NIGERIA:Financial inclusion: Transaction settlement cycle frustrates agent banking operations

By Elizabeth Adegbesan

OPERATORS in the mobile money market appear to be struggling with services delivery due to the two days transaction settlement cycle of the Central Bank of Nigeria (CBN).

Financial Vanguard investigations revealed that due to the limitation of the two day (T+1) settlement cycle on their liquidity, agent banking operators are turning down request for financial services from members of the public.

Confirming this development to Financial Vanguard, President of the Association of Mobile Money Agents in Nigeria (AMMAN), Mr. Olojo Victor said:  “One of the problems affecting the business is the CBN’s T+1 policy. What the T+1 policy means is that an agent does not receive settlement in his/her bank account the same day after performing a withdrawal transaction for a customer. For instance, if you do transactions on a Friday, you don’t get settled until late Monday night.

“Imagine paying out N300,000 to customers and you don’t get your cash until Monday. More needs to be done in terms of how this policy can be twicked a bit to support and favour those in the business. For instance someone who is a Mobile Money agent or Agent banking partner should be able to do a N5, 000 transactions and get the value instantly. This would encourage the players in the industry.”

On his part, Alhaji Adeoye Abiodun, an agent of Paga and Diamond Yello account, said, “Sometimes when people want to use the Point of Sale (POS)  to withdraw huge amounts I tell them there is no network whereas there is no cash. But if I can get a loan with low interest rate I can do those cash transactions and the business will grow.”

A First Bank agent, who pleaded anonymity expressed concern for the agents in the business saying that if there is a means of funding the business in the area of agent banking, it will have a bigger input.

Introduced in 2013, the agent banking system was one of the initiatives of the CBN to achieve the nation’s financial inclusion goal of reducing the national exclusion rate, or the number of adult Nigerians without access to financial services to 20 percent by year 2020. A survey by Enhancing Financial Innovation and Access (EFInA), on access to financial services in Nigeria conducted in 2016, showed that the financial exclusion rate rose to 41.6 percent from 39.5 percent in 2014.

On impact of agent banking on financial inclusion, Olojo said, “If we are to grade the performance of agent banking, I would say we are still below what is expected of us. Agency banking is a system where banks are allowed to include third parties to carry out their services on their behalf. And not all banks in Nigeria are in the agency banking sector today. Those who are in the space are still grappling with the challenges of fine-tuning their technology and their system to suit what obtains in the market.

“The challenge in the industry basically is reaching the last mile and also being able to improve on their technology and tools to be able to meet what is obtainable in the market. For instance, technologies and tools that last longer without electricity should be deployed to rural areas especially the North.”

Commending the CBN’s recent effort on the sharing of quota formulas to all players in the financial sector in other to achieve the 2020 target on financial inclusion, Olojo stressed that the industry needs to do a lot of collaboration to grow rather than individual effort.

“Non-availability of fund has been one of the challenges we face in the industry. The CBN and the Federal government through the Bank of Industry (BoI) should begin to look into this new industry.

“We have been collaborating with them from time to time and we hope that our collaboration will move to the next level. The CBN and other AMMAN partners who are serious with driving financial inclusion should create a window of opportunity in terms of fund for agents in the sector.

“We are trying our best in funding in the ways of cooperative because this business model requires fund. Fund is the oxygen of this business. We are mini banks and if we don’t have enough funds to cater for people when they come for it, it would be like a trigger effect which won’t be good.”

SOURCE:VANGUARD