CBN berates banks for focusing on wealthy customers

The Central Bank ofNigeria, CBN has berated banks in the country for concentrating on wealthy individuals and for failing to provide savings and investment opportunities for the poor and low income earners in the country.

Deputy Governor, Financial System Stability, CBN, Dr. Kingsley Moghalu, in a paper presented at the 2011 Global Policy Forum of the Alliance for Financial Inclusion, AFI, in Mexico, titled: ‘Towards a more inclusive financial future: The Nigerian perspective,’ lamented the fact that Nigerian banks are not concerned about turning the country’s population and large market into an opportunity, but are, instead, focusing on making profits from only the wealthy few in the society.

He said this will not help in the drive towards ensuring increased access to financial services by a vast majority of the population, and will, therefore, hinder the viability and growth of the finance sector.

He said, “From a financial inclusion standpoint, the principal challenge that facesNigeriais to turn the advantage of its large population and large market into an opportunity to utilize finance as a driver of inclusive economic growth.

“That is not the dominant perspective inNigeria’s financial industry today. What we have now is a narrow, short-term focus on making financial profits from serving the wealthy few without providing real savings and investment opportunities for the poor.

“Financial inclusion is, or at least ought to be, the future of finance inNigeriaif the financial industry is to remain viable and sustainable.”

Moghalu explained further that excluding a portion of the population would be detrimental to achieving the country’s objectives of financial inclusion.

According to him, In Nigeria, the entire population will be central to the achievement of financial inclusion objectives from the perspectives of present and future contributions to savings and other financial services, adding that small savings from Nigerians when added together could create large volume of resources that could be channeled to bring excluded people to the financial corridor.

“Assuming 50 per cent ofNigeria’s population of 140 million could save, a large volume of resources can be mobilized for intermediation on an annual basis.

“Based on this model, in ten years, 70 million Nigerians will be capable of saving N25.5 trillion (about US$159 billion).   This will be a motivating factor for pursuing and promoting the culture of savings amongst Nigerians as part and parcel of an overall Financial Inclusion Strategy forNigeria,” He said.

Moghalu noted that the CBN, in addition to building the capacity of financial institutions and developing products targeted at the financially excluded, it will also focus on ensuring that those excluded from financial services take steps to overcoming challenges responsible for their exclusion.

He said, “As we move towards the future,Nigeriawill endeavor to go beyond provision of credit and other microfinance services to promote usage, as a way of creating sustainable and effective demand for financial services.

“While building the capacity of institutions, developing appropriate products to reach the financially excluded, efforts will be made to improve the pace at which the excluded undertake steps to resolve their exclusion challenge.

“Awareness will be created to enlighten them on the services available and their capacities will be built for them to use credit to improve productivity, income savings and investment.

“The Central Bank ofNigeriais developing strategies that will encourage effective demand for financial services – micro, small, medium and large scale.

“The Bank intends to further escalate  institutional structures and arrangements, infrastructures and technological solutions  to  provide timely, adequate financial services such as loans/credit, savings, insurance, leasing, hire purchase facilities, overdraft, payment/remittance services, financial advisory amongst others.”

 

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