Financial inclusion’ is the availability of a range of financial services in an affordable way to all segments of the population. There are many people that often slip between the cracks and are unable to get financial services – like the poor, youth, women. A financial report says that about 37 million adults in Nigeria are excluded financially. That’s about 39.5% that do not have assets to financial services. Financial inclusion also refers to matters of economic citizenship. ‘Economic citizenship’ is enabling persons who are able to be active participants in the national economy. If we exclude people financially, we are depriving them of full economic citizenship.
DIMENSIONS OF FINANCIAL INCLUSION There are a number of dimensions of financial inclusion. Availability of a complete set of financial services. Access to financial services without any form of discrimination on the basis of disability, gender, faith, socio economic status and location. Access to affordable financial services delivered in a manner that is convenient and client friendly. Geographical access to financial services. Financial institutions must be close to where people require them. Most financial services are in urban and semi-urban areas. The participants of rural economy are deprived of access to financial services. Let us now look at some of the barriers to financial inclusion.
BARRIERS TO FINANCIAL INCLUSION Complicated nature of service delivery – The poor, illiterate and women folk suffer from the complicated nature of service delivery. They often find it difficult to fully understand the procedures involved. For example – legal and personal identification like KYC. For someone who has no identity card or access to any place, it is a barrier. I remember being in Iraq once and seeing people lining up for micro-finance options. The people were often ignorant and were guided by group leaders who had to provide information for everybody. Limited assets – Many people are poor and don’t have enough assets to provide a collateral. Psychological and cultural barriers – These are barriers that are sometimes deep rooted in culture and psychological mindsets. For example – if you ask people about taking an insurance policy, some people will refuse point blank. Regulatory barriers – There are regulatory barriers where there might be micro finance banks where you are not allowed to engage in international money transfer. High cost of operations and limited literacy
HOW CAN WE THEN REACH THE UNDERSERVED? Micro-financiers seek collateral from the borrower. This is so that it acts as a motivation for them to make all efforts for repayment, if they don’t want to lose the property they have pledged as collateral. When you provide services to people who do not have assets that serve as collaterals, you have to create the motivation to repay in other forms. Some of these are:- Collateral substitution – Believe in what they are, not what they have. For example – We gave 11.4 billion naira to some women and we never took any collateral for that. We had no performing loan ratio that was 2% less for more than 30 days. So it is possible to do it without asking for collateral. Unit of services should be small – This is so as to avoid over-debtedness. Simplified procedure – The interest calculation should be explained in a simple manner. For example – We can say that if you take a 100 naira you pay 2 naira and 20 kobo. People understand that we are talking about interest rates. Door-step delivery services – We need to go to the customers’ locations rather than waiting for them to come to us. Repeated loan – We need to ensure that the clients are comfortable enough and feel like they can come back to us for their further loan needs.
CONCLUSION Micro financing must relate with the client beyond their bank account numbers, but striving to meet their needs. It will definitely help us to extend full economic citizenship to all people.