How digital advancement can shift the microfinance landscape in Nigeria

As Nigeria looks to drive financial inclusion through the propagation of Microfinance institutions, technology has a central role to play in expanding the reach and quality of financial institutions. This is according to Head of Intelligence at Phillips Consulting Victor Mba.

Mba’s comments came in the context of a microfinance seminar held on the theme “Addressing Opportunities for MFBs Using Digital Technology.” The seminar was held in Lagos, and organised by Action Microfinance Bank to facilitate discussion on a subject that is increasingly gaining momentum across Nigeria.

In 2017, Big Four accounting and advisory firm KPMG released a report revealing that as many as 94 million Nigerians remain financially underserved, indicating the staunch need for financial inclusion efforts in the country. A significant factor in this scenario is the use of technology to reach users across the country.

Aside from using digital means to increase the reach of major financial institutions, another means to financial inclusion has been the propagation of microfinance institutions. Victor Mba of Phillips Consulting has highlighted how technology can be used to bring these two means together.

Mba was speaking in the context of a survey conducted by Phillips Consulting last year, when the firm discovered that more than half of the respondents were in contact with at least five people who were financially excluded to some extent. Most of those surveyed indicated that the reasons for this were poverty and unemployment.

Far from reaching full financial potential, more than 60% of Nigerians are engaged in the financial system primarily to receive pay. Salary transactions constitute their entire interaction with the banking system, and Mba asserted that technology – or more specifically financial technology – is a powerful way of changing this scenario.

Drawing on the fact that financial exclusion seems to be concentrated in certain remote parts of the country, Mba highlighted the role that microfinance can play to increase reach. Technology can thereafter be used for know your customer (KYC), product development, and credit ratings, among other useful enhancements.