Government proposes agency banking framework to boost financial inclusion

MD. NDIC, Umaru Ibrahim
MD. NDIC, Umaru Ibrahim

The agency model involves a process where retail outlets are contracted by a financial institution or mobile network operator to process clients’ transactions.

The Federal Government has said it is proposing the adoption of agency banking framework, practiced in Kenya, as a way to deepen financial inclusion in the country.

The Managing Director of the Nigeria Deposit Insurance Corporation, NDIC, Umaru Ibrahim, said this on Wednesday in Dutse, Jigawa State, at the opening of a three-day 2012 Workshop for Business Editors and Finance Correspondents.

The agency banking model involves a process where retail outlets, like pharmacies, shops or supermarkets are contracted by a financial institution or mobile network operator to process clients’ transactions.

Besides the agency banking proposal, the NDIC boss said government is also considering adopting various policies towards ensuring that the over 70 per cent unbanked Nigerians can access banking services.

Mr. Ibrahim said these measures include all-women micro-finance institutions and automated teller machines adding that evidence from other countries has shown that such institutions have the potential to promote easy access to credit amongst poor rural women, especially at the group level, as it could be used to mobilise large quantum of savings among them.

He, however, expressed regrets that despite these efforts at deepening financial inclusion, the regulatory authorities are still experiencing challenges in achieving their goals.

He identified the grossly uneven distribution of microfinance banks as one of the greatest threats to the effort to achieve financial inclusion.

Of about 869 microfinance banks in the country, he said only 346, or 39.81 per cent are located in the South West geopolitical zone, 162, or 18.64 per cent in the South East, 158, or 18.8 per cent in the North Central, while only 63, or 7.25 per cent and 32, or 3.68 per cent are located in the North West and North East, respectively.

Available statistics show that Lagos, Anambra and Abuja top the list in the number of micro finance banks..

Mr. Ibrahim also stated that out of the total number of provisional and final micro-finance bank licences issued by the CBN, Northern Nigeria including Abuja, had only 24.75 per cent.

To enhance financial inclusion, especially in northern part of the country, he said it is an imperative for the governors of states in the region to promote the establishment of microfinance institutions in their respective states.

He said only 36 per cent of Nigeria’s adult population make formal use of financial services adding that soon, a micro finance framework that will address the anomaly would be unveiled by the CBN.

While canvassing an expedited action for the release of a regulatory framework for the introduction of agency banking in the country, the NDIC chief said the corporation is working closely with the Central Bank to design an appropriate insurance to protect funds used for transaction in the new mobile payment system.