Experts Identify Education, Digital Transformation and Access to Credit as Critical Factors to Inclusive Growth

Zedcrest Group, a new-age financial solutions powerhouse, in collaboration with the Nigerian Economic Summit Group (NESG) recently hosted a financial inclusion conference themed: ‘Securing and enriching Nigerians at scale: Prosperity inclusion through financial sector innovation’ at the Lagos Continental Hotel, Victoria Island.

The national discourse was aimed at re-evaluating and reconsidering the role of the government, regulators and the financial sector in building a secure future for inclusive prosperity in Nigeria.

In his opening remarks at the event held on Tuesday, April 26, 2022, the Group Managing Director of Zedcrest, Mr. Adedayo Amzat, said that prosperity inclusion through financial sector innovation is a follow up to discussions at the 27th Nigerian Economic Summit (NES#27) and focuses on finding ways to enhance Nigeria’s financial environment.

He noted the need to address existing gaps by focusing on three key areas: mobilizing domestic resources, attracting foreign capital, and striking a balance between innovation, regulation, and consumer protection.

In his keynote address, NESG Board member and the Chief Executive Officer, Stanbic IBTC Holdings Plc, Dr. Demola Sogunle, said that the financial sector is essential to drive financial inclusion and economic growth.

He stated that it is crucial for the financial sector, through commercial banks, capital markets, and the insurance sector, to play a vital role in funding capital investments and not just providing industry loans concentrated in the oil and gas sector. Furthermore, Dr. Sogunle noted that Nigeria ranks low regarding financial penetration, with 40 percent living below the poverty line, with only 4 percent of the 40 million MSMEs having access to credit.

“The factors affecting the financial sector include lack of credit history, inability to keep proper financial records, non-realization of collateral, lack of management strategies, stiff competition from larger corporates and limited business presence of micro-SMEs. In addition, there is a need to adopt partnerships that will drive mobile adoption and inclusive development.

"Development of credit infrastructure, creation of financial literacy programs, facilitate open banking initiatives for information sharing and collaboration to develop innovative financial products amongst stakeholders,” Dr. Sogunle stated.

He noted that homegrown solutions to some of these problems include online payment provisions, payment data to determine lending risks which can be obtained from smartphones, SME hubs to generate records on transactional activities and improved credit scoring in the rural areas, mainly where banking activities are limited, reiterating that businesses must strengthen their capital base to survive as an SME.

During the first panel session themed “Financial Sector and Economic Expansion: Mobilising Domestic Resources for Inclusive Prosperity”, Mr. Ayo-Bankole Akintujoye, the Lagos SME Boot camp convener, said that SMEs respond to shocks quickly, and it is nearly impossible to intervene at individual levels.

He reiterated the need to leverage, register, and provide credit and exposure to some clusters. “Technology alone will not solve financial inclusion problems. We need to study the characteristics critically; leverage the clusters they respect and mobilize resources using the clusters as gatemen to reach the people at the end of the funnel,” he stated.

Mr Dayo Obisan, Executive Commissioner (Operations), Securities and Exchange Commission (SEC), said that proper financial education is essential, as, for every 100 businesses funded, only five are expected to be profitable. He said there is a need to raise capital for structured firms with proper financial record keeping.

He said a lot must be done requiring information dissemination and educating the public. “People may have the money but there is a wide gap in terms of how to use it which explains why they spend their time chasing illegalities such as Ponzi schemes,” Obisan said.

“One of the key areas for inclusive prosperity is education. I don’t mean going to school alone but being educated. If people are not educated, having inclusive growth will be very difficult,” Zeal Akaruiwe, the executive officer at Graeme Blaque Group said.

“Financial organisations like the banks need to have an incubator mindset by participating in financial literacy and partnering more with religious leaders to educate people on the benefits of financial literacy and having a smartphone,” Oseikhueme Anao, Chief Financial Officer at Standard Chartered Capital and Advisory, said.

Anao also noted that although agency banking is a good initiative by the banks, in order to bring more people into the financial net, they need to have an investment strategy by going to the streets to teach people how to use bank accounts.

During the second panel session with the theme “Attracting Foreign Capital to Nigeria, Post-Pandemic”, Mr. Sam Ocheho, Head of Global Markets, Stanbic IBTC, said that necessary infrastructure must be in place for Nigeria to export and earn revenue from non-oil products, noting that fines deter foreign investors and that Nigeria ranks low on the World Bank ease of doing business index ranking.

Mrs. Yinka Adelekan, Managing Director, Agusto & Co, submitted that structural reforms had brought foreign investments into several countries. Nigeria needs to learn and adopt the positives from other countries for her growth and development.

She reiterated the need for the laws governing fintech to continue stimulating innovation that will improve foreign direct investment and encourage companies to thrive.

During the third panel session, with the theme “Striking a balance between Innovation, Regulation and Consumer Protection in the Financial Sector”, Professor Olayinka David-West, Associate Dean and Professor of Information System, Lagos Business School, said that technology is a great tool but not a magical solution to every problem. She noted that financial service providers should not wait for economic times to change before providing financial services to people of all strata of life.

Furthermore, Dr. Tunde Popoola, CEO of CRC Credit Bureau Limited, revealed that credit penetration in 2009 was 4 percent, and it has grown to about 14 percent now. He stated that fintech and financial innovation should help stimulate faster growth in all of these, noting the need for a robust digital identity that will encourage specific and targeted services that will enhance access to credit.

“From there, you can give them credit and help them grow through the sector. We need to stop focusing only on big corporations but more on the small ones.”

Financial literacy refers to the ability to make informed judgments and take effective decisions regarding the use and management of money. And thus, it goes hand in hand with financial inclusion in terms of strengthening more financial depth.

According to data from Enhancing Financial Innovation and Access (EFInA), Nigeria’s financial inclusion rate grew to 64.1 percent in 2020 from 63.2 percent in 2018. The 2020 figure is below the Central Bank of Nigeria (CBN)’s 80 percent financial inclusion target for the year 2020.

Although the inclusion rate dropped marginally from 36.8 percent in 2018 to 35.9 percent in 2020, the excluded adult population of 38.1 million reported in 2020 was higher than the 36.6 million recorded in 2018, meaning 1.5 million adults fell into the exclusion circle in the last two years to 2020.

Zedcrest Group (“Zedcrest Capital” or “Zedcrest”) is the parent company of Zedavnce Finance Limited, a leading consumer lending firm; Zedcap Partners, a foremost securities brokerage firm engaging in the broking of financial products in sub-Saharan Africa Over-the-counter (OTC) Fixed Income and currencies markets (FICC). And Zimvest, an asset management firm licensed by the Securities Exchange Commission (SEC).

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