The Myth Around Literacy and Financial Inclusion

According to EFInA (Enhancing Financial Innovation and Access), 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, especially the low-income segment” (EFInA, n.d., p1). It requires that financial services (bank accounts, credit, insurance, remunerative savings, and payments and remittance systems) be available and accessible to the underbanked and unbanked.

The Global Findex database showed that as of 2017, there were about 1.7 billion unbanked adults worldwide (Asli et al., 2017). The database also revealed that nearly 50% of these people lived in Bangladesh, China, India, Indonesia, Mexico, Nigeria, and Pakistan (Asli, et al., 2017) as shown in figure 1 below.

Figure 1: Adults without a bank account in 2017
Source: Global Findex database
Note: Data not displayed for economies where the share of adults without an account is 5% or less.
Reproduced under the Creative Commons Attribution license

The map shows that Financial Exclusion is mainly confined to the developing world. Figure 2 below shows that 4% of the world’s unbanked adults live in Nigeria. Between 40–64% of adult Nigerians are excluded from any form of financial services, and ownership of Mobile Money accounts in Nigeria stayed at between 0% and 9% between 2014 and 2017 (Global Findex Database, 2017).

Figure 2: Distribution of Adults without a bank account in 2017
Source: Global Findex database
Reproduced under the Creative Commons Attribution license

A recent report dubbed Nigeria “the poverty capital of the world” (Kazim, 2018) and the World Bank’s 2018 atlas of development goals showed that Nigeria had 86.9 million people living in extreme poverty (The World Bank Group, 2018). Compared to the second runner up, the Democratic Republic of Congo at 60.9 million people, that is saying something. One just can’t help wondering if our leaders care even just a tiny bit that Nigeria has overtaken India (with a population seven times that of Nigeria) as the country with the most significant number of people living below $1.90 a day (World Poverty Clock, 2019). Well, that’s a rant for another day.

Figure 3: Top 10 African countries with extreme poverty (June 2018)
Source: The World Bank Group SDG Atlas 2018
Reproduced under the World Bank’s Open Data Initiative

Financial illiteracy has been blamed for the statistics in Nigeria. It is argued that the main reasons for financial exclusion in Nigeria are poverty and illiteracy (Martin, 2008). As of 2015, the adult (15 years and over) literacy rate for Nigeria was 59.6% (Knoema Database, 2015). It is the popular belief that most financially illiterate Nigerians are the uneducated and the under-educated. Illiteracy has been linked, consciously or unconsciously, to financial illiteracy. This conception is even somewhat backed by research and statistics. But, is this really the case? Is it true that the illiterate shy away from financial instruments and services mainly because they are unable to grasp the basic concepts of finance? Is this really the full picture?

Financial literacy can be defined as the ability to identify, acquire and utilize financial information and services independently. It is demonstrated by the ability to display the basic skills needed to function in the present economy. These basic skills include numeracy, problem-solving and general prose literacy (Robson, 2012), as well as the ability to figure out abstract things. The interesting thing is that the very same basic skills are required to get a grasp of mobile smartphone technology as well. In fact, it can be argued that mobile telephone technologies are much more complex than financial technologies. This, however, hasn’t stopped the developing world from taking up mobile technology. Sub-Saharan Africa is the fastest-growing mobile region in the world (Damian, 2018) with over 400 million mobile subscribers and an overall subscriber penetration rate of 44% (GSMA, 2018). About 250 million of these mobile subscribers own a smartphone (Damian, 2018) and this figure is expected to grow to 690 million by 2025 (GSMA, 2018). And believe me, not all those 690 million smartphone owners will be university graduates. Just ask the Bodaboda driver in Uganda or Bàba Làsìsì who sells beef in Sábó market.

Figure 4: Mobile subscription and penetration in Nigeria and Africa
Source: Jumia Mobile Report: Nigeria 2018

The big question now is: if digital inclusion is exploding across the continent, why then isn’t the same true for financial inclusion? When mobile phones first hit the scene in 1983 with the Motorola DynaTAC 800x, they seemed so advanced and brain-wracking, and they came with fat user manuals. The Motorola DynaTAC 800x cost almost $4,000, was about a foot long, and had a battery life of a half hour. IBM’s Simon was probably the world’s first commercially available smartphone. It cost about $1, 099 and was equipped with a calendar, address book, clock, notepad, PDA, email service, fax service, a QWERTY keyboard, and a touchscreen. In the 26 years since Simon’s debut, smartphones have come a long way. They have become more affordable and pretty easy to use. In order to stay competitive, phone makers have had to “dumb down” the previously complex technologies that run these devices by hiding these technologies behind easy to use interfaces. We went from having to tap like a million times just to get to the figure 9 to QWERTY phone pads with emojis. Even my three-year-old niece can pick out the camera and YouTube icons in a heartbeat and knows to swipe to unlock her mum’s phone. Now, Bàba Làsìsì, who didn’t go beyond primary 6 and who can’t speak a lick of English, has WhatsApp on his phone and can torment all his friends and kids with random broadcast messages that threaten doom and damnation if you don’t forward them to 20 people. He didn’t need a degree or the ability to speak Queen’s English to be able to take selfies on his phone or to send a message to Mama Put to let her know that her cuts of meat are ready. The figure below shows that a larger percentage of Nigerians can carry out several functions on a smartphone than are able to perform financial transactions.

Figure 5: Phone user capability in Nigeria in 2017
Source: FII Nigeria 2017 Wave 5 Report

Why have people taken to mobile technology in a way that has seemed impossible with financial services and products? The truth is that people simply developed functional literacy around mobile phones — how to identify numbers, key in airtime tokens, read balances, etc. It helped that the mobile phone developers made the technology accessible and within reach of everyone, educated or not. The user interfaces on phones are very intuitive and make navigating the otherwise overwhelming world of technology pretty straight forward. It is easier for Bàba Làsìsì to recognize the phonebook icon and call button on his phone than for him to wrap his head around the notion of a revolving line of credit.

What then is this telling us about the so-called illiterate Nigerian? Illiteracy doesn’t necessarily mean that people are dumb or have low IQ. Illiteracy is mostly a function of access, or a lack of it, to formal education. Illiteracy cannot take all the blame for financial illiteracy and financial exclusion. In fact, a survey carried out amongst students from a large metropolitan university in South African revealed that 17% of the respondents were financially illiterate, and 68% moderately financially illiterate (Shambare & Rugimbana, 2012). This shows that education does not necessarily imply financial literacy and that even the educated still struggle with some aspects of their finances.

The world’s poor and un(der)educated don’t need to go to school or have a fancy degree to understand banking. The banks need to borrow a leaf out of Apple and Samsung’s book and present financial services and products in such a way that they can be understood using functional literacy. If undergrads, who are technically considered as literate if they could get to that level of education, don’t understand the concepts of compound interest or have any idea what a credit history is, how then is the man on the streets expected to do that? these banking concepts need to be simplified and made as easy to grasp as tapping an icon on a phone screen. If using an App required having to type in some code in C++, smartphones would have died out eons ago.

The simple truth is this: having a bank account should be as simple as using a mobile phone; having insurance should be as simple as an understanding risk; services should be cheap enough to be within the grasps of the poor — the poor are very sensitive to pricing. In my opinion, banking for the poor should be free, and the banks should figure out how to make money off their larger customer base; understanding how your savings are performing should be as easy as saying “Ok Google.”

I’ve been blogging for 18 years; Here are a few things I discovered

I started blogging at dejiolowe.com in April 2001, 2 years after blog became a noun and a verb. I didn’t even know it was called blogging; I just wanted to be the cool dude. I mean, companies didn’t even have websites in 2001 abosi abosi a recent graduate?

Since that time, over 100 million Nigerians have been born, 160 million + phone lines have been sold, and banks have reduced from 89 to 21 + Five.

It has been a fun and fulfilling ride. Done a few tech changes since I went live in April 2001 but dumb me lost all my postings between April 2001 and July 2005. Very sad but I’m probably also grateful as most of what I wrote before they weren’t better than chicken shit.

I learned a few things

  1. Writing is hard; so hard that I know only psychopaths enjoy doing it. Procrastination and writer’s block are the biggest enemies
  2. Only a few bloggers will get to super-stardom and nobody really cares about your writing anyway. But if you are driven by passion instead of applause, Hallelujah!
  3. The traffic doesn’t come unless you are hosting that sex video of Kim Kardashian
  4. Consistency is key
  5. If you don’t love blogging, you can still start. Nobody would beat you up if you fail at it.
  6. My grammar improved significantly over the years. When I look at some of the sloppy writing I did, I cringe so badly my teeth rattle
  7. I managed to stay out of trouble by focusing on the few things I love to write about
  8. I finally discovered that I really do enjoy writing even if it’s a difficult thing. Does that make me a psychopath?

What do I love to write about?

Science fiction, personal development, payments, and technology. At one time I posted a few jokes, but they were just too crummy for me.

Greatest Joys

  1. Someone used my article as a reference for his Masters abroad. It was gratifying
  2. I get the most traffic for the Nigerian constitution as I have managed to collate all of them

My top 5 favorite articles

  1. In 100 years, 9 women will deliver a child in a month
  2. The end is nigh. artificial intelligence
  3. Certifications broke your heart
  4. Ladies, please stand up
  5. 10 predictions for digital payments in 2019

10 predictions for digital payments in 2019

2018 was an exciting year for payments in Nigeria. Tons of cash came in as international investments; interbank transfer crossed 700 million transactions, even mCash had a little showing. Of course, the bitcoin bubble made a loud burst with many licking their wounds.

As usual, the following are my 10 predictions for 2019. They are mostly influenced by my understanding of the industry, discussion with various stakeholders, and my penchant for foolery. While these 10 predictions could be a guide for you, rely on them at your own risk.

Interbank transfers overtake ATM cash transactions
Come April 2019, for the first time ever and every month forever after, Nigerians will do more interbank transfers (using USSD, mobile, and online banking) than they collect money from ATM machines. Interbank has seen a steady 100% annual growth over the last few years and is poised to eclipse other payment methods as more bank customers gravitate towards USSD or can afford smartphones.

Payment Service Banking flops
The euphoria around Payment Service Banks (PSB) is unfounded as it is more about financial inclusion than fancy mobile or digital banking. Nevertheless, the poison pill of 22% CRR and 75% deposit with CBN as Treasury Bills is marking this as dead-on-departure. While a lot have applied, only a few will launch. MTN will find that it’s a different kettle of fish and would struggle significantly.

SANEF becomes a surprising success
Shared Agency Network Expansion Facility is a massive N32B undertaking by banks and NIBSS to haul in 30 million financially excluded Nigerians into the financial ecosystem. While it has been on for months with little to show apart from daily adverts by NIBSS, there appear to be unseen moves to make it a success. For example, the adoption of a common API standard for account opening would help the super agents get to the market faster. The appointment of Ronke Kuye, a veteran of payments and a co-founder of CeBIH, to run SANEF is a significant step in the right direction.

A massive data breach or fraud hits some fintechs
Some months ago, someone found exposed data about Arik customers which included card details, phones, and emails. This discovery underscores how pervasive the security lapses have been for technology companies worldwide. When you hear about likes of Google, Facebook, and Yahoo having breaches, you know it’s a matter of time that a Nigerian bank, a fintech, or government agency is walloped. This time around, it would be a hit so hard they cannot sweep the stories under the carpet. By the way, some of these frauds would be done by internal teams.

CBN clamps down on errant fintechs
After the embarrassing frauds and data breaches, CBN will go into a knee-jerk reaction and go after banks and/or fintechs who do not have licenses. A lot of apps will disappear with many investors dollars following the pipe into the drain.

Interbank transfer becomes N20
CBN will update its rules to force banks to reduce their interbank transfer payments to N20 a pop. Bill payments and others will not change though.

Micropayments become free
Part of the CBN rule would say that transfers below N1,000 should not be charged subject to a maximum of N2,000 per day to engender financial inclusion and cashless payments. Customers will rejoice, and I will throw a party (just make sure you RSVP). Before you think I am mad, just remember that CBN made ATM withdrawal free in 2013 and only put a cap of 3 free transactions when banks went begging with their grandmothers. With the cost of interbank transfer down to N20 or even zero for transactions of N1,000 and below, micropayments will explode. Now you can pay for Agege bread with N50, and you won’t get charged.

International players go big
Whatsapp finally figures out how to connect your bank account (for some banks) to your app so you can now transfer funds instantly to anyone. And guess what, they will do it so well and so seamlessly that you wonder if our banks have been playing.

CBN does an about-turn on the new licensing regime
The Central Bank of Nigeria recently threw some gasoline into the fintech fire when it proposed to create 3 licensing bands of up to N5B capital requirements. Since then, everyone has been snipping at CBN’s heels.

Someone hacks AI for banking
A smart bank finally figures out what to do with the mess that Whatsapp banking. Instead of the rubbish flow, you will now be able to chat using natural language. I mean, if you can talk to Alexa in Ijesha accent with all the glory of “H factor” and it recognizes your voice, why can’t you chat with your bank Whatsapp and say “transfer N15,000 to Silifa” and it gets done?

I didn't do too bad predicting digital payments for 2018

Last year, I wrote about 10 predictions for digital payments in 2018 (better to read this first). Looking back, I can assure you, my career as a seer hasn’t been as illustrious as I planned it to be. So how bad am I? Let’s take a look at how I scored myself.
Alat gets a (bigger) challenger (Score = 1)
Every bank looked at Alat and moved on. Not a single initiative came out to challenge the dominant digital bank which continues to garner critical acclaims world-wide. Likes of dot.bank and Wallet.ng are snipping at its heels though.
PSD2 instigates Open Banking (Score = 5)
Open Banking is no longer a swear word in the UK, and it has been primarily replaced by enthusiasm. Quite some countries are now on the open API bandwagon. Bahrain is a new country that published specific guidelines. Despite the excitement, the fire is like a table-warmer and not a bonfire.
Maturity comes to Fintech (Score = 8)
The Nigerian fintech ecosystem has grown significantly over the last 12 months. The growth is best represented by about 5 international fintech conferences done in Lagos to showcase opportunities. Additionally, some odd 5 Nigerian fintechs firms got into YC over the year. Likes of Paystack attracted top international investors like Stripe, Visa, and Tencent. Mines.io and Cellulant raised a ton of cash. What else can we ask for?
Smaller Fintechs instigates price war (Score = 0)
No price war happened. Prices are same. Everyone is cranky.
Bitcoins bubble explodes, killing many (Score = 10)
Last year, BTC was dancing around $20K with investors (real and Babalawos) predicting $100K per coin. Of course, the bubble made a loud splat with values dropping 80% over the last 1 year. Many of my friends who were coin fanatics then have lost their voices. Can’t gloat but don’t equate greed with tech.
International players come to lunch (Score = 7)
Opera made a serious inroad into Nigeria with the launch of Opera news that now has 28m active users. The company will also start to lend to all my cousins soon.  Stripe and Tencent are also putting a tiny toe via Paystack. Please come! We will take care of you.
Android supports pay with Paga (Score = 0)
Nothing happened. Sorry, come back later.
Fraudsters get a beating (Score = 0)
Nothing changed. Stop Fraud Africa floundered and never launched. People are still getting scalped day-in-day-out.
Retail digital lending become prevalent (Score = 7)
Digital lending is on a tear with likes of Mines.io getting $13m to play. But with just 0.77% of all loans going to individuals, the journey is still very far!
AI to the customer service’ rescue (Score = 0)
You would have thought that the opening of Whatsapp APIs for banking would bring decent AIs to help customers? Fat chance. Practically every implementation has been sub-par. Just someone copying and pasting USSD menu into a chat. Disappointing.
I scored a measly 38 out of 100; which is even less impressive when you considered that I marked myself. Next year, take my predictions with a pinch of salt, but then 38% accuracy about the future is better than most prophets can handle. Maybe I am not so bad after all.
Read the original predictions here: https://dejiolowe.com/2017/12/10-predictions-for-digital-payments-in-2018/ and subscribe to my blog to get other posts whenever I can summon enough energy to write them.

The bold will always boss the smart around

Recently, I was enduring a never-ending stream of ranting from one of my mentees (why don’t I ever get paid for this?) about how he gives solid business propositions, but the founder and chief executive of his company doesn’t take his advice. But then when the so call CEO makes a mess, my mentee has to do the cleanup.
Of course, my mentee is super smart. First class engineering from a top Nigerian school with IQ as many as floors in the Shanghai Tower. But then, here is a broken man who obviously deserves more and yet isn’t fulfilled. He works in a company that isn’t doing too well because it’s probably poorly managed by the CEO who tells him that if he was that good, he should have started something better.
Does this scene resonate with you? Probably yes.
His story forced me to look around, assess my own life and that of many friends, families, mentees, and random agberos around me. Why do apparently smart people get stalled in poor careers and [some] dumb people become successful? Was it luck? Or business smarts?
Of course, luck plays a role, but statistically, luck should smile on as many smart people as average jones. But empirically, I see most intelligent people working for those less smart. Meanwhile, you would expect the most successful people to be smart since they can use their intelligence to exploit opportunities more but alas, probably around me, this ain’t the case.
Sometimes we talk about hard work. Yes, working hard pays and working smarter pays better. But of what benefit is that if you are working smartly for your dumb bosses and you don’t get any of the upsides and only all the downsides? Most of the hardest working smart people I know work for less-smart bosses, and they rant about it so much my ears bleed. I need to see an ENT.
One thing that seems to be consistent with many founders is that they are bold. Successful founders come in all intellectual shapes and sizes and in various forms of dedication to the hours. But what you won’t take from them is their ability to charge headlong into whatever they believe. They are bold enough to make the leap, not sometimes of faith but many times out of the sheer ballsiness of it. The bold veer towards the edge of insanity to the right, conmanship to the left, inability to access limits to the top, and sheer audacity to the bottom.
I have seen guys walk up and promise delivery of certain products and services without a shred of where and how they would do it, sign the contract and then scamper around to deliver. Sometimes they fail, but when they succeed, maga pays!
And what do the bold do? They employ the smart “you” and “me” to make their dreams come through.
We ain’t all born bold – either because we lost our balls somewhere or we never even came with them. Therefore, we compensate by reading, become thought leaders (whatever that means), get multiple degrees and useless certifications. And when things get really awry, we skip town like Andrew to the US as illegal aliens or to Canada to freeze dry our brains in the name of greener (and extremely cold) pastures.
By the way, it’s not a crime not to be bold; if you don’t have it, you can’t do anything about it. Or maybe you can. I once heard that pretending to be brave and being bold are the same.
But to my many friends and mentees, if you think you are smarter than your boss, just suck it up and spare me the rant. Either you grow your cojones or zip your lips.