As a thought leader on Financial Inclusion and the credit ecosystem, read what Adedeji has to say about financial inclusion and how important it is to have a better world.
Access to credit in Nigeria has historically favored large corporations and the wealthy, leaving millions excluded. Credit access is crucial for economic growth, especially in times of high inflation and rising living costs. While digital lenders have made strides, there’s still a long way to go.
Access to credit has historically been difficult in Nigeria. This is because, for years, big banks were the sole providers of financial services and those banks didn’t care too much for retail banking.
Between thinking about the risk profile of individuals and smaller business players and the absence of real disincentives against failing to repay loans, banks mainly provided credit facilities to large companies and the rich. It has robbed Nigeria of a unique opportunity to grow its middle class or lift over 100 million of us out of chronic and crushing poverty.
Credit is a global conversation because it has the potential to be a growth driver for economies. Credit is how people can fund their small business idea, deal with the economic shocks of job losses, or acquire assets.
In Nigeria where the inflation rate is at a record high of 16.47%, credit maybe even more than a means to grow businesses; it is a tool to manage daily challenges. Food prices are up, fuel prices are up and civil servants who are often routinely owed salaries for months always need to borrow money.
Many cannot access small loans from the banks they use mainly because the process of getting a bank loan can be complex. Know Your Customer (KYC) procedures and the need to fill numerous forms often means that people do not consider banks as a source of credit.
Instead, many rely on shylock money lenders in their network who charge high-interest rates, so high they are just a shade better than armed robbers. It puts many ordinary people in bad spots. Thankfully, digital lenders are changing situations like this, by giving people access to quick and easy unsecured loans.
In 2020, FairMoney said it lent $93 million in loans to Nigerians while Carbon said it disbursed N25 billion. Those are impressive figures when you consider that many of those loans are likely under N200,000 ($484).
Yet, despite the strides, digital lenders are making and the Central Bank of Nigeria’s loan to deposit ratio which is forcing banks to give more loans, we still have some way to go. A few people contend that less than 2% of Nigerians still have access to any type of credit.
The majority of the world’s 1.7 billion unbanked people live in just five countries; Bangladesh, China, India, Mexico, Nigeria, and Pakistan. How can credit change the lives of people in these countries?
Personal loans for the vulnerable
In a country like Nigeria where unemployment and underemployment are high, people often need personal loans to feed their families. According to SBM Intelligence, a consulting company in Nigeria, at least 63% of people spend the majority of their income on food.
Those stark figures explain why people often say that every product in Nigeria competes against food. But it also shows something more important; that a large percentage of people will not be able to meet other needs like rent, healthcare, and entertainment.
Most of these people who are often underbanked and financially underserved often have no recourse to credit facilities. Many of these people do not even have functional identification so there’s no hope that they can scale the stringent Know Your Customer (KYC) requirements of financial institutions.
According to the Director-General of the NIMC, Aliyu Aziz, only 38% of Nigerians have any form of identification. It shows you the scale of the problem and it lets you know that despite the big amounts digital lenders are disbursing every year, there’s still a huge unaddressed market.
Beyond this, when people meet their immediate needs, there’s still a need for credit, but for a different kind; small and medium business financing.
The SME financing gap
Small and medium businesses account for 96% of businesses and 84% of employment. There are different types of small business owners in Nigeria but a good part of those are people whose businesses often need steady cashflow.
Many are traders who need working loans to restock their goods or to buy items in anticipation of festive periods. Their loan requirements range from daily loans which they can pay back by the end of the business day to short-term loans.
Right now, there are not a lot of credit options for the informal small or medium business owner save for loans from family, friends or cooperatives of some sort. This is one reason why it is difficult for small businesses to scale in Nigeria; working capital is hard to come by.
As we move further up the socioeconomic ladder, there are also all sorts of credit gaps that can need to be filled.
Asset financing for the salaried worker
Nigerians often need to pay in full whenever they need to buy phones, laptops, televisions, or any other type of asset. It’s often a strain on salaried workers who sometimes are doing just enough to get by.
Sometimes people need to buy some of these gadgets without planning such as when they lose their phones or when their laptops go bad unexpectedly. Asset financing can make situations like this easier.
There have been several attempts to solve this problem by financial institutions but many of the solutions have been criticized for having expensive markups. It has prevented buy now pay later companies from scaling in Nigeria.
Whenever the financing for these sort of light assets is sorted, the problems get even bigger down the road.
Car policies vs auto loans
Nigeria has enacted several policies to encourage car manufacturers to manufacture cars within the country. Some of those policies, like the ban introduced on the import of second-hand cars older than 10 years into the country did not produce the desired results.
Instead of spurring production, the ban merely made smuggling more profitable and consequently, it drove up the prices of secondhand cars. There have been more auto policies, but nothing has significantly moved the needle.
In discussing Nigeria’s Finance bill last year, Vice-President Osibanjo said that while Nigeria’s annual vehicle demand was around 720,000, local production currently stands at 14,000. The answer to the problem isn’t more auto-policies.
This is because only a handful of Nigerians can afford brand new cars. In fact, very few Nigerians can afford cars at all. According to 2017 data by the National Bureau of Statistics (NBS), “on the basis of private vehicles only, vehicles per 1000 Nigerians comes to about 24. It is also about 41 Nigerians to one private vehicle– one of the lowest among its emerging market peers.”
One way to look at this problem is that most Nigerians have to pay cash and pay in full for vehicles. Auto-loans and car financing are difficult to come by and where food is competing for people’s paychecks, it is difficult to ask them to put down millions to buy a car.
It is pretty much the same situation when you look at homeownership and mortgages in Nigeria. These are sectors and situations where access to credit can provide the much-needed quick wins.
Using credit to improve homeownership
In developed countries, mortgages allow millions of people to buy and own homes with affordable payments stretched over several years. In Africa, the mortgage market remains thin.
Here’s data from one publication; “In Uganda, there are an estimated 5,000 mortgages for a population of 41 million while in Tanzania, there are only 3,500 mortgages in a country with a population of 55 million.”
It’s not much better in Nigeria where even the wealthy do not often opt for mortgages. Jason Njoku’s famous thread about trying to secure a mortgage a few years ago is a stark reminder. It means that homeownership rates in Nigeria very low.
While homeownership in Kenya is 75% and 56% in South Africa, in Nigeria, it is estimated to be around 25%. Ten more homeownership policies will not change this.
In the end, across many sectors, Nigerians need a way to finance asset acquisition without putting down years of their savings. Why pay N40 million upfront for a house when you can spread the payments over 20 years while using the rest of your money to invest in other ventures?
Without credit, we’re going nowhere
The real game-changer for Nigeria won’t be more policies, but a more conscious drive towards expanding access to credit to every single Nigerian and creating a framework that makes eligibility a right instead of a privilege.
Financial exclusion remains a significant hurdle in developing economies, where access to credit facilities is key. Discover our proposed model for a more inclusive financial future.
Financial exclusion remains a significant challenge in developing economies. It has been shown that access to credit facilities is a strong predictor of financial inclusion. Credit reporting and scoring remain effective tools for both traditional and alternative lenders, however, access to credible credit data and scoring mechanisms is one of the biggest roadblocks that alternative lenders in developing economies face. While some lenders have developed systems that leverage social media analytics and data harvested from smartphones in order to create a scoring system, the poor and vulnerable are still excluded from such scoring systems. There have been significant advances in the use of telecoms data for credit scoring, making it a promising alternative to credit bureau data. However, readily available data is still an issue. With the increase in the development and use of open APIs, telecoms data could be made readily available for credit scoring, while addressing privacy and other issues. This paper is a conceptual paper that proposes a model for the use of Open APIs from telco data for credit scoring that will ultimately increase access to credit, and ultimately financial inclusion in Africa.
Improving access to credit is crucial in Nigeria due to high poverty rates. Only 2% of adults currently have loans, leaving a significant credit gap. Lenders face certain challenges, but with the right strategies in place, we can solve these problems and tap into this industry.
Access
to credit and financial inclusion are closely related [1], and they both play an essential role
in improving the structure and quality of a country’s financial system, which
drives economic growth [4]. According to CBN’s National Financial Inclusion
Strategy (NFIS), credit has been identified as a key product to increase the country’s
financial inclusion [4]. CBN has set a 2020 target of the Nigerian adult
population having access to credit at 40%, which means that about 42 million
Nigerians should have access to loans. We are, however, far from this, as only
about 2% of the Nigerian adult population have been able to access loans from
banks and other financial institutions [3], leaving a variance of about 38%.
This
huge variance presents a tremendous opportunity for lenders (commercial banks,
microfinance banks, Fintechs, and other lending companies). This article
explores the potential credit gap in Nigeria that lenders can address, as well
as the extent of value which stakeholders within the lending ecosystem can
create. The article also focuses on significant challenges being faced by
lenders today and ways these challenges can be addressed to effectively meet
the country’s credit deficit and financial inclusion targets.
A quick look at Nigeria’s Credit Conditions
Before
arriving at an estimated credit gap for Nigeria, it would be vital to consider
the different types of credit and the various segments of borrowers. It would
also be important to explore lending trends and conditions within the country. Regarding
loan types, loans to customers are either secured or unsecured. Secured loans (e.g.,
mortgage, car loan, etc.) are connected to tangible collaterals and typically
come with lower interest rates because of the lower financial risk attached.
Unsecured loans (e.g., personal loans, payday loans, credit cards, etc.) are
not protected by any collateral, and they typically have higher interest rates
due to the financial risk involved. While unsecured, there should be legal
frameworks and policies in place to protect lenders especially in situations
where borrowers default on their loan payments.
According to CBN’s Credit
Conditions Report (Q4, 2019), the availability of secured credit to households increased
over the year and is expected to keep increasing in the next quarter. This
expected growth in the supply of secured credit is met with a corresponding
expected increase in demand for secured credit by borrowers [17], which is complemented by CBN’s directive
to increase loans to individuals and businesses [8]. A growth trend is also the
case for unsecured credit, as lenders expect the availability and demand of
unsecured loans to increase in the next quarter [17]. This expected increase in
unsecured loans to Nigerian households is complemented by a forecasted general
growth of unsecured lending in Nigeria, which is mostly driven by the
proliferation of digital lenders that are using data and technology to grow
consumer and SME financing in the country.
Loan default
rate, which represents the percentage of outstanding loans written off by
lenders due to the inability or unwillingness of borrowers to pay back, or
after an extended period of missed payments, has also improved in recent times
and is expected to keep growing in the next quarter [17]. Lenders are, however,
forecasting that loan pricing and interest rates will remain unchanged in the
coming quarter. This means that a lot of lending organizations in Nigeria have
not leveraged data and analytics to improve the risk management process, which
can create opportunities for lower interest rates. There is the opportunity for
lenders to adopt open banking, which creates an opportunity to share data using
standard Application Programming Interfaces (APIs) and has the potential to
reduce delinquency and make loans cheaper and more accessible.
NGN 51.8 Trillion and counting – Estimated credit gap in Nigeria
Improving
access to credit to Nigerian individuals and businesses has been high on CBN’s agenda
in recent times, with the apex bank unfolding measures to increase lending to
consumer, mortgage, micro, and SME sectors. One of these measures is the
increase in the Loan-to-Deposit ratio from 60% to 65% [8], which has led banks
to give out more loans to comply with CBN’s directive. According to CBN, Nigeria’s
credit gap is about NGN 1.7 trillion [9,10]. This has been estimated as the
difference between loans currently being given out by financial institutions
and the loan amount that financial institutions will be required to give out to
maintain LDR of 65% (assuming current deposit figures). Based on 2019 figures,
Nigerian banks gave out about NGN 13.6 trillion loans [8], which were about NGN
1.7 trillion short of the loan amount required to maintain LDR of 65% (NGN 15.3
trillion).
This
approach to estimating the credit gap in Nigeria might not be holistic as it
solely leverages LDR as an instrument to ascertain what the credit needs of
individuals and businesses are. The approach has a limited view of consumer credit
need, especially with how this can be mirrored to Nigeria’s working population.
Also, the approach focuses on only commercial banks as lenders. It does not
consider other lending institutions (Fintechs, microfinance banks, Credit
associations, etc.). It is, therefore, important to make other key
considerations while estimating the available credit deficit, which can be
addressed by lenders in Nigeria. This credit gap estimation will focus on only
consumer, micro and SME lending, as 95% of loans currently provided in Nigeria
have a value of above NGN 50 million [11], meaning most of the loans are
already being provided to large corporates.
According to lending data from a large commercial bank and leading FinTech, the average working adult in Nigeria takes a loan of about NGN 23,000, seven (7) times in a year], which amounts to an annual figure of NGN 161,000. World Bank has estimated the number of working adults in Nigeria to be at 62.4 million in 2019 [12]. This means that the estimated market size for consumer loans is about NGN 10.1 trillion. To ascertain what portion of the market size represents a ‘credit gap’ that needs to be addressed, we can apply the credit variance of 38%, as only 2% of the targeted 40% of the Nigerian adult population currently have access to loans [3]. This brings the estimated consumer credit gap to about NGN 3.8 trillion.
Micro,
Small, and Medium Enterprises generally experience greater financial obstacles
compared to large corporates. MSMEs enjoy less access to credit and other forms
of external finance and face higher transaction costs and higher risk premiums
[13]. This is mostly because financial institutions are often reluctant to lend
money or provide financing to companies with limited or no credit history [14].
This has resulted in an MSME credit gap that lenders can address. According to
CBN, the existing financing gap for
MSMEs is about NGN 48 trillion, with more than 17.5 million MSMEs seeking credit and
other forms of financing [15].
Combining
the credit gap for consumer and MSME segments, lenders can address a credit gap
of NGN 51.8 trillion through secured and unsecured loan products that
will help to boost financial inclusion and economic growth. However, it is also
vital to note that very excessive credit growth, coupled with high inflation
and default rates, can lead to a financial crisis [6]. Strong growth in credit
has preceded many episodes of financial instability in the past, resulting in the
materialization of systemic banking crisis [7]. Hence, it is important to not
get carried away while implementing measures to address Nigeria’s credit gap
and drive credit growth. There should be a focus on ensuring credit growth is
not too excessive that it leads to a national financial crisis. Further studies
and statistical analysis can be carried out to measure excessive credit
provision in the economy and identify optimal interactions between Nigeria’s credit
demand and supply factors, towards ensuring credit growth is not too excessive
that it leads to financial instability.
Impact of the estimated NGN 51.8 Trillion Credit Gap
The
credit gap, which is characterized by limited access to credit for individuals
and SMEs, has led to hampered growth in financial inclusion and, consequently, stunted
economic growth. Limited access to consumer credit also hinders consumer
spending and consumption [1]. This directly impacts the ability of
consumers to meet their immediate, medium-term, and long-term financial needs.
Some of the practical issues being faced by Nigerians include limited ability
to conduct an upfront purchase of assets (cars, houses, phones, etc.) and make
upfront payments for experiences and services (travel, education, rent, etc.).
This had led to Nigerians mostly having to save to meet financial targets,
which can be very difficult.
Furthermore,
limited access to credit has led to limited growth for MSMEs, as a lot of these
companies do not have the required financing to scale the business and invest
in appropriate resources and capabilities (people, technology, processes, etc.)
[18]. MSMEs are vital to the development of any economy as they provide opportunities
for employment generation, the advancement of local technology capabilities, economic
diversification, development of local entrepreneurship skills, and forward
integration with large-scale industries [16]. Hence, it is very crucial for participants of the
lending ecosystem to develop the right capabilities to improve access to credit
for individuals and MSMEs.
Other
benefits to be derived if the credit gap is addressed include improvement in the
country’s manufacturing and agricultural industries [19], increased
opportunities to improve health, education and innovation, and general
improvement in the quality of living [20].
Major challenges faced by lenders and other participants of the lending ecosystem
Poor credit reporting – One of the key processes within lending is the management of credit risk. Nigerian lenders currently combine customer information with credit reports from Credit Bureaus to ascertain customers’ risk and determine creditworthiness. This is not holistic, and it may leave out key information about a customer’s financial health, which could be crucial to determining what the customer’s risk profile should be. This also limits the extent to which lending organizations understand potential borrowers, as well as keeping loan prices and interest rates high.
Also, the
traditional credit scoring process does not serve MSMEs well [14]. Often, one
single piece of unavailable information about the MSME can prevent the
assessment and consideration of the organization. Due to this limited access to
rich customer data, lending organizations mostly provide loans to individuals
and organizations that have adequate credit information history, thus leaving
out potential borrowers with ‘thin-credit-files’ (potential borrowers with
limited or no credit history).
If we
consider a real-life scenario, a Credit Bureau API check costs between NGN 200
– NGN 500 and obtaining a transaction statement for a loan applicant from
NIBSS’ mybankstatement service costs NGN 400 for a JSON file and NGN 250 for a
pdf. If we assume a lender assesses 1,000 potential borrowers, that’s already a
cost of about NGN 500,000 on just conducting credit checks, and there is no
guarantee that all the loan applications will be approved. If the loan amounts
are small, the lender will only be able to pass on a maximum of 1% of the loan
disbursed to the borrower which would not be enough to cover the cost of
processing.
Limited collaboration between participants of the lendingecosystem – Participants of the lending ecosystem (commercial banks, Fintechs, microfinance banks, credit associations, other non-bank lenders, credit bureaus, regulators, etc.) play different roles across the lending value chain. There currently is no standard framework (such as open banking) that drives collaboration within the ecosystem. Data currently exist in silos, with each participant having a fragmented understanding of each customer, as opposed to a holistic and detailed understanding, which would be the case if participants adopt full collaboration and standardized data sharing.
Inadequate technology infrastructure – Some lending organizations in the country have invested in technology capabilities (applications, infrastructure, network, etc.) to automate the lending process and ensure efficiency and speed. Interactions with multiple lending organizations in Nigeria have, however, shown that there is limited reliance on relevant digital and emerging technologies to support the end-to-end lending process (loan origination, credit risk management, loan disbursement, loan performance monitoring and loan collections). Also, these technology capabilities are not nimble enough to cater to the growing availability and demand for secured and unsecured lending. Many financial institutions also lack robust technology platforms that seamlessly integrate risk modeling with reporting [22].
Lenders
will need to invest in digital and technology capabilities (core lending
applications, predictive analytics, omnichannel experience, etc.) to remain
agile in the provision of tailored loan products and services to Nigeria’s credit
market.
High default rates – According to the CBN’s credit conditions report, loan default rates are expected to reduce in the coming years [17]. However, due to limited access to customer information across the financial ecosystem, lenders currently don’t have a full view of customers’ financial health. Hence, it is difficult to accurately identify and separate potential borrowers that will have difficulty in paying back their loans from those that won’t. This has led to an automatic reduction of the potential credit market size and has also kept loan prices high, as lenders tend to price loans high enough to cover the risk of loan defaults.
Inadequate legal infrastructure – The legal infrastructure in place to protect lenders, borrowers and other participants of the legal ecosystem is not adequate to drive credit growth. There are a lot of cases where borrowers are easily cheated or have to pay very high-risk premiums to access credit. There are also cases where lenders are exposed to financial loss when borrowers are unable or unwilling to repay loans. In cases like this, the cost of debt recovery can be very high and most times, lenders have to let go of these defaulted loans. An adequate legal structure should provide the relevant protection to ensure lenders and borrowers are not hesitant with providing and accessing credit.
Initiatives to address Nigeria’s Credit Gap
Improve credit risk management and reporting. Borrowers shouldn’t know more about their financial situation than lenders do [22]. Lenders should have sufficient information about potential borrowers and have the right tools to conduct a detailed risk assessment to understand customers’ financial health and risk profiles, even more than the borrowers understand themselves. Lenders should integrate alternative sources of data, leveraging concepts such as open APIs, blacklists, etc. to improve credit reporting.
Explore new and innovative loan products to address the needs of Nigerians. In essence, Nigerian lenders need to be creative to develop loan products and services that are tailored to the needs of Nigerians. Due to the availability of data, lenders can fully understand their prospective and existing customers and develop custom offerings that will meet their needs. An example is how Flipkart, an Indian ecommerce company, commenced the provision of loan products to consumers and sellers on its platform to increase consumer credit growth. Another example is Branch, a Fintech organization, providing loan products to merchants based on their sales history and financial projections, which are available online. Other examples include how lenders can price loans differently for customers based on the result of their credit assessment and risk profiling.
Increase lending to underserved borrower segments. While addressing Nigeria’s credit gap, lenders should also focus on underserved borrower segments, such as thin-credit-filed customers and potential borrowers from the untapped informal sector of the country. For these segments of customers, lenders can build risk models that consider other forms of data (social networking data, telecommunication usage data, sales data, etc.) in other to gain a detailed understanding of each customer and ascertain if they’re creditworthy. Lenders can also implement channels (mobile, online, agents, USSD) to provide accessibility and convenience to these customers.
Governments and Regulators should create an enabling environment and policies to drive creditgrowth. While the CBN has taken some measures (such as the LDR directive) to improve access to credit, additional steps should be taken to ensure that both lenders and borrowers are protected. Governments have also made some steps to increase access to credit (TraderMoni, MarketMoni, FarmerMoni, National Collateral Registry, etc.). Governments should continue to contribute to developing and implementing policies that will create an enabling environment for credit growth.
Transformation of lending operations – Traditional lenders, need to undergo digital transformation to transition into agile lenders. Lenders will have to deploy a robust technology platform with seamlessly integrated capabilities to support risk modeling, reporting, loan origination, loan performance management, API management, etc. Lenders will also need to provide an omnichannel experience to individuals and MSMEs to ensure that they have access to loans, at any time, and on any channel of their choice.
Conclusion
Nigeria has an estimated consumer and MSME credit gap of about NGN 51.8 trillion. This presents a very huge opportunity for lenders, but closing the credit gap will require significant effort from private institutions, governments, and regulators. Lenders will need to develop key capabilities that will make them more agile and positioned to meet the needs of customers. They will need to implement sound business models that will adequately serve the different segments of individual and MSME borrowers. Governments and regulators will need to create the enabling environments that will improve access to credit, while also contributing significantly to economic development and job creation.
EFInA Access to Financial Services in Nigeria 2018 survey
Sulong, Z. and Bakar, H.O., 2018. The role of financial inclusion on economic growth: Theoretical and empirical literature review analysis. J Bus Fin Aff, 7(356), pp.2167-0234
Lang, J.H. and Welz, P., 2017. Measuring credit gaps for macroprudential policy. Financial Stability Review, 1.
The theory-based household credit gaps in this special feature are based on the methodology and results in Lang, J. H. and Welz, P., “Semi-Structural Credit Gap Estimation”, mimeo, 2017
National Bureau of Statistics (NBS) – Selected Banking Sector Data: Sectorial Breakdown of Credit, ePayment Channels and Staff Strength – December 2019
Central Bank of Nigeria (CBN) – Credit Conditions Survey Report Q4 2019
Oaya, Z.C.T., 2017. The impact of SMEs financing on business growth in Nigeria: A study of Keffi and Mararaba metropolis. International Journal of Innovation and Economic Development, 3(2), pp.44-55.
Aina, O.C. and RTP, A., 2007. The role of SMEs in poverty alleviation in Nigeria. Journal of Land Use and Development Studies, 3(1), pp.124-131.
Lederle, N., 2009. Exploring the impacts of improved financial inclusion on the lives of disadvantaged people (Doctoral dissertation, Heriot-Watt University).
Financial inclusion in Nigeria falls short because products lack accessibility and affordability, ignoring basic needs like free transactions. Understanding the needs of the poor is key to an effective design.
No scholar worth his salt would denigrate his study in the first line, or on any other line for that matter. However, listen carefully, take what I’m going to say below with a pinch of salt as it’s based on armchair projections.
Considering that nobody in Nigeria is faithful to anything, especially to their banks, I know finding unique bank customers could slash the numbers down to about 20M. Just a hunch, don’t quote this for your PhD!
The Central Bank of Nigeria, other NGOs and do-good money bags have tried all they could with financial inclusion but it ain’t just hitting that sweet spot. Banks were corralled into the deal, and we came up with Prepaid Cards and Mobile Wallets. Both had as much success as the Zepellin.
On a quiet Sunday morning, after the rain has done about 3 rounds, much more than middle-aged men can cope with these days, I thought about what could have made all the efforts, the bankers, the CBN, flounder like a pricked balloon.
It was just simple. Financial inclusion designed by rich bankers and their friends in Brioni suits just don’t work.
Why? Because financial inclusion products should be accessible and affordable. Unfortunately, they are not.
This is best underscored by a recent conversation I had with one of my banker friends designing a saving product where artisans and others can pay N100 a day to save about N1,000 using their phones. I was like, what the F? I wouldn’t even do that on a regular account!
Which brings us to why the fancy financial inclusion schemes never work. Most were designed with absolutely no idea of what poor people want. But then ain’t difficult to find out, they want basic and affordable financial products.
They want free cash in/cash out.
They want free balance inquiry.
They want free bill payments.
They really don’t give two rats’ legs about cost of transaction.
Oh my, they don’t keep money in balances because like we all know, you can only save when you can afford to. When you live off less than $1 a day, which 70% of us are anyway (who did the enumeration?) you can’t afford to save. When you earn less than N50K a month and you have mouths hungrier than young birds to feed, you can’t save.
So dear banker, if the poor can’t save, there isn’t going to be any float.
If you don’t get any of these above, you can’t design products for poor people, bottom of the pyramid or financial inclusion.
This isn’t Davos, so get off your high horse dude!
This morning I got a mail from a well-regarded source about the likely outcome of the bi-monthly Monetary Policy Committee (The MPC is a committee of the Central Bank of Nigeria) meeting coming up later in the day. The source argued that the MPR, LR and CRR would probably be left at 7.5%, 30% and 2% respectively. With a caveat that the prediction should be taken with a pinch of salt and she’s not liable for any calamity that hits anyone who uses the prediction to make decisions. Come on! Even Jim Jones was better than this.
By the way, if you don’t know what these acronyms stand for, don’t bother; they mean absolute nothing, especially to the man on the street. They are some of the jargons we bankers put up to feel very self-important.
It would have been a story if the ratios weren’t changed: I can’t remember if any of the predictions ever made by my source came true. But I’m sure if Harold Camping’s rapture hasn’t taken place before the next MPC, my impeccable source would make another prediction and guess what, my own prediction is that she’s going to be wrong, as usual.
The business world is replete with loads of analysts and self-styled experts but empirical evidence has shown we (too bad, seems I’m one of them) are not better than an army of random monkeys hitting away at the keyboards and a chance Shakespeare classic coming out. The publishing editors are thrilled and the monkeys have been given an advance for 4 more classics. You see, if you deal with a very large solution space (another jargon, another narcissistic comment) like I’m working on for my current project, anyone can get lucky.
The real disaster, of course, is confusing luck with expertise.
