How banks are driving financial inclusion with fewer branches


The number of adult Nigerians who were financially excluded increased from 36.6 million in 2018 to 38.1 million in 2020, according to Enhancing Financial Innovation and Access (EFInA).

These are adult Nigerians who did not have access to financial products and services and their economic activities could not be felt directly within the financial system.

Financial inclusion is of interest to national governments and development financial institutions because it is expected to help “address poverty and shared prosperity byimproving and smoothing household incomes at the same time as reducingvulnerability to shocks, improving investments in education and health, andencouraging the growth of businesses and related employment”, according to the World Bank.

Nigeria currently has over 80 million individuals living in poverty. As financial inclusion is linked to a number of SDG goals, this subject is constantly reviewed to know if real progress is being made.

In a matter of a decade, the proportion of adult Nigerians that were financially included rose from 30 percent in 2010 to 45 percent in 2020. On the contrary, the proportion of financially excluded Nigerians decreased from 46 percent to 36 percent during the same period.

Banks and telecommunications companies have been on the forefront of this cause, through the deployment of innovative solutions that give unbanked Nigerians financial access and inclusion.

A good metric to assess progress in Nigeria’s financial inclusion is by the growth in the number of customers of Nigerian commercial banks.

Other parameters include branches of banks, number of Automated Teller Machines (ATMs), debit cards in circulation, and what is more, the patronage of banks’ digital products by customers from all walks of life.Among all the metrics identified above, banks’ branches recorded the least growth rate in 2021.

Nigeria’s five biggest banks, that is, the tier-one banks, Access Bank, First Bank, GTB, UBA and Zenith, provide a good platform for assessment.

The analysis of available data extracted from their audited financial statements of 2020 and 2021, shows that the total number of the branches of tier one banks increased by just 6.7 percent, from 3,219 to 3,435, which means from an average of 87 branches per state (36 states plus FCT Abuja) in 2020 to approximately 93 branches per state in 2021.

The higher the number of branches of banks in the country, the higher the likelihood of access to financial services in the underserved communities.

All the commercial banks in the country had 5,158 branches in 2020, which showed that tier one banks controlled 61 percent of the branches of commercial banks in that year. In 2019, there were 5,392 branches of commercial banks.

“Banks are still opening branches but they are more strategic about it in terms of target market, location and security in the country. The world is fast evolving with the internet and it offers more opportunities with ease seamlessly too. And almost everyone has a phone so it is easier to get them to open accounts via the same web”, Oluyemisi Bowale, a banker, said.

What factors are promoting financial inclusion?

Increasing telecommunications penetration in the country is one of the major factors promoting financial inclusion in the country. According to the National Bureau of Statistics (NBS), active mobile lines rose by 3.71 percent in Q1 2022 to 199.56 million up from 192.41 million in the corresponding period of 2021. As at the end of 2021, the total active mobile lines were 195.46 million.

The top five states by number of active mobile lines are Lagos, 24.2 million; Kano, 11.67 million; Ogun, 11.54 million; Oyo, 10.12 million, and FCT Abuja, 9.52 million.

The states with the least active mobile lines are Gombe, 2.5 million; Zamfara, 2.4 million; Ebonyi, 1.79 million; Ekiti, 1.78 million, and Bayelsa, 1.44 million.

Active internet lines rose marginally by 0.62 percent from 144.95 million in Q1 2021 to 145.85 million in Q1 2022. By end of 2021, total active internet lines were 141.97 million. The top five states are Lagos, 17.84 million; Ogun, 8.53 million; Kano, 8.36 million; Oyo, 7.52 million, and FCT Abuja, 7.10 million.

The states with the least active internet lines are Gombe, 1.82 million; Zamfara, 1.67 million; Ekiti, 1.37 million; Ebonyi, 1.23 million, and Bayelsa, 1.04 million.

The increase in both active voice and internet lines was associated with increasing financial transactions through mobile platforms and USSD.

According to the Nigerian Inter-Bank Settlement System (NIBSS), mobile payment transactions skyrocketed from N136.85 billion within the first four months of 2019 to N4.86 trillion in the corresponding period of 2022, amounting to an increase of 3,451 percent.

Put differently, it was from monthly mobile payment transactions of N34.21 billion in the first four months of 2019 to monthly mobile payment transactions of N1.215 trillion in the corresponding period of 2022. These payments were carried out through mobile platforms and USSD services.

Also, the number of debit cards of tier one banks rose by 25.6 percent to 63.7 million in 2021 up from 50.76 million in 2020. Point of Sale units rose by 74 percent to 396,745 in 2021 up from 227,988 in 2020.

According to the findings of Uduak Michael Ekong and Christopher Nyong Ekong published in the Journal of Internet and Digital Economics, a unit rise in ATM usage in Nigeria increases financial inclusion by 0.012 units.

Also, a percentage rise in POS usages raises financial inclusion by 1 percent. Apart from that, agent banking during the reference period witnessed unprecedented growth with many banks deploying thousands of agents especially in the rural areas.

Deposits and loans

In spite of the not-too-impressive growth in the number of branches of commercial banks, there was growth in deposit mobilisation in Nigeria. The customer deposits of the five tier one banks increased by 18.6 percent in 2021 to N29.66 trillion, up from N25.007 trillion in the previous year.

Access Holdco mobilised N6.95 trillion in 2022, thus emerged as the bank with the largest customer deposits among the tier-one banks. Zenith Bank mobilised N6.47 trillion; UBA, N6.39 trillion; FBN Holdings, N5.84 trillion, and GTB, N4.01 trillion, all in 2021.

Loans and advances to customers grew by 18.3 percent to N15.16 trillion in 2021 as against N12.82trillion in 2020. Loans and advances relative to deposits was 51.3 percent in 2020 and wasalmost flat at 51.1 percent in 2021.
Across the entire tier one banks, Access Holdco and Zenith surpassed the industry loan-deposit ratio.

For Access Holdco, it was 64.6 percent in 2020 and 63.9 percent in 2021. It was 51.8 percent for Zenith Bank in 2021 as against 52 percent in 2020. The other three banks fell below the industry loan-deposit average ratio.

Zenith Bank’s mobile and internet banking revenue increased by 68.5 percent to N72.46 billion in 2021 as against N43.01 billion in 2020. Also, GTB Holdco’s revenue grew by 59.7 percent from N17.76 billion to N28.36 billion within the same period.

FBN Holdings grew its mobile and internet revenue by 60 percent from N15.61 billion to N25.02 billion during the same period. Still in the same period, Access Holdco saw its mobile and internet income increase by 40.9 percent to N33.86 billion in 2021 up from N24.02 billion in 2020. Growth in UBA’s digital income was 46 percent from N44.24 billion in 2020 to N64.59 billion in 2021.

PAT of tier one banks

Another area success is being recorded in financial inclusion is the rising usages of mobile, internet and digital platforms for bill payments which have increased in recent times.

A number of banks how have very strong digital platforms as their selling points. And according to NIBSS, electronic bill payments surged by 387.19 percent in the first four months of 2022 to N923.24 billion as against N189.5 billion in the corresponding period of 2019.

NIBSS defines “e-BillsPay is an electronic bill payment platform that facilitates the payment of Bills, fees, levies, premiums, and subscriptions etc. by the banking public through electronic payment channels provided and managed by banks”.

Read also: Commercial banks’ deposits jump 20.20% in Q1 2022

It added that e-BillsPay touch points include bank branches, internet banking,mobile banking, USSD and agent networks.

Industry sentiments suggest that commercial banks in the country may continue with the current trend of fewer branches. In recent times, banks were attacked in Edo, Ogun, Osun, Kwara, Abia, and Ondo states. With insecurity not abating yet, the enthusiasm for opening more branches is waning.

Even with a paltry growth in branches, the tier one banks still made more profit. Net interest income after impairment of the five tier one banks rose by 1.3 percent to N1.13 trillion in 2021, up from N1.12 trillion in the previous year.

Personnel expenses were higher by 14.2 percent to N432.04 billion in 2021 compared with N378.43 billion in 2020. In spite of that, profit after tax (PAT) increased by 17.5 percent to N849.44 billion in 2021 as against N722.77 billion in 2020.

Financial inclusion is rising in Nigeria in view of the increasing number of bank customers and debit cards in circulation.

Customers of the first tier banks rose by 19.3 percent in 2021 to 150.39 million individuals up from 120.02 million in 2020. Apart from that, debit cards in circulation increased by 41.6 percent to 63.74 million, up from 45 million in the previous year.

Zenith Bank, First Bank and Access Holdco deployed 338,339 agents in 2021 as against 200,992 in 2020.

The increasing use of agent banking has been felt both in the rural and urban areas. All these achievements were made when the growth in their branches was just 6.7 percent during the reference period.


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