MTN expands CBNs financial inclusion policy

…Targets 40million unbanked Nigerians

Telecom giants, MTN Nigeria, in a move that could potentially redefine the country’s banking industry, is about to delve into mobile banking services. Last week, the Central Bank of Nigeria (CBN) granted the country’s largest telecom operator a super agent license which now allows it to set up an agency network through which it can provide financial services, in what is the first step in the company’s plans to finally roll out mobile money services in Africas largest economy.

MTN says it has also applied for a payment service bank license, which will allow it offer a broader and deeper range of financial services. The license has come after CBN’s reforms last October permitting telecoms operators to get mobile money and banking licenses in a bid to boost financial inclusion and facilitate the long-held ambition for a cashless society.

Rolling out its plan for the next five years in June, CBN governor, Mr. Godwin Emefiele, increased the bank’s financial inclusion target from the previous 85 percent (by 2020) to 95 percent by 2024. Emefiele noted that the apex bank was working on a plan to increase the number of adults in the financial system from the current 38 million to 100 million in the next five years.

We will also intensify our financial literacy and consumer protection programmes such that current and eligible bank customers are fully aware of the financial services being offered to them as well as the cost of utilizing these services, which will enable them to make well-informed choices.

Nigeria has one of the lowest bank customers to population ratio in Africa at the moment. A survey conducted by EFG Hermes showed only eight percent of Nigerian population is using mobile banking service despite having 119.5 million internet users. This contrasts with the 72 percent for Kenya. A recent World Bank report put Nigerian adults outside the financial system at about 35 million, meaning that there are more adults with a mobile device and internet subscription than there are with bank accounts.

According to the Global Findex Database 2017, only 40 percent of Nigerian adults have an account with a financial institution or a mobile money provider, with 19 percent of those interviewed claiming they dont own bank account because financial institutions are too far away and 13 percent maintaining that financial services are too expensive.

Other listed barriers include lack of trust in the financial institutions, documentation required, religious reasons among others. The report also said that unbanked adults are more likely to have low educational attainment.

This is the gap MTN, which offers services in a number of indigenous languages, hopes to bridge with the mobile banking, and analysts say it could prove a game changer. The service primarily targets the unbanked segment of the population.

“It’s a potential game changer. MTN already has extensive network, they are all over the place,” said Dr. Boniface Chizea, MD/CEO, BIC Consultancy and former banker.

“They have their power stations all over the place. If they can leverage on that increased penetration and render banking services, it would be massive.
“It comes down to what we have been talking about; the fact that the kind of banking penetration in the country is not what we want to see. That could boost it.

As seen already in several African countries – particularly in East Africa where there has been more adoption of the service – the real-life application of mobile money among unbanked populations ranges from quick, seamless fund transfers to facilitating payments and boosting small businesses.

At the end of last year, there were nearly 400 million registered mobile money accountsnearly half of the global totalacross sub-Saharan Africa with nearly 90 percent of users in East and West Africa. In Ghana, Kenya and Zimbabwe, over 60 percent of adults have mobile money accounts.

In Ghana, the service has been adopted for investing, with MTN selling shares for its landmark IPO mainly through mobile money. The West African country has recently become the fastest-growing mobile money market in Africa, with registered accounts increasing six-fold between 2012 and 2017. Nigeria, with more than thrice the Ghanaian market is a potential goldmine.

MTN is Nigeria’s first and most dominant telecoms operator with a pool of 67 million users to offer its services. Yet, there is room for significant upside in the near future with Nigeria predicted to add 31 million mobile subscribers by 2025. The move is part of the company’s attempt to cover better grounds in Nigeria where it has had a recent history of fractious relationship with the country’s authorities.

Recently, the company faced allegations of illegally repatriating $8.1 billion in profits and owing $2 billion in taxes. In 2016, it reached a $1.7 billion settlement agreement with Nigerias government after a protracted SIM card registration dispute and an initial $5.2 billion fine.
Mobile money service is attractive in the country considering the population, and especially given its success in other parts of the continent. However, security concerns could prove to be a major challenge, given the preponderance of internet fraud.

“They have to get their professionals together because banking is different from mobile phone services and involves bigger risks,” Chizea said.

“But they have a presence and they also have a name, a reputation and a good pedigree. We expect that they will not come short of expectations. If they bring that professionalism, it will be a good thing.”