Nigeria: As POS Merchants Target Nigeria’s Unbanked Population, Banks’ Troubles Haunt Them
Widespread use of mobile and online transactions has made banks cut down on the number of ATM machines, a cost-saving measure that ironically takes cash away from agency banking.
Twenty-four-year-old Olatunbosun Olawoye owns a mobile phone with which he monitors happenings around the world via Twitter, Facebook and other social networking sites. As a member of the Gen Z generation, he said he is keen on adopting a diverse range of technological innovations that could help him gain more skills in the digital economy. However, he lamented, being a resident of Ile-Ogbo, a community in Osun State, comes with its own limitations.
“In the whole of Ile-Ogbo community, there is no single ATM,” he began, reeling out a long list of basic infrastructural amenities that the community lacks.
“Some of these things can limit one’s productivity and draw you back in your efforts to be digitally compliant. Apart from the absence of Automated Teller Machine (ATM) in Ile-Ogbo, there is no single commercial bank in our community.”
Ile-Ogbo is an agrarian community near Iwo in Osun State. It is the headquarters of Aiyedire Local Government in Osun. The town lies midway between Ibadan, the capital of Oyo State, and Osogbo, the Osun State capital.
In spite of its importance as headquarters of a major local government council in the state, the community hosts no commercial bank. In the absence of banks and ATMs, there are numerous Point-of-Sale merchants operating in and serving members of the community.
“POS operators are the engine room of financial transactions in this community,” said Gabriel, a POS attendant operating from the Idi-Ape area of the agrarian community.
“The major problem is that we go through hell before we can get cash for our own business too. We go as far as Iwo to get cash daily because that’s the only place you have banks and ATMs.”
Gabriel explained further that on several occasions, ATMs in Iwo would have been emptied by the many POS operators operating in the community.
“You can imagine going to Iwo to look for cash and coming back with nothing. But that’s the problem we face sometimes. There are too many POS operators in Iwo already and many of them stay around the ATMs. So once the banks fill their ATMs, they (the POS guys) just empty them.”
More than 42 million Nigerian adults live in rural areas that lack basic banking services. According to a 2021 EFInA study on trends in access to financial services in Nigeria, there are numerous gaps to fill in the rural areas populated by unbanked people excluded from the financial ecosystem.
The EFInA report shows that while 71 per cent of urban adults have bank accounts, only 40 percent of those in rural areas have a formal account. In over 60 percent of rural communities across Nigeria, there are no bank branches, agents or ATM.
Although it has helped in bridging the financial inclusion gaps, mobile money has not proven to be a widespread option as only 4 per cent of adults in the EFinA study report have such accounts. Worse still, in the Findex report of 2017, less than 6 per cent have such accounts.
Fewer ATMSs, Rising Operational Cost
Nigeria’s ATM per capita (number of Automatic Teller Machines per 100,000 Adults) as at December 2019 fell to about 8.75, down from the 16.92 ATM per capita recorded by the World Bank in 2018. According to data sourced from the Nigeria Interbank Settlement System (NIBSS), the number of active ATMs in Nigeria dropped to 17,518 in December 2019, representing a loss of about 1,213 from the 18,731 ATMs recorded in March 2019.
Experts say that merger and acquisitions among banks may have led to the reduction in number of branches and ATM, as beneficiaries of mergers often cut down on cost by shutting down branches and ATM points especially in places they already operate.
Tunde Bamishe, a financial analyst, explained that the widespread adoption of mobile platforms may also have significantly affected the need for the use of ATMs in most places, prompting banks to cut down on operational cost and ATM installation.
For instance, data from NIBSS showed that although the volume of ATM transactions in December 2019 dropped to 839.8 million from the 875.5 million recorded in 2018, the value of ATM transactions remained unchanged at N6.5 trillion in 2019 from what was recorded in 2018.
Similarly, a World Bank data showed that the number of commercial bank branches (per 100,000 Nigerian adults) dropped to 4.5 in 2020 from 4.8 in 2019.
“ATMs and new branches are very expensive to procure or maintain and since the COVID-19 outbreak, banks have learnt to cut down on cost,” Mr Bamishe said.
“The issue is that banks still serve their customers online and many more people are embracing internet banking. So, the solution might not be in banks installing new ATMs in rural areas or opening new branches as that is too expensive and not sustainable from the operations perspective.
“The government and other stakeholders would need to invest in financial literacy projects to deepen financial inclusion via mobile banking and access to the internet in many parts of the country. That way, those in unbanked communities can have access to financial services even as the banks continue to cut down on cost.”
Several studies have confirmed that women are less likely to be financially included than men, especially due to poor infrastructure. The EFInA report shows that while 57 per cent of men in Nigeria have a financial account, only 45 per cent of women do.
“For many of us women living in rural areas, the situation is far worse,” said Bimpe Akinremi, a resident of Apatere village on the outskirts of Ibadan, Oyo State.
“The rate of charges on withdrawals can discourage someone from even keeping money in banks or opening an account. They charge N100 per every N5,000; for many villagers, that’s somehow huge.”
Mrs Akinremi, who spoke in Yoruba, told PREMIUM TIMES that many of their men in Apatere work outside of the community, and that enables them to make use of banks and other financial institutions.
“Our men work either in Iwo or Ibadan, and some of them only come home on weekends. That way, they have bank accounts and can use banks in those big cities.
“But many of the women sell stuff here in Apatere and the absence of financial institutions could be a form of discouragement, to be honest.”
A POS attendant in the community who declined to have her name in print told this newspaper that she charges N100 on each N5,000 withdrawal, adding that the charges are not huge if compared to the stress of moving outside the village to withdraw cash.
“I go to Iwo or Iyana Church area of Ibadan to withdraw cash, so the money I charge them is not much at all,” she said.
“There is no bank here in Apatere and there is none too at Lagun (a neighbouring community). We spend money on transport to go to Ibadan or Iwo to withdraw so that’s how we can also stay in business.”
Financial Exclusion and Productivity
Financial inclusion has been identified as an enabler for 7 of the 17 Sustainable Development Goals. The World Bank Group considers financial inclusion a key enabler to reduce extreme poverty and boost shared prosperity.
According to the global financial institution, having access to a transaction account is a major step toward broader financial inclusion since a transaction account allows people to store money, and send and receive payments.
Mr Olatunbosun told PREMIUM TIMES in Ile-Ogbo community that the absence of banking infrastructure makes this goal quite difficult for residents of Ile-Ogbo.
“Unlike Iwo, where there are over five commercial banks, we have just one microfinance bank in our community and it is barely even functional,” he said.
PREMIUM TIMES visited the microfinance bank, Moyofade Microfinance Bank LTD, located beside the palace of the community king, and residents confirmed that it is operational.
“But they don’t have ATM and other stuff that could make banking seamless,” an Okada rider told this newspaper.
In Iwo, PREMIUM TIMES confirmed that there are branches of major banks scattered across the community, from Oke-Odo area through Oja-Ale. In addition to the banks, there are numerous POS agents operating in various areas in the town.
Mr Olatunbosun called for more banking facilities in the community to help deepen inclusion to accelerate growth.
“Ile-Ogbo is an important town and we need at least a branch of a major bank here to make transactions easier for our people. The POS operators are trying to fill the gap but it is not enough,” he said.