Promoting Access to Finance in Nigeria
Wednesday, May 14, 2014
The introduction of the tiered Know-Your-Customer regime for potential bank customers will drive the country’s quest for improved access to finance, writes Obinna Chima
In most developing countries, large population of low income earners has little access to financial services.
As a result of this, many of them have to always depend either on their own or informal sources of finance and generally at an unreasonably high cost.
More so, some have argued that financial inclusion seems to be geographically limited, saying that there is huge concentration of banks in some parts of the country.
Available statistics indicate that about 64.1 per cent of adult Nigerians (56.3 million) do not have access to financial services. Various factors account for the high level of financial exclusion.
These include irregular income, distance and low level of bank branches and cumbersome account opening requirements/procedures.
Indeed, the enforcement of full account opening procedures often excludes some segments of the population from financial services. This keeps them out of the formal economy and indirectly promotes the informal sector. This is particularly so among the lower income earners, poor and socially disadvantaged segments of the population, majority of who live in the rural areas.
It is trite to state that in Nigeria, many people lack formal means of identification. Even when they want to obtain such, the procedures to acquire them are too cumbersome and expensive, effectively out of their financial means. This inadvertently makes financial services go beyond the poor.
Therefore, the Central Bank of Nigeria (CBN) reckoned that in order to continue to maintain same level of Know-Your-Customer (KYC) requirements for all segments of the population, as hitherto required, encourages prevalence of informal financial systems which in turn undermines its anti-money laundering/combating of financing terrorism (AML/CFT) objective.