What is it and why is it important?¬†
Financial inclusion is the provision of a broad range of high quality financial products, such as savings, credit, insurance, payments and pensions, which are¬†relevant, appropriate¬†and¬†affordable¬†for the entire adult population, and especially the low income segment.
An inclusive financial sector is characterized by the diversity of financial services providers, the level of competition between them, and the legal and regulatory environments that ensure the integrity of the financial sector and access to financial services for all.
Evidence worldwide shows that access to financial services contributes both to economic growth and wealth creation and is therefore key to tackling the ‚Äėpoverty‚Äô trap in Nigeria. It is critical for regulators and policy makers to create an enabling policy environment to actively promote both the demand for and the supply of financial services to the unbanked and under-banked.
Financial inclusion in Nigeria
Many Nigerians, for numerous reasons, are unbanked and lack access to formal financial services. The results of the EFInA Access to Financial Services in Nigeria 2010 survey showed that 39.2 million Nigerians representing 46.3% of the adult population are financially excluded; whilst only 25.4 million Nigerians, representing 30% of the adult population are banked.
Billions of Naira circulate through the informal sector and this has a negative impact on the country‚Äôs economic growth and development. The EFInA Access to Financial Services in Nigeria 2010 survey revealed that 23.8 million adults are currently saving at home. If 50% of these people were to save N1,000 per month, then up to N143bn could be incorporated into the formal sector every year.
The impact of financial exclusion
High levels of financial exclusion pose two major threats to economies:
- Losing opportunities for business growth:¬†In the absence of finance, people who are not connected with the formal financial system lack opportunities to maximise their income and expand their businesses.
- The country's economic growth could be stifled:¬†Vast unutilized resources, in the form of money in the hands of people who are in the informal sector could limit a country‚Äôs economic growth potential.
The opportunity for the private sector
Providing financial products and services to the low income population represents a large business opportunity for the private sector. Providers of financial products and services should develop innovative products and services that better suit the needs of the low income unbanked and under-banked population.¬†