Banking the unbanked: payment service banks - the spark youth empowerment platforms in nigeria

Banking the Unbanked: Payment Service Banks

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What does CBN’s Payment Service Banks mean for Nigeria’s financial inclusion?

 

By Endurance Okafor  

The Central Bank of Nigeria (CBN) on the 5th of October 2018 released an exposure draft guideline in which it proposed Payment Service Banks (PSB), aimed at deepening financial inclusion in a country where only half of its total adult population is included into the financial cycle.

What is PSB?

PSBs is a payment service initiative proposed by CBN in which Banking agents, Mobile Money Operators (MMOs), Retail chains (Supermarkets), Telecommunications companies (Telcos) who are able to present an initial capital of N5 billion will be given license to operate under the structures and guideline specified by the apex bank, with the motive but not limited to ensuring access to financial services for the unbanked rural segments of the society.

Financial inclusion

The CBN, in collaboration with stakeholders, launched the National Financial Inclusion Strategy on October 23, 2012, aimed at further reducing the financial exclusion rate of adult population from about 53 percent in 2008 to 20 percent by 2020.

Several policies and initiatives have been introduced by Nigeria’s apex bank to ensure that the target is met. The CBN introduced the cash-less policy in 2012 as part of efforts to reduce the cost of banking services (including the cost of credit) and drive financial inclusion by providing more efficient transaction options and greater reach.

In collaboration with other key financial sector regulators, the CBN  in 2006 conceptualized the Financial System Strategy 2020. Also to further ensure that the financial inclusion target is met, the CBN, in 2017, inaugurated the Financial Inclusion State Steering Committee ( FISSCO) as well as the Financial Inclusion State Steering Committee (FISSCO).

Despite several initiatives including the introduction of Microfinance banking, Agents Banking, Tiered Know-Your-Customer requirement and Mobile Money Operation (MMO) in pursuit of this objective, financial inclusion rate remains below expectation, hence the proposed PSBs.

Why the proposed PS Banks

The proposed initiative allows banking agents, Mobile Money Operators (MMOs), Retail chains (Supermarkets), Telecommunications companies (Telcos) to leverage on their already existing customer base to include more Nigeria adults, specifically those in the remote areas to have access to financial products and services, considering the lack of proximity to, and availability of, financial service points (FSPs) — bank branches or agents which are meant to provide account opening and other customer service activities are the major barriers preventing rural inhabitants from accessing financial services.

The project seeks to deepen financial inclusion in Nigeria through an integrated ecosystem with strong regulatory oversight, consumer protection and interoperable payment systems with limited concentration risk.

The various agents that will be given the license will, therefore, have the right to carry out the following services; maintain savings accounts and accept deposits from individuals and small businesses, which shall be covered by the deposit insurance scheme; carry out payments and remittance (including cross-boarder personal remittance) services through various channels within Nigeria; issue debit and pre-paid cards; and operate electronic purse.

What Nigerians stands to benefit from the proposed PSBs

It has the likelihood of increasing the country’s financial inclusion rate, as it will help include more Nigerians into the financial cycle; owing to the fact that it will be able to provide financial services to the grass root communities, who have in the past spent a lot of time and money to travel out of the town in search of financial services

 

Editor’s Note: This article was originally published in The Spark Magazine. Find the magazine here to read other articles.

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