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

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

RESEARCH POLICY ADVOCACY INNOVATION

EFInA Overview

Key Objectives EFInA focuses on three distinct but mutually reinforcing sets of activities:

• Providing credible market information on the Nigerian

financial sector

• Supporting projects which will augment the development
• f Innovative Inclusive Financial Services for the unbanked

and under-banked through our Innovation Fund

• Engaging in policy related advocacy to promote

financial inclusion 3

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

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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

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The Innovation Fund

EFInA Demand side study (Access to Finance in Nigeria) EFInA Supply side study (Landscape

• f Financial

Services in Nigeria) Policy Recommendations Further access related research e.g. informal savings study Support on Policy Implementation e.g. payment systems reforms, microfinance Inclusion Policies Charters, working groups Dissemination, dialogue, facilitation Private sector engagement M arket research, pilots, etc.

How to use research to formulate evidence based policies and stimulate innovation

Innovation

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Key Findings from the EFInA Access to Finance 2008 Survey

21% 5% 74%

Never Banked

Currently Banked

Previously Banked

Banking Profile of the Adult Population

• Banking penetration is relatively low
• 85% of adult females are unbanked
• 86% of rural population are unbanked
• Only 21% of the adult population

has a bank account, which is equivalent to 18 million people

• 74% of the adult population have

never been banked, which is equivalent to approximately 64 million people

• About 4 million other adults are

previously banked, in other words, have left the banking system 8

35% 35% 16% 7% 7%

I M ake The Decision In Consultation W ith Other Family Or HH M embers I M ake The Decision In Consultation W ith Spouse I M ake The Decisions Alone I M ake The Decision In Consultation With The Head Of HH I Am Not At All Involved In Household Decision M aking

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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

82% 46% 14% 5% 8%

Family M ember Friends Someone You Trust In The Community Bank Other

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Sources of Financial Advice

• Family

members are the most important source of financial advice

• Only

5% of the adult population indicated the bank as a useful source

• f advice

Usage of Banking Products

18.5 11.4 6.8 2.4 1.7 1.5 4.7 2.9 76.1 85.7 89.3 96.0 96.5 96.1

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 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

16.5 14.1 13.9 8.9 8.4 8.2 5.2 4.7 4.0 3.5 44.7 50.6 36.8 29.3 36.2 35.8 38.3 48.7 25.3 26.5 38.9 35.3 49.3 61.8 55.3 56.0 56.5 46.6 70.7 69.9 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Cash withdrawals Cash Deposits Receive S MS messages on Transactions on M y Account Bank Draft Request Receive Account S tatement Electronic Bank Transfer (via ATM, Internet or Telephone) Cheque Deposits Account Payments to a Third Party e.g. Electricity/S tore Act To Keep Valuables/Important Documents Money Transfers Between Bank Accounts

W eekly M onthly Periodically

Frequency of conducting banking transactions

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• UBA and First Bank has the highest level of awareness

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Spontaneous Awareness of Banks

46 43 35 20 19 17 14 13 12 11 17 16 9 3 2 3 3 2 2 1

10 20 30 40 50 60 70 %

Total spontaneous ToM

5 10 15 20 25 30 29 17 11 9 7 4 4 3 3 3 28 16 10 9 7 4 4 3 3 3 Currently use M ain bank

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• UBA and First Bank are the top two main banks
• Only 3% of the adult population use microfinance banks as their main bank

Financial Institutions Used M ost Often

9% 10% 32% 20% 33% 40% 56% 61% 68% 77% 62% 66% 49% 58% 47% 42% 29% 28% 22% 13% 4% 3% 1% 3% 2% 1% 1% 1% 2% 2% 3% 2% 1% 2% 2% 2% 1% 1% 1% 2% 23% 19% 18% 17% 17% 14% 12% 9% 7% 6%

LSM 1 LSM 2 LSM 3 LSM 4 LSM 5 LSM 6 LSM 7 LSM 8 LSM 9 LSM 10 Bank Local Saving Club/ Pools Friends Relatives/ Husband At Home

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

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
• Can save any amount however small
• No language barrier for the Hausa

respondents – they speak Hausa with the person

• No major dislike

Ajo Ojumo

• Respondents save between N50 – N100

in rural areas and N100-N200 in the urban areas

• Money handled by operators varies

between N220,000 – N250,000 monthly

• Ability to access their money when needed
• Personal relationship with operator
• Access to loans
• Convenience – operator comes to

respondent

• Ability to save as little money as N100
• Perceived as not secure – risk of operator

absconding with funds is high. Ajo Adako (group contribution)

• Average weekly contribution is N15,000
• N100,000 as average monthly

contribution

• Access to short term significant amounts of

money for immediate use

• Ability to swap position in order to access

fund when needed – female respondents

• Puts me under pressure
• Perceived inability to access fund before
• ne’s turn
• Inability to access fund due to other default

by other members Ajo M osalasi (saving in a M osque)

• No fixed amount –accumulated saving

per member varies between N50,000 – N100,000

• Convenience – can save any little amount of

money

• Perceived as secure due to Imam’s

involvement

• No charges on money saved
• No provision of loans

Ajo Egbe (associations – yearly savings)

• Amount of money handled by the

association varies between N350,000 & N500,000 at year end

• Access to flexible loans with low interest rate

– N50 on N1,000

• Occasional controversy over saving records

between members & coordinators

• Time consuming – ‘must attend meetings’

Alajeseku (Cooperatives)

• Average amount handled at year end

pegged between N500,000 & N1 million

• Access to loans with low interest rate – N50
• n N1,000
• Access to loans without interest –

cooperatives amongst Muslim / Christian members

• Delay in loan repayment by members

resulting in other members inability to access loans

• Risk of collapse – most respondents

claimed to have lost money due to collapse

• f the cooperative

Usage of with Loan Products

13.4 5.6 1.9 0.8 0.6 0.4 0.3 0.3 0.2 0.2 0.2 6.6 14.4 79.2 79.0 95.9 97.5 96.9 98.3 98.1 97.6 99.0 99.0 98.9

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

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

3.4 4.5 5.0 6.4 6.5 8.7 10.1 20.0 22.3 Zenith Bank Afribank Diamond Bank Skye Bank Intercontinental Bank Oceanic Bank Union Bank UBA First Bank % of those with bank loans

Banks where Loans have been taken

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Usage of Insurance Products

0.7 0.5 0.4 0.4 0.2 0.1 0.1 0.1 98.7 99.0 99.0 99.0 99.4 99.4 99.5 99.4

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Vehicle Pension M edical Life Personal accident/ disability Electronic equipment Investment plan Life stock

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

23% 14% 12% 11% 8% 8% 6% 5%

Nicon Insurance Union Assurance Industrial & General Insurance (IGI) AIICO Insurance Plc Leadway Assurance GT Life Assurance Great Nigeria Insurance Plc Standard Trust Alliance Company

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Companies where Insurance Policies are held

Of those that have insurance products

Reasons for having/ wanting to have a bank account (banked vs. unbanked)

91.9 60.5 46.5 41.2 26.0 30.3 15.9 25.3 89.5 44.9 31.1 19.9 13.4 12.6 5.4 2.1

10 20 30 40 50 60 70 80 90 100 To save money To withdraw money when needed To keep money in a safe place To receive and send money safely To deposit money To earn interest To access loans To pay in salaries %

Banked Unbanked

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Thank You

www.efina.org.ng innovation@efina.org.ng