Banking the unbanked doesn’t come naturally to financial institutions who tend keep a firm eye on their top-line, however it is becoming increasingly clear just how important financial inclusion is for national economic development. M-Pesa in Kenya is the poster-child for how successful initiatives can be, and more and more countries across Africa are investigating ways they can increase their nations’ financial livelihood.
Ghana, Tanzania, Nigeria and South Africa are just a few examples of the many countries that have rolled out initiatives led by their governments and the central banks to help increase the availability of access to financial services. The Central Bank of Ghana has laid out plans to formulate regulations to encourage the infiltration of mobile-based financial services to increase their reach; Tanzania has been quick off the mark, with MNO and microfinance operations paving the way; Nigeria has rolled out their national identity card pilot, enabling inclusion through prepaid electronic payments; whilst South Africa, arguably the most developed country in region, is devising plans to deal with the estimated R12 billion that is still kept “under mattresses.”
However early in development financial inclusion initiatives across the continent are, they are still leaps and bounds ahead of more developed regions such as the US in their nationwide efforts. What can be learnt from these countries? Every continent without exception, boasts a largely untapped resource of underserved customers awaiting their opportunity for financial inclusion. How can they ensure success?
Financial inclusion is not merely the act of offering access to financial services, but of offering appropriate banking methods that can be adopted and used sustainably in the long term. It isn’t about who is responsible or who is to blame, but how it can be addressed according to the requirements of each different community. The most successful financial inclusion projects to date have been based on understanding and collaboration: financial services providers (bank and non-traditional) and governments working together to deliver affordable and accessible financial services.
Unsurprisingly, projects across the continent that have first monitored and assessed market requirements and built strategies that directly meet the needs of their population have seen the most penetration.
In the instance of Nigeria, the government conducted a survey to establish the key reasons why people were actively choosing not to bank. They found that a lack of trust was the top answer and as such, launched a national financial inclusion strategy in October 2012 with the aim to increase their nations’ financial literacy, transparency and understanding of money management and, ultimately, increase access to financial services to 70% penetration by 2020.
In Kenya, the progress of financial inclusion has been tracked aggressively, with constant evaluation on the effect of government and industry-led initiatives. This in turn, has encouraged programs such as M-Pesa to extend the reach of awareness to ensure the public are properly educated on the financial services available to them and how these services are beneficial.
With the new models of financial inclusion, new channels and advances being made across prepaid and mobile; the infrastructure for success is available. Now it is up to key players to take the initiative and offer value propositions that are inclusive of all economic demographics.
