Micro-lending, or lack of it, didn't kill Financial Inclusion

My recent rant on what’s making mincemeat out of financial inclusion in Nigeria generated quite a bit of talk within my little circle of friends. Some thought I must have mistakenly installed someone’s mind while looking for my lost one. A pitiful few others felt it made some sense, which is something that’s rarely said about me.

Along the line, I read somewhere that lack of micro-lending killed financial inclusion and that because there is easy credit in places like Kenya, financial inclusion bloomed.

I fell off my chair and almost cracked my skull. A tile broke instead (Agbari Ojukwu!).

I think it’s time we laid it out clearly for some of my fancy armchair consultants, financial inclusion + mobile money software purveyors and self-styled rich-do gooders.

Micro-lending and other types of consumer lending haven’t worked in Nigeria because if a bank ain’t sure money would come back home, she ain’t lending it. If you ever spent 2 minutes working in a bank, that’s the second thing you are gonna be taught. The first lesson? Always get to work on time!

For those who ever made a mistake of transferring money to wrong accounts, the lucky account holders always clean out before Bart Simpson could blink. Give a loan to someone without proper ID or means to punish, you will never see his dirty backside again.

Nigeria is a special country where only fools hand out kishi without a guarantee of getting them back. Bankers are not the smartest but not fools either.

Who doesn’t want to do micro-lending? Bankers can smell money better than sharks could smell blood. The margins are simply better; fewer concessions; shorter terms with more rollovers. I can smell heaven and bonuses! But without a means of scaring bejesus out of erring borrowers, when there’s need to do that, nobody’s gonna play dice.

Because of this, banks, CBN and hapless staff of the banks came together to do the BVN which is a biometric identification that’s unique across the financial estate in Nigeria. They want to ensure that even if you take money and skip from paying, you will be permanently locked out of banking until you pay back, do penance, both or just die (whichever comes earliest).

Some people have called this the sign of the beast and I think there is an element of truth in that. Calling it The Financial Beast would be more appropriate: It bites your backside when you misbehave, financially.

The Banks spent about $55M putting this contraption in place – if they weren’t serious about KYC and financial inclusion (really?) they wouldn’t have done it.

Which comes to the lack of ease of account opening because of KYC. Frankly it is a chicken and egg problem.

Accounts are very easy to open in most Nigerian banks as long as you have a passport photograph, barely legibly filled account opening form, a government ID and proof of address such as original utility bill – it doesn’t even have to be in your name. What else can we ask for?

But original ID is hard to come by and the average banker trust most IDs less than they trust New Year prediction by new age prophets. The ease at which you can invent an ID would make PhotoShop software makers proud of themselves. Most IDs are non-verifiable which lead to the previously discussed BVN.

Does the BVN make a good man out of everyone? Maybe not but the punishment for lying is eternal damnation in the pit of financial exclusion. Too bad, you are probably stuck with your ten fingers and their wobbly prints unless you take some drastic actions.

So some people will lie to get their BVN but how they will unlie when they need other documentations and accounts in the future, is something I’m sitting on my chair, sipping Pina Colada, waiting for.

I’m still rubbing my sore head.

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