Nigerian Retail Finance LandscapeInnovation Forum

Modupe LadipoChief Executive Officer, EFInA

10 August 2010

EFInA Overview

About EFInA Enhancing Financial Innovation & Access (EFInA) is an independent, professional and non-

profit organisation funded by the UK’s Department for International Development (DFID) andthe Bill & Melinda Gates Foundation. EFInA’s purpose is to promote pro-poor FinancialSector Development and Financial Inclusion in Nigeria

Our Approach EFInA’s aim is to become an innovation centre targeting catalytic change across Nigeria’s

financial sector, to make markets work for those currently excluded from formal financialservices

RESEARCH

POLICY ADVOCACYINNOVATION

EFInA Overview

Key ObjectivesEFInA focuses on three distinct but mutually reinforcing sets of activities: Providing credible market information on the Nigerian

financial sector Supporting projects which will augment the development

of Innovative Inclusive Financial Services for the unbanked and under-banked through our Innovation Fund

Engaging in policy related advocacy to promote financial inclusion

3

Objectives EFInA will share the risk of developing and implementing innovative products and services

by providing a grant subsidy (up to 50%) for new commercial projects

Seed Grants Seed grants are given at an early stage to provide support for projects in design,

development or pilot phase These projects are to be implemented within 6 months of the grant being awarded Seed Grants are awarded all year round

Innovation Grants Innovation grants provide larger funding for projects in the implementation phase for

sectors defined by our Request for Proposals These projects are to be implemented within 24 months of the grant being awarded RFP 1 launched in May 2009; In December 2009, EFInA awarded Stanbic IBTC Bank an

Innovation grant of $1.5 million in support of their Alternative Banking Service Platform (E.susu) to extend financial services to the unbanked

RFP 2 launched on 19 April 2010, decisions to be finalised by 3 September 2010 RFP 3 to be launched in Q3 2010

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The Innovation Fund

Key Focus Sectors for 2010 Branchless banking - often using non bank retail agents and relying on

technologies such as mobile phones, POS & POC terminals Savings Payment Services Consumer Protection Financial Capability/Education

5

The Innovation Fund

EFInA Demand side study (Access

to Finance in Nigeria)

EFInA Supply side study (Landscape

of Financial Services in Nigeria)

Policy Recommendations

Further access related research

e.g. informal savings study

Support on Policy Implementation e.g.

payment systems reforms, microfinance

Inclusion Policies

Charters, working groups

Dissemination, dialogue, facilitation

Private sector engagement

Market research, pilots, etc.

How to use research to formulate evidence based policies and stimulate innovation

Innovation

6

Key Findings from the EFInA Access to Finance 2008 Survey

21%

5%

74%Never Banked

Currently Banked

Previously Banked

Banking Profile of the Adult Population

Banking penetration is relatively low 85% of adult females are unbanked 86% of rural population are unbanked

Only 21% of the adult population has a bank account, which is equivalent to 18 million people

74% of the adult population have never been banked, which is equivalent to approximately 64 million people

About 4 million other adults are previously banked, in other words, have left the banking system

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35%

35%

16%

7%

7%

I Make The Decision In Consultation With Other Family Or HH Members

I Make The Decision In Consultation With Spouse

I Make The Decisions Alone

I Make The Decision In Consultation With The Head Of HH

I Am Not At All Involved In Household Decision Making

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Who makes the financial decisions in the household?

51% of the population indicated that they make financial decisions on their own or inconsultation with a spouse

82%

46%

14%

5%

8%

Family Member

Friends

Someone You Trust In The Community

Bank

Other

10

Sources of Financial Advice

Family members are the mostimportant source of financial advice

Only 5% of the adult populationindicated the bank as a useful sourceof advice

Usage of Banking Products

18.511.4 6.8 2.4 1.7 1.5

4.7

2.9

76.185.7 89.3

96.0 96.5 96.1

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Savings Account ATM Card Current Account Debit Card Credit Card Fixed Deposit Account

Have it now and use it Have it now but don’t use it Used to have it in the past but not now Never Had it

16.5

14.1

13.9

8.9

8.4

8.2

5.2

4.7

4.0

3.5

44.7

50.6

36.8

29.3

36.2

35.8

38.3

48.7

25.3

26.5

38.9

35.3

49.3

61.8

55.3

56.0

56.5

46.6

70.7

69.9

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Cash withdrawals

Cash Deposits

Receive SMS messages on Transactions on My Account

Bank Draft Request

Receive Account Statement

Electronic Bank Transfer (via ATM, Internet or Telephone)

Cheque Deposits

Account Payments to a Third Party e.g. Electricity/Store Act

To Keep Valuables/Important Documents

Money Transfers Between Bank Accounts

Weekly Monthly Periodically

Frequency of conducting banking transactions

12

UBA and First Bank has the highest level of awareness

13

Spontaneous Awareness of Banks

46 4335

20 19 17 14 13 12 11

1716

9

3 2 33 2 2 1

0

10

20

30

40

50

60

70

%

Total spontaneous ToM

0

5

10

15

20

25

3029

17

119

74 4 3 3 3

28

16

10 97

4 4 3 3 3

Currently use Main bank14

UBA and First Bank are the top two main banks

Only 3% of the adult population use microfinance banks as their main bank

Financial Institutions Used Most Often

9%

10%

32%

20%

33%

40%

56%

61%

68%

77%

62%

66%

49%

58%

47%

42%

29%

28%

22%

13%

4%

3%

1%

3%

2%

1%

1%

1%

2%

2%

3%

2%

1%

2%

2%

2%

1%

1%

1%

2%

23%

19%

18%

17%

17%

14%

12%

9%

7%

6%

LSM 1

LSM 2

LSM 3

LSM 4

LSM 5

LSM 6

LSM 7

LSM 8

LSM 9

LSM 10

Bank Local Saving Club/Pools Friends Relatives/Husband At Home

Usage of Savings by LSM The Living Standard Measure (LSM) is a wealth proxy, calculated mainly on ownership of

household goods, which runs from 1 (very poor & rural) to LSM 10 (wealthy & urban) Of those currently saving, informal methods of saving are predominant among LSM 1 to 6

Why are informal savings so attractive?

Products Average amount contributed Key Likes Key Dislikes

Saving at home No fixed amount Can access the money when needed Can save any amount however small No language barrier for the Hausa

respondents – they speak Hausa with the person

No major dislike

Ajo Ojumo Respondents save between N50 – N100 in rural areas and N100-N200 in the urban areas

Money handled by operators varies between N220,000 – N250,000 monthly

Ability to access their money when needed Personal relationship with operator Access to loans Convenience – operator comes to

respondent Ability to save as little money as N100

Perceived as not secure – risk of operator absconding with funds is high.

Ajo Adako (group contribution)

Average weekly contribution is N15,000 N100,000 as average monthly

contribution

Access to short term significant amounts of money for immediate use

Ability to swap position in order to access fund when needed – female respondents

Puts me under pressure Perceived inability to access fund before

one’s turn Inability to access fund due to other default

by other members

Ajo Mosalasi (saving in a Mosque)

No fixed amount –accumulated saving per member varies between N50,000 –N100,000

Convenience – can save any little amount of money

Perceived as secure due to Imam’s involvement

No charges on money saved

No provision of loans

Ajo Egbe (associations – yearly savings)

Amount of money handled by the association varies between N350,000 & N500,000 at year end

Access to flexible loans with low interest rate – N50 on N1,000

Occasional controversy over saving records between members & coordinators

Time consuming – ‘must attend meetings’

Alajeseku (Cooperatives)

Average amount handled at year end pegged between N500,000 & N1 million

Access to loans with low interest rate – N50 on N1,000

Access to loans without interest –cooperatives amongst Muslim / Christian members

Delay in loan repayment by members resulting in other members inability to access loans

Risk of collapse – most respondents claimed to have lost money due to collapse of the cooperative

Usage of with Loan Products

13.45.6 1.9 0.8 0.6 0.4 0.3 0.3 0.2 0.2 0.2

6.6 14.4

79.2 79.0

95.9 97.5 96.9 98.3 98.1 97.6 99.0 99.0 98.9

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Have it now and use it Have it now but don’t use it Used to have it in the past but not now Never Had it

3.4

4.5

5.0

6.4

6.5

8.7

10.1

20.0

22.3

Zenith Bank

Afribank

Diamond Bank

Skye Bank

Intercontinental Bank

Oceanic Bank

Union Bank

UBA

First Bank

% of those with bank loans

Banks where Loans have been taken

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Usage of Insurance Products

0.7 0.5 0.4 0.4 0.2 0.1 0.1 0.1

98.7 99.0 99.0 99.0 99.4 99.4 99.5 99.4

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Vehicle Pension Medical Life Personal accident/disability

Electronic equipment

Investment plan Life stock

Have it now and use it Have it now but don’t use it Used to have it in the past but not now Never Had it

23%

14%

12%

11%

8%

8%

6%

5%

Nicon Insurance

Union Assurance

Industrial & General Insurance (IGI)

AIICO Insurance Plc

Leadway Assurance

GT Life Assurance

Great Nigeria Insurance Plc

Standard Trust Alliance Company

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Companies where Insurance Policies are held

Of those that have insurance products

Reasons for having/wanting to have a bank account(banked vs. unbanked)

91.9

60.5

46.541.2

26.030.3

15.9

25.3

89.5

44.9

31.1

19.913.4 12.6

5.4 2.10

10

20

30

40

50

60

70

80

90

100

To save money To withdraw money when

needed

To keep money in a safe place

To receive and send money

safely

To deposit money

To earn interest To access loans To pay in salaries

%

Banked Unbanked

21

Thank You

www.efina.org.nginnovation@efina.org.ng