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Nigerian banks are exploring new ways of reaching the approximately two-thirds of the population who do not currently have bank accounts.
About 57 million Nigerians are said to be outside the banking sector. Part of the problem is that microfinance banks, which have so far dominated the sector, have largely focused on just some regions of the country, leaving out others perceived as lacking in robust business activity.
Edgar Andagalu, Ecobank Nigeria’s head of mobile banking, said one way his company and others hope to change that is through a new model that allows people to transfer money using mobile telephones.
Nigeria’s Central Bank has recently licensed 16 mobile operators to participate in the mobile banking program. And, at a recent banking and technology conference in Accra, Andagalu said his organization is hoping to deploy about 80 million active mobile handsets into the system to rope in more people.
But he says the handsets are only one part of the equation.
The banker explains that, in Nigeria, funds are mostly transferred from urban to rural communities. Therefore, there need to be many places, throughout the country, to go and cash mobile money.
“Wherever there is mobile phone connectivity,” he said, “you can do mobile operation. But you must have a vibrant agency network, and the agents in the rural areas must have a unique incentive to play that role.”
Andagalu says the new model of money transfer uses existing infrastructure, and not just banking agents. This keeps program costs low -- ensuring that costs to the client are minimized.
“Our view is that cost of set up should be low and the charges should be reasonable and not high. So we are using existing entities. Shops that sell goods doing cash in, cash out,” Andagalu said.
“So that is the model we are pushing. It’s a shared platform, using existing infrastructure, and allowing the agency to be close to the customer, so they feel comfortable parting with their cash.”
Agents are also allowed to offer services to customers of multiple telecom companies as a way of improving their profit margins.
Andagalu says the new model is being piloted in some areas of Nigeria but they hope to extend services nationwide in a period of 18 months.