While the Sustainable Development Goal (SDG) 1 aims to reduce the number of people living in poverty by half and ensure that the poor and vulnerable have equal rights to economic resources and access to basic services, the Covid-19 pandemic has made these aspirations appear elusive as a large number of people lost their means of livelihood at the peak of the pandemic. The Covid-19 pandemic is estimated to push between 30 and 40 million people into extreme poverty.
It is therefore no longer news that when conversations around poverty arise, sub-Sahara African (SSA) is one region that comes to mind, even when the region possesses almost half of the world’s uncultivated land – about 200 million hectares, which is largely under-utilised.
Despite this, Africa holds about 30 percent of the world’s mineral reserves, 12 percent of the world’s oil, and 8 percent of the world’s natural gas reserves, according to the United Nations.
This is because many people in this region are deprived of the resources, opportunities, income, and food they require to live fulfilled lives.
Recently, World Bank data noted that SSA accounts for two-thirds of the world’s extremely poor population, despite having abundant mineral and land resources. Africa is rich in mineral resources that are of enormous value.
Also, income poverty has existed in Africa for a long time as records show that half of the world’s extremely poor individuals live in rural areas in SSA and work in the agricultural sector.
About 400 million of these people practice subsistence farming that yields insufficient produce and offers meagre earnings below the poverty line of $1.90 a day. Nigeria occupies a land area of 923,768 kilometres, thus providing ample land for agricultural production.
However, less than 50percent of the available agricultural land is under cultivation by smallholder farmers who have limited knowledge, skills, and tools for improving productivity and crop yield on their farmlands. These smallholder farmers manage 80 percent of the farmland in SSA, according to FAO estimates.
One strategy that can definitely help farmers and other poor Africans break away from the poverty trap is to encourage the widespread use of financial tools and services.
A survey by EFINA in 2017 showed about 37.6percent of farmers have no bank accounts and are financially excluded. Being one of the largest groups of people who are unbanked, farmers can improve farm output, grow their businesses and become prosperous if they have unfettered access to financial tools and education.
Across the SSA region, governments, development agencies, and financial institutions are consistently making efforts to move the financial inclusion needle further. However, issues such as illiteracy, gender discrimination, means of identity, and account opening requirements have been impediments.
The Nigerian government has been working to reduce the barriers to the formal financial sector and the Nigerian financial inclusion narrative cannot be complete without acknowledging the crucial role played by the Central Bank of Nigeria (CBN) which through different policies and guidelines reduced the barrier for the unbanked, opened up the sector to new investors that extended financial services to the last mile and created innovative products.
For instance, documentation requirements for account opening have been reduced; means of identification have been streamlined. Also, Shared Agency Network Expansion Facilities (SANEF) have increased licensing for microfinance banks, mobile bank agents, and recently the issuance of licences for Payment Service Banks (PSBs) to the telecoms and other non-bank operators.
These efforts are expected to increase financial access points while expanding payments, savings, and credit services to the unbanked and will also boost digital financial services, agent banking, and other innovative business models.
With increased access points, smallholder farmers and other unbanked groups can imbibe the saving culture and utilise their transaction history to access loans, insure their farms or businesses, procure inputs, and benefit from government incentives such as the Anchor Borrowers Programme to improve their livelihood to a large extent.
A prime example of this model is Verve Card’s partnership with credit unions in Uganda, specifically with the Buyanja Savings and Credit Cooperative Societies (SACCO) in Rukungiri district in Southwestern Uganda. Working with Future Link Technologies (FLT), Verve International has extended financial services to the Buyanja SACCO members, issuing them ATM cards that allow them to access their funds from over 600 Interswitch-enabled ATMs and to buy goods and services from stipulated Point of Sale (POS) terminals across the country.
Also, Fintechs and digital financial service providers are constantly innovating digital products that address the pain points of the unbanked and underserved, offering them convenient means of saving, sending, and receiving payments online and offline, creating mobile wallets, facilitating wealth management and soft loans.
Payment and lending-focused solutions have been the key focus of fintechs in Nigeria as they are more acceptable across all customer segments – Consumers, SMEs, and corporates.
Fintechs such as Interswitch have been able to address the payment issues faced by SMEs through enhanced products that are cost-effective, driving up SME payments to 28 percent compound annual growth rate over the last three years.
Although innovative solutions around insurance, merchant, and personal finance solutions are also available, they are limited and not as widely adopted as the payments and lending solutions.
To spread economic prosperity among Nigerians, the government has reviewed its financial inclusion target to 95 percent by 2024, which is currently at less than 70 percent. According to a survey by EFINA, while the ailing economic situation might have caused retrenchment, the situation has resulted in the emergence of about 5 million new micro business owners, especially in the service sector.
Appropriate market segmentation and proper understanding of each segment will help government, development agencies, the organised private sector, and other financial service providers to develop customised solutions such as insurance, pension, estate planning, low-interest loans, equipment funding, flexible savings, last mile logistics and transportation that will capture and satisfy the financial aspiration of such critical groups as women, rural dwellers, farmers and other Nigerians who are largely unbanked.