Financial inclusion has always been a bone to grind in Nigeria since as far as anyone could remember. However, the big push began in Nigeria in 2012 when Nigeria developed its National Financial Inclusion Strategy (NFIS) with the aim of enhancing easy access to a broad range of financial services for Nigerians that meet their needs at an affordable cost.
This strategy followed the alarming findings of the EFInA Access to Financial Services in Nigeria 2010 Survey, which revealed that 46.3% of the adult population in Nigeria was financially excluded with no access to formal or informal services. The survey also revealed that bank proximity was of greater concern to the rural population, 78.8% of whom were unbanked.
The vast swaths of Nigerians disenfranchised from financial services were undoubtedly concerning for key stakeholders but by 2018, the percentage of the unbanked adult population had risen to 63% from 30% in 2010. Significant, but not quite there yet. The financial inclusion movement has been on an upward trajectory, however, in the last six years, we’ve seen something truly incredible.
Agents and Mobile Money Operators have transformed financial inclusion efforts in Nigeria and the financial ecosystem in its entirety, for good. Agency banking has been instrumental in financially including the informal sector and rural areas faster and more effectively than the brick-and-mortar branches could have done. Agent networks have been more successful in penetrating the rural communities, essentially taking banks to the people who were unable or unwilling to come to them. The latest evidence of this decisive success is Moniepoint’s newly attained unicorn status on the back of servicing the financially excluded via its agent network.
I can argue that this success can be accrued to Nigerian banks and their sometimes, reclusive invention, Shared Agent Network Expansion Facilities (SANEF).
Who is SANEF?
SANEF was created by the Central Bank of Nigeria (CBN) and deposit money banks (DMBs); funded with the money from the 10% of Profit After Tax (PAT) that CBN mandates banks to put into an SME fund. It first started as a project in February 2018 was then formally incorporated and launched in January 2019 with Ronke Kuye, who transformed GTBank into a digital powerhouse, appointed to run it. They were already making significant moves in 2018 and I predicted that SANEF would become a surprising success.
My digital babalawo saw it coming!
SANEF was set up to do one thing: expand the agent network to bring financial services closer to every Nigerian to increase financial access across Nigeria and set a common standard for stakeholders to be able to get this done. This is what they set out to do and they have been incredibly successful. SANEF was the driving force of the standardization of agency networks in Nigeria and they helped all the super agents to be able to connect to NIBSS and banks so agency banking could thrive like it is today.
From their inception in January 2019 to August 2024, they grew the number of agents from 83,560 to 1.92 million, with agents present in each geopolitical zone and all 774 Local Government Areas and over 3.5 billion transactions completed via agent locations in that time. From this, we have seen over 19.3 million accounts and over 20 million wallets opened at agent locations and an impressive 57.3% increase in the number of registered Bank Verification Numbers (BVNs). The agent/100,000 adult population ratio also grew from 62 to 1,810.
The explosive coverage facilitated by SANEF over the last few years validates that a significant proportion of excluded and underserved Nigerians were ready to consume financial products and services; all they needed was access.
Agency banking: the financial innovation Nigeria desperately needed
We have seen the transformation leaders in this ecosystem like Moniepoint, Opay and MTN’s MoMo have ushered in, alongside heavy hitters in SANEF’s network like PalmPay,Nomba, Fairmoney MFB, LAPO MFB, etc. It is a long list of super agents doing great stuff. These are manifestations of the work SANEF is doing, plugging the personal banking and microlending gaps that traditional banking could not hack for the formally and financially excluded.
I remember when Palmpay first entered the scene and it almost seemed like you could find a small group of Palmpay agents at every corner. If you take an Uber or Bolt ride and request for the driver’s number, almost 9 out of 10 times, they give you an Opay account number. This is the same thing with neighbourhood supermarkets and corner shops; you pull out your card to pay and it is almost always met with a Moniepoint POS.
It is also important to note that most of this was achieved with very little fancy marketing. These players created services seemingly so basic but super great, paired that with ease and access and now the numbers speak for themselves—super agents now make up 43.3% of the market.
These numbers are impressive but not all that surprising. Super agents, in collaboration with SANEF have been able to successfully execute a sustainable method for Nigeria’s financial inclusion drive; bringing financial services to the last mile customers and empowering them with access to banking and credit facilities within their immediate environment. No more travelling long distances just to wait in long queues at the few physical branches around.
This drive has been instrumental to advancing the spread of financial services, giving people easy access to money and credit for sustenance and productive activities. This improved inclusion is essential to tackling poverty, promoting economic growth and enhancing social welfare of the Nigerian populace; all of which align with the move towards achieving the United Nations Sustainable Development Goals (SDGs).
Although the end user enjoys the most visible benefits of this strategy, financial institutions are not left out. The agency banking model offers a more cost-effective method of delivering services. Agents are a cheaper, faster and more easily accessible channel for banks as opposed to setting up physical branches. Acquiring more customers at lower costs also bodes well for their revenue figures.
Additionally, the impact on the overall economy cannot be missed. The boots on the ground needed to continue this work means more business and employment opportunities for those who set up agency banking businesses in their communities. I am also an aggressive advocate for credit and more people being able to access credit to take care of their needs and do business, strengthens our economy and puts us on a path to prosperity.
Unfortunately, a lot of bad things happen on Agent networks
While agency banking is a great tool for driving financial inclusion in Nigeria, this strategy is not without its fair share of human tragedies. Naturally, the use of third-parties to facilitate financial transactions exposes the institutions and end users to certain risks. Agents are typically non-bank employees with little to no experience within the formal financial systems and just enough training to operate the tools they need to deliver basic financial services. So, the expected standards of confidentiality and responsible and ethical handling of customers’ financial data are constantly threatened. Some of the consequences of this we have seen include the agent network being used as the last mile for fraud and theft, including BVN fraud.
We also cannot leave out that the major driving force for agency banking is having boots on the ground, and like all other human beings, agents can be ruthless. This was confirmed on a large scale during the Naira cash shortage earlier in 2023. Agents took advantage of this crisis to shaft Nigerians by charging exorbitant withdrawal fees that went as high as over 30%. This was the worst of it, but such exploitation still happens daily with agents who discriminate charges based on location or customer profile; charging arbitrary and unpredictable fees for transactions.
However, with constant education, engagements and monitoring, which make up a significant part of the work SANEF is doing, we can expect the relevant culture and ethics from the formal financial sector to gradually become a part of how agents conduct their businesses within the ecosystem.
The future of agency banking with SANEF
The journey ahead will be characterised by continued growth, however, it may slow down as the adoption of agency banking becomes more widespread and the ecosystem reaches maturity. The ecosystem can also expect bad actors to be weeded out.
Unfortunately, this maturity means that marginal players may lose out as the market becomes more saturated. The agent networks started by catering to basic banking services, but we have seen them evolve to extend more financial services like credit, merchant payments and other use cases when combined with mobile wallets. As the ecosystem matures, the market will be met with an increase in competition and customer appetite for more advanced financial services, which smaller players may struggle to keep up with, without substantial investment in technology and service expansion. As a result, they risk losing relevance or being phased out entirely as more established providers like the Moniepoints and Opays of this world, dominate the space.
A few years from now, the success of agency banking for business banking will be more pronounced. Although, as a result of the ecosystem’s leaning towards digital payments, agency banking providers might eventually cut out the middlemen (agents) and serve the customers and businesses initially welcomed into the ecosystem through the agent networks, directly. Fully digitized platforms for business transactions like digital storefronts and web checkouts that providers like Paystack and Flutterwave seem to have locked down, will be prominent in the future.
SANEF has done commendable work using agency networks as a tool to increase financial inclusion in Nigeria and the populace has shown great acceptance of this model to meet their financial needs.
However, we still have a long way to go, especially with penetrating the Northeastern region of Nigeria. But who shall bell that cat?