Enhancing Financial Innovation & Access (EFInA).

The report titled “Capital Market Inclusion” notes that a well-functioning capital market can play a vital role in supporting inclusive economic growth by channeling long-term finance to infrastructure and other scale that create jobs and improve access to markets.

“In the advent of the COVID-19 pandemic, the importance of diversity in creating sustainable capital markets and the need to advance an objective financial inclusion initiative that gives individuals and businesses a better access to affordable financial products and services that meet their needs have been highlighted,” he added.

For market costs, the report states that with cost being a key factor, depositories and exchanges have taken strong measures to improve operational efficiency and reduce fees.

Second, for investor education, efforts by infrastructure providers to promote financial literacy and investor education include the combination of traditional initiatives, such as global investor days, “ring the bell” campaigns , master classes and training courses, and social media influencer campaigns.

“Exchanges, supported by government agencies and regulators, are leading this charge. Young people are a crucial demographic and infrastructure providers are fueling their interest with initiatives that involve gaming, coding and filmmaking,” he added.

For product diversity, exchanges generally encourage participation by offering products and services that serve a wide range of investors.

With respect to technology enablement and strategic partnerships, the report notes that the capital market infrastructure landscape has broadened to include fintechs and start-ups that offer lifelong products and services. value chain.

“Exchanges and depositories are forming strategic partnerships with these entities to adopt new technologies that help improve access to previously underserved customer segments at lower cost.

“Recent defaults/delays in payments from crowdfunding platforms, particularly in the agricultural space, have raised concerns about the stability of the space.

He also added that trust remains a key factor in fostering financial inclusion. “Therefore, the security and stability of mass market investment platforms is key to increasing financial inclusion.”

According to the World Bank, financial inclusion is when individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit and insurance – provided responsibly. and sustainable.

Also Read: NowNow Raises $13M in Seed Funding to Promote Financial Inclusion Across Africa

The importance of financial inclusion, which is a key catalyst for reducing extreme poverty and boosting shared prosperity, has made it a catalyst for seven of the 17 2030 Sustainable Development Goals.

This is why since 2012; the Central Bank of Nigeria (CBN) has found ways to reduce the unbanked population by introducing initiatives that can draw more people into the financial system.

One way is its National Financial Inclusion Strategy which aims to increase the financial inclusion rate to 80% by 2020 from 46.3% in 2010. But EFInA data shows the rate has dropped 64.1% in 2020 below the CBN target.

The ultimate goal of financial inclusion is inclusive growth and for that to happen, the place of capital markets cannot be compromised, says Uchenna Uwaleke, professor of finance and capital markets at the state university of Nasarawa, Keffi.

“Indeed, the capital market can serve as a real channel to improve financial inclusion through new products and services tailored to investors’ risk and return preferences, as well as borrowers’ project needs and risk appetite,” Uwalek said.

He also added that this challenge has since been recognized in other jurisdictions.

“In China for example, to reduce the rate of exclusion of small and medium enterprises, there is an interbank bond market offering a number of innovative products such as SME Collective Notes (SMECN) which is a special financial bond.”

The EFInA report also highlighted the main levers through which fintechs drive financial inclusion in the capital market. The levers mentioned are access, pricing, product design/innovation and education/perception.

“Fintech has increased product accessibility through higher returns. They offer two to three times the interest rates on savings compared to traditional players.

“And the design of their financial products caters to the needs of various segments of the population across culture, religion, gender, geography, etc. They also educate consumers about the needs and benefits of financial products and services” , he concluded.

In 2021, Nigerian fintech startups raised nearly $800 million, a 120% increase on what they raised in the last three years combined ($360.7 million), according to Techpoint.

Growing investments in the fintech space have prompted experts to call for collaboration between fintech and the capital market, as this would effectively create a digital economy and increase financial inclusion and cashless payments.

“Fintechs have enormous potential to transform capital markets and effectively build a digital economy,” said Jude Chiemeka, Division Head, Trading Business, Nigerian Exchange Limited (NGX).

He says they are transforming the financial services industry by focusing on targeted products and services, automating and standardizing high-margin processes, using data strategically, and collaborating with cardholders.

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