1. FINANCIAL INCLUSION IN NIGERIA:
THE MICROFINANCE BANKS’ SCORECARD

2. Introduction Financial exclusion Financial dualism
Implications of dualism
Government response
Rural banking scheme
Peoples Bank
Microfinance banking

3. Objectives To examine the state of financial inclusion in Nigeria
To assess the contributions of microfinance banks to financial inclusion

4. National Financial Inclusion Targets
Table I: Nigeria’s National Financial Inclusion Targets
Source: Central Bank of Nigeria (2012)
2010 Baseline
2015
2020
% of total adult population
Payments
22%
53%
70%
Savings
24%
42%
60%
Credit 2%
26%
40%
Insurance 1%
21%
Pensions 5%
Units per 100,000 adults
Bank Branches
6.8
7.5
7.6
MFB Branches
2.9
4.5
5.0
ATMs
11.8
42.8
59.6
POS
13.3
442.6
850.0
Mobile Agents
0.0
31.0
62.0
% of population
KYC ID
18%
59%
100%

5. State of Financial Inclusion
Table 2: Change in Access Strand 2008 – 2016 (%)
Year
Banked
Formal
Other
Informal only
Formally served
Financially included
Not served
2008
21.1
2.5
23.9
52.5
47.5
23.6
76.4
2010
30.0
6.3
17.4
46.3
53.7
36.3
63.7
2012
32.5
10.5
17.3
39.7
60.3
43.0
57.0
2014
12.3
11.9
39.5
60.5
48.6
51.4
2016
38.3
10.3
9.8
41.6
60.4
Source: EFInA Access to Financial Services Survey, 2008, 2010, 2014, 2016.

6. State of Financial Inclusion
Table 3: Financial Access by Urban/Rural Setting
Banked
Formal other
Informal
Excluded
Population
Urban
60.9%
10.4%
43%
24.4%
36.7m
Rural
10.3%
13.1%
52.2%
59.7m
Total
38.3%
9.8%
41.6%
96.4m
Source: EFInA Access to Financial Services in Nigeria Survey, p.20

7. State of Financial Inclusion
Table 4: Nigeria’s performance vis-à-vis a few select countries.
Country
Adult populati on (million)
GDP ($Billion)
Mobile subscription (%)
Fin. a/c ownership adults (%)
Fin. a/c ownership women (%)
Overall score (%)
Bangladesh
106
173 56 31 26 66
Brazil
144
2417 69 68 65 78
India
860
2049 48 53 43 71
Kenya 25 61 57 75 84
Nigeria 97
569 47 44 34 72
South Africa 36
350 67 70
Uganda 19 27 46 37
Source: The 2016 Brookings Financial & Digital Inclusion Project

8. State of Financial Inclusion
Table 5: Financial Access Comparison among Sub-Saharan African Countries
Banked
Formal other
Informal only
Excluded
South Africa (2015)
77%
6.0%
3.0%
13.0%
Kenya (2016)
42.3
33.0
7.2
17.4
Nigeria (2016)
38.3
10.3
9.8
41.6
Ghana (2015)
36.0
22.0
17.0
25.0
Rwanda (2016)
26.0
42.0
21.0
11.0
Zambia (2015)
21.4
16.8
21.1
40.7
Togo (2016)
18.0
27.0
15.0
40.0
Madagascar (2016)
12.0
30.0
41.0
Source: FinScope; FinAccess National Survey, Kenya; Central Bank of Kenya; EFInA Access to Financial Services in Nigeria 2016 Survey.

9. Trends in MFB Financial Inclusion Indicators
Annual percentage change in MFB deposit (% MFBD), MFB credit (%MFBC) and no. of MFBs (% NMFB)

10. Trends in MFB Financial Inclusion Indicators
Graphical Trends in financial Inclusion Indicators RDGDP & RCGDP

11. Model Specification
COB = f(NUMBF, MFBDEP, MFBCR, INTD, INTL, RDGDP, RCGDP)
COB = Currency outside banks
NUMBF = Number of microfinance banks
MFBDEP = Microfinance bank deposit
MFBCR = Microfinance bank credit
INTD = Interest on deposit
INTL = Interest on loan
RDGDP = Ratio of MFB deposit to GDP
RCGDP = Ratio of MFB credit to GDP

12. Diagnostic Test Source: Computed Eviews 9 Results
RESULT OF UNIT ROOT TEST BASED ON PHILLIPS-PERRON (PP)
Variable PP
CRITICAL
Order of Integrati on
P-value 1% 5%
10%
COB
I(1)
0.0311
NUMFB
0.0000
MFBDEP
MFBCR
INTD
0.0001
INTL
I(0)
0.0003
RDGDP
RCGDP
0.0054
Source: Computed Eviews 9 Results

13. OLS REGRESSION RESULTS
Dependent Variable: COB
Variable
Coefficient
Std. Error
t-Statistic
Prob.   C
0.0562
NUMFB
0.3429
MFBDEP
0.0048
MFBCR
0.0572
INTD
0.0358
INTL
0.5908
RDGDP
0.0907
RCGDP
0.7057
R-squared
    Mean dependent var
Adjusted R-squared
    S.D. dependent var
S.E. of regression
    Akaike info criterion
Sum squared resid
2.48E+11
    Schwarz criterion
Log likelihood
    Hannan-Quinn criter.
F-statistic
    Durbin-Watson stat
Prob(F-statistic)

14. Findings
Most of MFBs financial inclusion indicators are positively trending
There are 1.02 MFBs per people against the projected 4.5 in 2015
Increasing MFB influence indicated by increasing ratios of MFB deposit and credit to GDP and MFB deposit and credit to rural commercial banks branches deposit and credit.
Increases in the number of MFBs and their credit, interest on deposit are inversely related to currency outside banks.
MFB deposit related positively while interest on loan had inverse relationship with COB contrary to expectations.

15. Conclusion
The study thereof concludes that MFBs in Nigeria are enhancing financial inclusion and that with the large population of financially excluded adults that enormous potential exist for MFBs to do more.

16. Recommendations MFBs should pay competitive interest on deposit
CBN should encourage and license more MFBs.
Provision of low cost funds to MFBs for on-lending.

17. THANK YOU FOR YOUR ATTENTION