Financial Inclusion can be defined as any initiative by the public and private sector to deepen access to financial services for individuals and businesses of all sizes. It is aimed at fixing frictions which prevent people from consumption of financial services.
According to the Global Findex Database 2017, only 40 percent of Nigerians of adult age have an account with a financial institution or a mobile money service provider.
Lack of accessibility to formal banking services, illiteracy on the benefits of financial services, cultural and religious factors such as Islam which forbid non-interest banking are some of the reasons for the high financial exclusion rate in Nigeria, leaving many to adopt traditional methods of savings such as Esusu in the management of their day to day expenditure.
The following are benefits of formal financial services:
Savings of capital for future purposes: Financial institutions help small and large businesses save their capital. Savings also allows them to enjoy interest on their money in the case of fixed deposit which could be useful in cases of emergency such as during a recession. This opens the door for them to enjoy credit facilities for the banks to boost their businesses.
Access to Credit Facilities: As account owners in banks, the deposit money banks and microfinance banks monitor the financial health of the micro small business owners in order to determine eligibility for loans, and based on this offer finance to expand their business.
Insurance: Microfinance institutions offer micro insurance which helps micro and small businesses mitigate risks inherent in their businesses.
Convenience: With the advent of digital technology, commercial and microfinance institutions offer a convenient and traceable means of conducting financial transactions which the informal finance system lacks.
Helps in Economic Policy Planning: The formal financial system is structured and with the introduction of identity and security management initiatives like the Know Your Customer and Bank Verification Number, it helps the government with data on those financially excluded and poverty rate which can help in developing policies to deepen access to financial services, and lifting millions out of the poor pool.
The Government Enterprise and Empowerment Program (GEEP) is a micro credit initiative of the Federal Government of Nigeria, and powered by the Bank of Industry, to empower millions of micro enterprises with collateral free and interest free loans, to grow their businesses as they comprise the MSME sector which employs over 60 percent of the nation’s labour force and contributes 76 percent of Nigeria’s GDP, but lack access to finance. Of all bank loans in 2017, only about 0.4 percent was lent to micro enterprises.
On the mode of pay back, the GEEP officer said two options were given to the beneficiaries to make daily payment of N85.00 or N430.00 weekly to the tradermoni account of the federal government in any bank of their choice after two weeks of grace.
“Those who finish the repayment of their first loan on time stand the opportunity to receive higher amount of N15,000 and so on. The federal government has a very big plan for the empowerment of small scale enterprises.
“The programme is for the federal government to empower traders, artisans and it makes it easier for young entrepreneurs to grow their businesses.
“Of course, our targets are micro business SMEs; these are people who typically have zero access to credit. As the government helps them to grow their businesses, their families will benefit and the economy will also benefit”, he added.
Most micro entrepreneurs are non-consumers of financial services which makes visiting deposit money banks unnecessary since they cannot afford collaterals nor interest rates for their loans and are averse to technology.
The GEEP was designed to fix this friction by delivering last mile microcredit through aggregation construct, leveraging technology and market cooperatives, as the pillars, leading it to a high scalable advantage as over seven million MSMEs in 1,600 markets across the 36states have been enumerated.
Each day over 4,000 GEP agents visit various markets to onboard beneficiaries equipped with proprietary technology that enables full registration and capture of beneficiary data such as biodata, market information, nature of trade, GPS coordinates of trade pint, association membership and other necessary data to determine eligibility for credit. The platform utilizes geo-fencing and mapping to ensure that target beneficiaries at the bottom of the pyramid and most rural parts of the country are reached. Every captured beneficiary is sent to the Bank of Industry in real time for verification, appraisal and credit assessment through over 120 agents and officials operating from a call centre.
Qualified applicants receive money in their bank accounts or mobile wallets which was opened for them during the onboarding process and those of them who are non-consumers of mobile phones are given free phones. Each loan disbursed is booked autonomously on a core banking system which is connected to all commercial banks in the country for beneficiaries to easily enter any bank and make repayments periodically. It has also created a repayment scratch card for recharge targeted at beneficiaries who don’t like patronage of the banking hall which can be purchased in local markets. Upon recharge, it automatically credits their loan account, and upon completion of loan repayments, a subsequent loan offer is made by phone to the beneficiaries.
Using biometrics, Bank Verification Number as a digital collateral, mobile data capture, mobile wallets, over 4,000 agent network in all the 774 local government areas and its state of the art operations monitoring centre where its real time dashboards beam live details of active registrations, disbursement and beneficiary data across all the states and FCT, the GEEP has been able to give loans to 2.5 million Nigerians through its various products Trader Moni which disburses 10,000 naira to petty traders and artisans to boost their trade reaching 1.3 million, Market Moni which gives loans from 50,000 naira to market women across the country with over 350,000 beneficiaries and Farmer Moni which offers farmers in clusters loans from 300,000 naira and over 5,000 farmers have benefited from this scheme.
The Government Enterprise and Empowerment Program should include capacity development to help its beneficiaries in growing their businesses to boost Nigeria’s GDP. It plans to reach 20 million Nigerians through its various initiatives by 2023.