strong>Financial Institutions Training Center (FITC) Managing Director/General Manager Chizor Malize in 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 global adoption has changed the way we live for the better. From transportation to education to healthcare, technology has improved service delivery and facilitated access to many facets of our daily lives. This is especially true of financial services.
Today, thanks to financial technology, it is not necessary to be physically present in a bank, for example, to initiate transactions or receive funds. Services such as e-wallet and other payment infrastructure that facilitate sending and receiving money, as well as tools for activities such as budgeting, investing, micro-credit, insurance and many more mean individuals and businesses can actively and easily participate in the global marketplace. economy.
It is unclear how the various fintech companies such as Paystack, Flutterwave, Piggyvest, Remitta and Kuda are disrupting the Nigerian financial industry. Even though 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 low-income segments, with 51% young and mass-market customers (according to Mckinsey). SMB owners also say they are increasingly trusting fintech because of its speed of execution.
How does this disruption promote financial inclusion?
Fintech has democratized access to banking and financial services, providing even more Nigerians with 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, over 35% of Nigerian adults are excluded from financial services. Put simply, over 40 million Nigerian adults have no access to any kind of financial services, from savings and payments to pensions and insurance. Conversations around financial inclusion for the unbanked as well as its importance for economic growth are not new. The World Bank has stated 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 for emerging economies like Nigeria, with significant income inequalities between socio-economic classes.
However, the financial services landscape is changing rapidly due to the disruption and innovation brought by fintech, anyone with an internet-enabled phone can access a plethora of financial services, from payments to insurance, while pressing 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 possible a few years ago, thanks to the surge in fintech adoption. All of these 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 telecom operators into the financial services sector means that they can bring critical financial services to the last mile simply by using their existing infrastructure, especially in rural areas. It 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 aiming for 80% inclusion by the end of this decade. Are these goals achievable with the adoption of fintech?
Fintech contributes to achieving the objectives of the World Bank and the CBN in several ways. The first is through solutions such as SMS banking and agent banking, which expand the reach of financial services, especially in rural areas. Not only do these services bring financial inclusion to the last mile, but they also create jobs, which in turn contribute to nation building and economic growth.
Additionally, fintech enables SMEs to connect to the digital economy, with tools to not only access capital, but also to manage and manage their businesses and operations. These services and tools support business processes, driving efficiency and profitability.
All of these point to significant growth in the volume of transactions within the financial services sector and the resulting gains for economic activities. It can be said with confidence that fintech has greatly expanded the reach of the financial services industry beyond its traditional service offerings. It can therefore be said that the growth of the fintech space in Nigeria is directly linked to an increase in economic activities and wealth creation, invariably adding to the objectives of the World Bank and the CBN.
What do you think 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 overstated. These include diversification of bank assets, increased stability of the deposit base, and increased transmission of monetary policy. On the other hand, lower lending standards, reputational risks to 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 become wealthier and overcome poverty. In developing economies like Nigeria, the people who are typically excluded from financial services are, ironically, those who desperately need financial inclusion and the benefits it offers the most. These are the people at the bottom of the economic pyramid.
Remarkably, 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. We are effectively leaving money on the table so to speak while almost half of the adult population cannot contribute significantly to the GDP.
What efforts are companies in your space making to support skills development to catch up with the speed of change?
As an innovation and technology driven organization, FITC remains the leading provider of knowledge solutions for consumers, operators and investors in the financial services industry and other sectors of the economy. Our mandate remains to equip our clients with relevant skills and knowledge for business performance, organizational growth and success. Through our consulting services, executive education, board leadership and tailored programs, as well as our thought leadership conferences, research and industry reports, FITC provides actionable insights and knowledge to players and operators in the financial services industry, and particularly in the fintech space. .
To achieve the vision of a financially stable economy, the FITC is committed to supporting all players in the financial services industry with the knowledge and skills necessary to meet the challenges of a rapidly changing industry. We have designed programs and workshops to specifically address any identified gaps. These programs help regulators understand the fintech space: the opportunities, the associated risks, and how to create frameworks to protect consumers while enabling operators to remain innovative and profitable.
For example, the FITC designed the Risk-Based Supervision Program for FinTech to enable regulators to effectively address the risks and challenges inherent in the growth of the FinTech sub-sector in Africa. This program focuses on the most vulnerable areas and risks associated with fintech operations. It also discusses the financial stability of the industry, as well as key principles and methodologies for developing supervisory frameworks. The first edition of the program was launched in February in Rwanda and the second in Dubai with participants from central banks across Africa.