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Nigerian FinTech and the Promise of Financial Inclusion: Progress, Challenges & Future Prospects

25/05/20246 minute read
Nigerian FinTech and the Promise of Financial Inclusion - Progress, Challenges & Future Prospects

Nigerian FinTech has had considerable success in fostering financial inclusion. According to the EFInA Access to Finance Survey report, formal financial inclusion in Nigeria has grown remarkably from 56% in 2020 to 64% in 2023. The report acknowledges that the tremendous growth is due to an increase in the use of non-banking channels.

The survey also shows that access to financial services has reduced the financial exclusion rate from 32% in 2020 to 26% in 2023, barely above the 25% target the Central Bank of Nigeria expects to achieve in 2024.

The Challenges of Nigerian FinTech in Fostering Financial Inclusion

Although Nigerian FinTech has had considerable success in furthering financial inclusion, there are also challenges that are hindering a smooth process, such as illiteracy, poor infrastructural facilities, unsteady power supply, poor mobile receptions, low level of financial literacy, Lack of consumer trust, poverty, etc.

Illiteracy  

Most people in rural areas are not educated, and this is a tough barrier preventing Nigerian FinTech from achieving its goal of financial inclusion. Some of the digital financial services are designed for the educated and internet-connected members of society, so those who cannot read cannot take advantage of the financial services offered by the FinTech industry.

Poor Infrastructural Facilities

Poor infrastructural facilities are another challenge faced by Nigerian FinTech in fostering financial inclusion. The lack of good roads and the high cost of transportation make it difficult for FinTech agents to reach people in rural areas.

Low Level of Financial Literacy

The unbanked population generally believes that they do not require the financial products offered by banks and FinTech companies.

Instead of taking out a loan from a bank or a fintech company, this group of people would prefer to use unofficial lending from friends, family, and the local cooperative society.

Additionally, they will favor joining an unofficial savings group known as Osusu or putting their money in a savings box. Due to these obstacles, fintech companies that offer lending and savings services have found it challenging to attract these customers.

Insufficient Trust from Customers

Not many people trust FinTech companies and their services. Some people feel that they are out there to defraud people.

Also, the increase in cyberattacks is a serious threat and challenge to the FinTech industry, which may hinder people from trusting them. A cyberattack on fintech firms is dangerous and can be very expensive to recover from.

Unsteady Power Supply

Unsteady power supply and a lack of electricity in rural areas challenge FinTech, making it difficult for people to use digital financial services.

Poor Mobile Network Reception

Poor mobile reception, especially in rural areas, has made it difficult for people to access digital financial services.

The Future Prospects of Nigerian FinTech in Fostering Financial Inclusion

Fintech is reshaping the future of finance by transforming payments, lending, investment, insurance, and other financial products and services.

Nigerian FinTech is committed to combining new technologies with existing ones to tackle challenges that prevent some people from having access to financial products and services.

Easy access to basic financial services will foster financial inclusion and high productivity and growth for micro and small businesses in urban and rural areas.

The Bottom Line

Financial inclusion is important to a developing country like Nigeria. People and businesses who have access to financial products and services are bound to grow, which will also lead to the country’s economic progress.

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