Why Access is not Inclusion

Banking should be as easy and affordable as fast-moving consumer goods to reach Nigeria’s banked and underbanked

Tomilola Adejana
6 min readMar 24, 2021

In the early 2000s, the arrival of the telecoms companies opened a whole new world of access to telephone services to Nigerians.

Wealthy Nigerians could afford to buy sim cards that cost as high as ₦20,000 ($170) — that excludes the cost of a mobile handset. For the rest of us, we had to go to the nearest kiosk or mom-and-pop shop to make phone calls, paying as much as ₦50 per minute.

Fast forward to today. We all have mobile phones. We top-up digitally and are able to do more than just call. We can use this technology in our day-to-day lives: e-top ups, USSD transactions, mobile apps, and social media. The difference is that Nigeria has evolved from access to inclusion in the telecommunications industry.

This trajectory is also underway in financial services.

Over the last three decades, Nigeria has come a long way with financial inclusion. Over 45m Nigerians have access to affordable financial products and services. They have proof of identity (a bank verification number) and a bank account.

From the creation of the NIBSS payment switch to instant P2P transfer to USSD banking, Nigeria’s regulators and largest banks — GTB, FirstBank, Zenith and Access Bank — pushed through reforms and innovations that drove financial inclusion.

Despite these strides, a large swathe of Nigerians still remain outside the formal banking sector. Financial exclusion goes hand-in-hand with the nature of employment. The vast majority of Nigerians — representing 84% of the total labor force — work in the informal sector, both in rural and urban areas. They are market traders, minibus (danfo) drivers, okada drivers, and smallholder farmers. They earn and transact in cash on a daily basis outside of the formal financial system.

Cash is still king in Nigeria. This is not just the case in Nigeria but in all African countries. According to the World Bank, 43% of Sub-Saharan Africans are financially included but 95% of retail transactions are in cash.

The next frontier in financial services will focus on bringing the roughly 30m Nigerian adults into the formal banking sector. Fintechs have a large role to play with their strong advantage in banking the unbanked and underbanked. They can leverage innovation to reach the last mile and, in the process, expand the financial services pie in Nigeria.

Fintechs cannot afford to shy away from the hard work required to serve the truly excluded — smallholder farmers, traders, and other informal workers — rather, we overly focus on cutting a slice of the existing pie and serving the same customers: middle class digital natives who are already banked.

When I started to research the use of cash in the informal sector, I had two light bulb moments. If we were to succeed in banking Nigeria’s unbanked population, we had to:

  1. Meet people where they are and create a gateway use case that solves their day-to-day problems.
  2. Treat banking like a consumer good. We had to ask ourselves: how can we make banking services as widely available as coke, soap, or recharge cards?

By acting on these two insights, we would reach the North Star of financial inclusion: we would digitize the money inflows and outflows for Nigeria’s unbanked.

Digitizing the use of cash was not enough. While payments are incredibly important, they are merely a piece of the puzzle in financial inclusion.

We had to digitize the income of Nigerians working in the informal sector.

Inspired by consumer goods — and telecoms in particular — I approached building Bankly based on the following three views of the market.

1. Distribution is the key first step in bringing banking services to the unbanked but it is not inclusion.

If you are selling a product or service for the Nigerian mass market, distribution has to be core to your strategy. Since Nigerians who work in the informal sector have lower disposable income, they are limited in what they can buy. Whether in a rural village or a mega-city like Lagos, transportation is expensive. Your product needs to go to them. It needs to be everywhere.

Fast-moving consumer goods companies are masters at distribution. Every mom and pop shop carries Coca-Cola, Omo, and Indomie. In Lagos, it is hard to miss MTN agents selling airtime under the company’s distinctive yellow umbrellas.

Yet, in the case of financial services, distribution is only the first step in reaching unbanked Nigerians. It is not financial inclusion. Nigerians depend on agents to access basic banking services (cash deposits, transfer, bill pay, etc) because they are not able to transact directly. Under a pure agent banking network, power is in the hands of the agent, not the customer. If Nigerians can’t access banking services independently, they are not financially included.

2. As the market evolves, agents become a point of sale

The market reaches a turning point when agents are no longer service providers but instead sell commodity products. As more Nigerians own the asset (for mobile inclusion that is a sim card; for financial inclusion, a store value wallet) companies are less dependent on agents for the customer relationship. They begin to directly acquire customers.

The telecoms example is illuminating. As more Nigerians bought mobile phones, they no longer relied on agents to provide the service. They could make their own calls. Instead of transacting on the customer’s behalf, agents became points of sale. They sold commodity products and services like recharge cards.

The idea is the same for banking. With market maturity, agents become “cash in points”. Unbanked Nigerians deposit cash with an agent to store their savings digitally. Once income inflows are saved in a mobile wallet, they can pay for services and products digitally, accelerating the spread of financial services.

This stage of growth kicks off a positive feedback loop. The more that Nigerians transact digitally, the more data on behavioral insights and transactions are gathered. This helps create formal identification and a credit profile and allows other financial service providers to offer lending, insurance, and other products to the unbanked.

3. Network stage: financial inclusion is complete

With incentives like access to affordable credit, more unbanked Nigerians move to store their savings digitally. The organic spread of financial services creates a network effect. Since a critical mass of the unbanked are storing value electronically in a wallet, they can pay for more services digitally with a card or transfer.

In the telecoms industry, at this stage of development, customers could buy airtime and data directly. In response, telecoms companies, MTN, Airtel, and 9Mobile, diversified their distribution channels so they could sell even more services to customers. To do that, they integrated with partners, like banks.

As more cash is digitized, more Nigerians working in the informal sector will start receiving their income via their wallets. They will no longer depend on cash like they once did.

It is at this stage that financial inclusion is achieved.

Creating a bank for the unbanked

Banking the unbanked is a long journey. Any company that is serving the Nigerian mass market is committed to the long-term. Tolaram, the company that makes Indomie noodles, took twenty years to become a household name in Nigeria. While we marvel at the innovation and size of Nigerian banks, we didn’t see the long-term investments in infrastructure that they made decades ago.

After nearly two years of operations, we are just getting started at Bankly. With our recent seed round, we will accelerate our customer acquisition plans. We will continue to grow our 15,000 person agent banking network to serve our customers at the last mile. After two years of research, we will roll out tailored products that meet the needs of Bankly customers.

It brings us one step closer to accomplishing our mission: putting a bank in the pockets of 38m unbanked Nigerians.