Nigerian Retail Finance Landscape Innovation Forum M odupe Ladipo - PowerPoint PPT Presentation

Nigerian Retail Finance Landscape Innovation Forum M odupe Ladipo Chief Executive Officer, EFInA 10 August 2010

EFInA Overview

EFInA Overview About EFInA  Enhancing Financial Innovation & Access (EFInA) is an independent, professional and non- profit organisation funded by the UK’s Department for International Development (DFID) and the Bill & M elinda Gates Foundation. EFInA’s purpose is to promote pro-poor Financial Sector Development and Financial Inclusion in Nigeria Our Approach  EFInA’s aim is to become an innovation centre targeting catalytic change across Nigeria’s financial sector, to make markets work for those currently excluded from formal financial services Key Objectives EFInA focuses on three distinct but mutually reinforcing sets of activities: RESEARCH  Providing credible market information on the Nigerian financial sector  Supporting projects which will augment the development of Innovative Inclusive Financial Services for the unbanked POLICY INNOVATION ADVOCACY and under-banked through our Innovation Fund  Engaging in policy related advocacy to promote financial inclusion 3

The Innovation Fund Objectives  EFInA will share the risk of developing and implementing innovative products and services by providing a grant subsidy (up to 50%) for new commercial projects Seed Grants  Seed grants are given at an early stage to provide support for projects in design, development or pilot phase  These projects are to be implemented within 6 months of the grant being awarded  Seed Grants are awarded all year round Innovation Grants  Innovation grants provide larger funding for projects in the implementation phase for sectors defined by our Request for Proposals  These projects are to be implemented within 24 months of the grant being awarded  RFP 1 launched in M ay 2009; In December 2009, EFInA awarded Stanbic IBTC Bank an Innovation grant of $1.5 million in support of their Alternative Banking Service Platform (E.susu) to extend financial services to the unbanked  RFP 2 launched on 19 April 2010, decisions to be finalised by 3 September 2010  RFP 3 to be launched in Q3 2010 4

The Innovation Fund Key Focus Sectors for 2010  Branchless banking - often using non bank retail agents and relying on technologies such as mobile phones, POS & POC terminals  Savings  Payment Services  Consumer Protection  Financial Capability/ Education 5

How to use research to formulate evidence based policies and stimulate innovation EFInA Demand EFInA Supply side Policy side study (Access study (Landscape Recommendations to Finance in of Financial Nigeria) Services in Nigeria) Inclusion Policies Private sector engagement Further access Charters, working related research groups e.g. informal savings study M arket research, Dissemination, pilots, etc. Support on Policy dialogue, facilitation Innovation Implementation e.g. payment systems reforms, microfinance 6

Key Findings from the EFInA Access to Finance 2008 Survey

Banking Profile of the Adult Population  Banking penetration is relatively low  85% of adult females are unbanked  86% of rural population are unbanked 21%  Only 21% of the adult population has a bank account, which is Currently Banked equivalent to 18 million people  74% of the adult population have never been banked, which is equivalent to approximately 64 5% Previously Banked million people  About 4 million other adults are previously banked, in other words, have left the banking Never Banked system 74% 8

Who makes the financial decisions in the household?  51% of the population indicated that they make financial decisions on their own or in consultation with a spouse I M ake The Decision In Consultation W ith 35% Other Family Or HH M embers I M ake The Decision In Consultation W ith 35% Spouse I M ake The Decisions Alone 16% I M ake The Decision In Consultation With The 7% Head Of HH I Am Not At All Involved In Household Decision 7% M aking 9

Sources of Financial Advice Family M ember 82% Friends 46%  Family members are the most important source of financial advice Someone You Trust In The Community 14%  Only 5% of the adult population indicated the bank as a useful source of advice Bank 5% Other 8% 10

Usage of Banking Products 100% 90% 80% 70% 76.1 60% 85.7 89.3 96.0 96.1 96.5 50% 40% 30% 4.7 20% 10% 18.5 2.9 11.4 6.8 1.7 1.5 2.4 0% Savings Account ATM Card Current Account Debit Card Credit Card Fixed Deposit Account Have it now and use it Have it now but don’t use it Used to have it in the past but not now Never Had it

Frequency of conducting banking transactions Cash withdrawals 16.5 44.7 38.9 Cash Deposits 14.1 50.6 35.3 Receive S MS messages on Transactions on M y Account 13.9 36.8 49.3 Bank Draft Request 8.9 29.3 61.8 Receive Account S tatement 8.4 36.2 55.3 Electronic Bank Transfer (via ATM, Internet or Telephone) 8.2 35.8 56.0 Cheque Deposits 5.2 38.3 56.5 Account Payments to a Third Party e.g. Electricity/S tore Act 4.7 48.7 46.6 To Keep Valuables/Important Documents 4.0 25.3 70.7 Money Transfers Between Bank Accounts 3.5 26.5 69.9 W eekly M onthly Periodically 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 12

Spontaneous Awareness of Banks  UBA and First Bank has the highest level of awareness 70 60 17 16 50 40 9 % 30 46 43 3 20 2 3 35 3 2 2 1 10 20 19 17 14 13 12 11 0 Total spontaneous ToM 13

Financial Institutions Used M ost Often  UBA and First Bank are the top two main banks  Only 3% of the adult population use microfinance banks as their main bank 29 28 30 25 20 17 16 15 11 10 9 9 10 7 7 4 4 4 4 3 3 3 3 3 3 5 0 Currently use M ain bank 14

Usage of Savings by LSM  The Living Standard M easure (LSM ) is a wealth proxy, calculated mainly on ownership of household goods, which runs from 1 (very poor & rural) to LSM 10 (wealthy & urban)  Of those currently saving, informal methods of saving are predominant among LSM 1 to 6 Bank Local Saving Club/ Pools Friends Relatives/ Husband At Home LSM 1 9% 62% 4% 3% 23% LSM 2 10% 66% 3% 2% 19% LSM 3 32% 49% 1% 1% 18% LSM 4 20% 58% 3% 2% 17% LSM 5 33% 47% 2% 2% 17% LSM 6 40% 42% 1% 2% 14% LSM 7 56% 29% 1% 1% 12% LSM 8 61% 28% 1% 1% 9% LSM 9 68% 22% 2% 1% 7% LSM 10 77% 13% 2% 2% 6%

Why are informal savings so attractive? Products Average amount contributed Key Likes Key Dislikes    Saving at home No fixed amount Can access the money when needed No major dislike  Can save any amount however small  No language barrier for the Hausa respondents – they speak Hausa with the person    Respondents save between N50 – N100 Ability to access their money when needed Perceived as not secure – risk of operator Ajo Ojumo in rural areas and N100-N200 in the absconding with funds is high.  Personal relationship with operator urban areas  Access to loans  Money handled by operators varies  Convenience – operator comes to between N220,000 – N250,000 monthly respondent  Ability to save as little money as N100    Ajo Adako (group Average weekly contribution is N15,000 Access to short term significant amounts of Puts me under pressure contribution)  money for immediate use  N100,000 as average monthly Perceived inability to access fund before  contribution Ability to swap position in order to access one’s turn fund when needed – female respondents  Inability to access fund due to other default by other members    Ajo M osalasi (saving in No fixed amount –accumulated saving Convenience – can save any little amount of No provision of loans per member varies between N50,000 – money a M osque) N100,000  Perceived as secure due to Imam’s involvement  No charges on money saved    Amount of money handled by the Access to flexible loans with low interest rate Occasional controversy over saving records Ajo Egbe (associations – yearly savings) association varies between N350,000 & – N50 on N1,000 between members & coordinators N500,000 at year end  Time consuming – ‘must attend meetings’    Average amount handled at year end Access to loans with low interest rate – N50 Delay in loan repayment by members Alajeseku pegged between N500,000 & N1 million on N1,000 resulting in other members inability to (Cooperatives) access loans  Access to loans without interest –  cooperatives amongst Muslim / Christian Risk of collapse – most respondents members claimed to have lost money due to collapse of the cooperative

Usage of with Loan Products 100% 90% 80% 70% 79.2 79.0 60% 95.9 96.9 97.5 97.6 98.3 98.1 99.0 99.0 98.9 50% 40% 30% 20% 6.6 14.4 10% 13.4 5.6 0.3 0.3 0.2 0.2 1.9 0.8 0.6 0.4 0.2 0% Have it now and use it Have it now but don’t use it Used to have it in the past but not now Never Had it

Banks where Loans have been taken First Bank 22.3 UBA 20.0 Union Bank 10.1 Oceanic Bank 8.7 Intercontinental Bank 6.5 Skye Bank 6.4 Diamond Bank 5.0 Afribank 4.5 Zenith Bank 3.4 % of those with bank loans 18