INTEGRATED FINANCIAL INCLUSION DEVELOPMENT

PROGRAMME (IFIDP)A ONE-DAY

CONSULTATIVE MEETING OF

COOPERATIVE LEADERS IN KADUNA

Dr Abdalla Yakub; PhD (Cranfield), MBA

MD/CEO, KAJAURA International Consults

(A Financial Management Company)

"... this Administration is fully aware that more jobs are needed to support our growing population. This is my priority - and this is why the 2014 Budget is focused on Jobs and Inclusive Growth". To achieve this, we will continue our drive to create an environment conducive for our private sector to thrive...“

- President Goodluck Jonathan, 2014

FGN POLICY DIRECTION

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The overriding goal of the Budget is to:• create jobs • improve the standard of living for Nigerians in a sustainable

manner, and • inclusive growth.

To achieve this, it aims to continue to create an enabling business environment that would promote innovative entrepreneurship, and support domestic industry to thrive.

Example: Reinforced Sectoral Initiatives — In addition to the establishment of a Wholesale Development Finance Institution aimed at granting Nigerian entrepreneurs access to affordable financing, the Budget holds hope for productive sectors of the economy including Agriculture — Fund for Agricultural Finance in Nigeria; Manufacturing — the Nigerian Enterprise Development Programme; and Housing and Construction — access to mortgage facilities through the Nigeria Mortgage Refinance Company.

THE OVERRIDING GOAL OF 2014 BUDGET

1 Oil Revenue 57%

2 Companies Income Tax 12%

3 FGN Independent Revenue 12%

4 Customs 9%

5 Others 4%

6 VAT 3%

7 Share of Fed Account Levies 3%

WHERE IS THE MONEY COMING FROM?

REALITY CHECK 1: THE GAP IS REAL & IS GROWING

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1 Oil Benchmark Down

Affects our capacity to fund development projects

2 Foreign Reserve Down

Affects our capacity to fund development projects, borrow from international market and loss of influence

3 Naira Value Down

Beneficiaries: Foreign Investors in Services industry such as Banking and Finance, Agriculture, Construction, Tourism etcLosers: Manufacturing industries – very high cost of importation of hardware

4 Inflation Up Will affect cost of goods and standard of living

4 Youth Unemployment

Up Socio-political instability, loss of productive generation

5 Poverty Ratio Up Socio-political instability, loss of productive generation

6 Insecurity Social instability

REALITY CHECKS

Individual MSMEs through Primary Societies or Clusters70% of the Population

THE BOTTOM OF THE PYRAMID (BOP)

IT IS FINANCIAL INCLUSION – NOT EASY ACCESS TO FINANCE ONLY

NATIONAL FINANCIAL INCLUSION STRATEGY

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1. Know Your Customer (KYC)2. Regulatory Framework for Agent Banking3. National Financial Literacy Framework4. Protection Framework 5. Mobile Payment System and other Cash-less Policies6. Credit Enhancement Schemes/Programmes to empower micro,

small, and medium enterprises (MSMEs):i. MSMEDF, 60% of which will support loans from microfinance banks

and institutions to women and women-owned enterprisesii. Nigerian Incentive-Based Risk Sharing System for Agricultural

Lending (NIRSAL)iii. Entrepreneurship Development Centres (EDCs)iv. Restructuring and Refinancing Facilities for SMEsv. SME Credit Guarantee Scheme

The Central Bank of Nigeria (CBN) and other stakeholders intend to implement a National Financial Inclusion Strategy that will reduce the percentage of adult Nigerians that are excluded from financial services from 46.3% in 2010 to 20% by 2020 .

NATIONAL FINANCIAL INCLUSION STRATEGY – High Priority Areas

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In pursuing the stated targets, efforts will be concentrated in the following areas:

• Agent banking – Agent banking is the delivery of banking services outside traditional bank branches through touchpoints such as existing retail stores and petrol stations or via technology such as 'Point of Sale' (POS) devices and mobile phones.

• Mobile banking / mobile payments – Access to financial services through mobile phones that are either directly linked to a bank account or the use of mobile wallets as intermediary virtual money accounts.

• Linkage models – Enhancement of financial and business cooperation between traditional financial institutions (Deposit Money Banks or Development Finance Institutions), government and microfinance banks/institutions for providing wholesale funding for on-lending transactions.

• Client empowerment – More people are brought into the formal financial system through coordinated national financial literacy initiatives complemented by consumer protection programmes and policies

STRATEGIES FOR ACHIEVING THE FINANCIAL INCLUSION TARGETS

An analysis of global best practices revealed that explosive growth in financial inclusion is possible through a variety of approaches. The most significant include:

A strong uptake of payment services in Kenya, led by mobile network operators and based onagent networks.

Increased payments and savings services in Brazil, driven by agent banking, sharedinfrastructure, partnerships between commercial banks and the national postal network, and government policy that channelled welfare payments through this network.

The high impact of tiered KYC regulation and basic savings / transaction accounts such as in Mexico.

This benchmarking exercise views financial inclusion in Nigeria through a global lens and gives legitimacy to the proposed strategies for addressing specific financial inclusion gaps.

INTERNATIONAL BENCHMARKS FOR FINANCIAL INCLUSION

SUGGESTED BUSINESS MODEL FOR COOPERATIVE ORGANIZATIONS

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THE FINANCIAL INCLUSION INITIATIVE - Business Model Required

THE GATEWAYMobile Banking / Mobile

Payments

THE SERVICE NATIONAL

COOPERATIVES/MSMES MFB

(ON-LENDING/ SELF REGULATION)

To hasten financial inclusion 1. 15– 20% (9 – 12million MSMEs)I Financial

Inclusion in 12 months2. Seeking partnership/collaboration with

Organizations with footprint in all 774 LGAs

1. Vehicle as On-lending lending platform to drive access to Fund from CBN and Other lending agencies for on-lending to our members..

2. As the first one-stop shop cooperative microfinance powerhouse for farmers, cooperative societies, small scale industrialists, students and market women.

STABILIZERMICROFINANCE ASSET MANAGEMENT COMPANY

An investment and asset management platform for Micro Finance Banks that will effectively and transparently manage their assets and enhance their stability and growth in the nation’s economy..

REALITY CHECK 2: TIME IS OF ESSENCE

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1. There is a heightened interest among private sector venture capitalists to take break into this market and take stage before the end of this year

2. Cooperative organisations having critical mass of membership will be the target of investors

3. You can take the centre stage by:i. Investing in and owning a National Microfinance Bank within the

next three months (A potential has already been identified which has a favourable standing with CBN, BOI and BOA)

ii. A Digital partner has been identified to facilitate your agency banking model down to primary level nationwide. It will provide you the GATEWAY technology including ATM cards and mobile money facilities immediately.

iii. An investment partner has been identified to work with Cooperatives to set up MAMCOM (optional)

THE COMPETITION: THE VENTURE CAPITALISTS ARE HERE

• You have access to more than 60 million Nigerians through cooperatives nationwide. We are already working closely with Apex Associations

• You have access to ready ‘Money’ technology platforms

• You have the capacity to own the ‘On-lending’ platform nationwide

• You can take the 1st centre-stage

I URGE YOU TO SERIOUSLY CONSIDER THIS TODAY

THE CONCLUSIONS

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