1.0 It is a great honour to welcome you all to this very important workshop for Business Editors and Finance Correspondents Association of Nigeria (FICAN) organised by the Nigeria Deposit Insurance Corporation (NDIC). I would like to first congratulate the Government of Jigawa State, in particular the Executive Governor for choosing to host the workshop for two years in succession. The interest of the state government in extending financial and banking services to its citizens is obvious to all by hosting us for the second consecutive year. I trust all the participants are enjoying your stay in Dutse. The participants also have an opportunity to witness the progress and achievements of the state government since the workshop of last year.
2.0 The main objective of this year’s workshop is the sensitisation of participants on the importance of financial inclusion not to only the economic growth and development of our nation but also in empowering the economically active poor to enable them breakaway from the chain of poverty. The workshop is aimed at exposing the participants to the role of NDIC as a deposit insurer in promoting financial inclusion in Nigeria. The workshop will also touch on the role of media, as an important stakeholder, in financial inclusion. These objectives are apt in the light of the Corporation’s role in contributing to the stability of the financial system.
3.0 Last year’s theme, titled “Banking Reforms in Nigeria: Role of Deposit Insurance System”, was on the reform measures of the Central Bank of Nigeria (CBN) and the unique role of deposit insurance in promoting banking system stability. This year’s theme is concerned with how economically active poor can breakaway from poverty by accessing financial services at an affordable cost and sustainable for the provider. This year’s theme is therefore aptly titled “Deposit Insurance and Financial Inclusion”. A Bank Deposit Insurance Scheme (DIS) is a financial guarantee to depositors, particularly the small ones, in the event of a bank failure. Bank deposit insurance schemes developed out of the need to protect depositors, especially the uninformed, from the risk of loss and to also protect the banking system from instability occasioned by bank runs and loss of confidence. Deposit insurance therefore plays a unique role in promoting banking system stability and public confidence in the financial system. Financial Inclusion implies access to a broad range of financial services including payments, savings, credit, insurance and pension products.
4.0 The importance of deposit insurance in improving financial inclusion cannot be overemphasised. Access to finance by the poor and vulnerable groups is identified as a prerequisite for employment, economic growth and poverty reduction. Particularly, microfinance banks are globally recognised as veritable tools for financial inclusion as they play the very important role of enhancing the participation of rural dwellers as well as the economically active poor in economic activities through financial intermediation. Through public awareness initiatives, deposit insurance systems can play a meaningful role to ensure that poor and low-income depositors are informed about safe methods of storing their money and can help build trust in formal financial institutions. Thus, the Corporation plays a significant role in financial inclusion by fostering confidence at the grassroots level through deposit protection and supervision which ensures the safety and soundness of deposit-taking financial institutions.
5.0 Distinguished ladies and gentlemen, the Central Bank of Nigeria (CBN) and NDIC as Nigeria’s financial sector regulators, have an uphill task in improving financial inclusion given the relatively low level of penetration of financial services in the country. According to the World Bank, Nigeria under-performs most of its sub-Saharan African (SSA) peers, with the widest disparity being in the category of percentage of adults who borrowed from a formal financial institution in the past 12 months. It is also reported that only 36 percent of the adult population make formal use of financial services.
6.0 Distinguished ladies and gentlemen, you will recall that in pursuant of the goal of promoting financial inclusion in Nigeria, a new financial inclusion strategy was launched on October 23, 2012. At the event, the CBN set out targets and commitments to financial inclusion reforms and initiatives. Priority actions set out by CBN included: a risk-based tiered framework for Know Your Customer (KYC), regulation aimed at easing access to financial services for low income customers and financial literacy and the promotion of ‘no frills’ bank accounts with low/zero balance requirement for low income customers .The targets set out in the new financial inclusion policy are to increase the percentage of total adult population who use payments, savings, credit, insurance and pension services from 22%, 24%, 2%, 1% and 5% in 2010 to 53%, 42%, 26%, 21% and 22% respectively, in 2015. Though the targets may look ambitious, it is a good benchmark to work with.
7.0 At the heels of the National Financial Inclusion Strategy came the launching by the Federal Government of a N220bn (US$1.3 billion) Micro, Small and Medium Enterprises Development Fund, 60% of which will be earmarked for businesses managed by women at single-digit interest rate. The CBN also revealed that plans to roll out a micro-insurance framework were at an advanced stage. The significance of this development is that now our microfinance banks will now have access to wholesale fund at affordable cost for on-lending activities.
8.0 Another initiative to promote financial inclusion in Nigeria is the cashless policy designed to bring low-cost, secure and convenient financial services to urban, semi-urban and rural areas across the country especially through the mobile payment services. In that respect, 15 mobile scheme operators have so far been granted operating licenses by the CBN. The NDIC is working closely with the CBN to design an appropriate insurance to protect fund used for transaction in the new payment system. Such effort is expected to further enhance the system.
9.0 A complimentary policy that is worthy of emulation is the agent banking framework. A banking agent is a retail outlet contracted by a financial institution or a mobile network operator to process clients’ transactions. Banking agents can be pharmacies, supermarkets, and many more. Agent banking has the potentials to grow access to banking facilities in the country especially uneducated and those in rural areas. Another area where agents could be meaningfully deployed banking is the mobile payment system as successfully done in Kenya and some other countries.
10.0 Ladies and gentlemen, despite the various initiatives taken by the government and regulators to enhance financial inclusion, several challenges still exist. First, the distribution of microfinance banks as agents of financial inclusion is grossly uneven. Out of the 869 MFBs in existence, 346 or 39.81% are located in the South West geopolitical zone, 162 or 18.64% in the South East, 158 or 18.8% in the North Central while only 63 or 7.25% and 32 or 3.68% are located in the North West and North East, respectively. Lagos, Anambra and the Federal Capital Territory, Abuja topped the list in the number of MFBs, The uneven distribution had exposed the untapped potentials that require attention in order to realize the government’s policy on financial inclusion.
11.0 As at 2008, the northern Nigeria had ownership and control of only 3% of banking assets in Nigeria, 2% of insurance assets and 10% of industrial assets. Out of all the total of 602 provisional and final micro finance bank licences issued by the CBN, northern Nigeria including the Federal Capital Territory (FCT) had only 24.75%. To enhance financial inclusion especially in Northern Nigeria, it is imperative for the governors of states in Northern Nigeria to therefore encourage and promote the establishment of micro finance institutions in their respective states.
12.0 Distinguished participants, if financial inclusion with its associated benefits is to be available to our people and the economy, then competent, professional and skilled financial correspondents and business editors are critical. The Corporation, therefore, considers increasing the capacity of financial correspondents, their skills, capacity and understanding through a successful workshop a sine quo non to the development of sound and sustainable banking system. It is therefore hoped that at the end of the workshop, the participants will be better equipped to discharge their duties.
13.0 On this note, Ladies and Gentlemen, I urge all participants to take this opportunity seriously knowing that the success of this workshop will depend on your constructive deliberations. I therefore appeal to every one of you to give their best in addressing the topics listed for discussion. It is my sincere hope that you will find your participation in this workshop worthwhile and enjoyable.
14.0 Thank you for your attention.
November 14, 2012.