Driving financial inclusion in Nigeria: A feature on Agency Banking

Driving financial inclusion in Nigeria: A feature on Agency Banking

Nigeria boasts of a vibrant financial system with over 40 million active bank accounts, 21 commercial banks, and 916 regional and national microfinance institutions. However, behind these stellar statistics lie something far unacceptable in modern economic discourse – more than a third of Nigerian adults are unbanked, underbanked or financially excluded. 

Nigeria’s financial inclusion rate at 64.1% as of 2020 is significantly lower than the 80% target for 2020 set by the CBN’s National Financial Inclusion Strategy (NFIS). This financial inclusion rate indicates that about 38 million or 35.9% of the Nigerian adult population remain financially excluded. “At our current rate of progress, we will not reach the 2020 financial inclusion target until around 2030,” Ashley Immanuel, the CEO of EFInA, stated at a public presentation event to launch the findings of EFInA’s Access to Financial Services in Nigeria 2020 Survey.


Financial inclusion in Nigeria 

Nigeria’s financial inclusion rate also lags her African peers like South Africa (93%), Rwanda (89%) and Kenya (82%). Some of these countries have reduced their financially excluded population by primarily leveraging non-bank mobile money, e.g. MPesa in Kenya. To achieve 80% financial inclusion, Nigeria will need to add about 21.7 million people into the financial system. With its capacity to reach the unserved and underserved, agency banking plays a vital role in achieving this goal.

As stated by PayCentre CEO Olaoluwa Awojoodu, agency banking plays a massive role in financial inclusion. “It provides easy access to cash, especially in rural communities where access to financial facilities is scarce. Even the available facilities are not enough to accommodate the teeming population in urban communities. This is where agency banking shines – filling this gap by helping community members access the cash in their bank account and send or receive cash.” 

Agent banking start-ups like PayCentre are spreading the mission of making financial services available to these target populations while creating a new expanding earning capacity for more people. 


      source: EFInA, Naspire  


Demographically, females represent c.50.3% (or 53.3 million) of Nigeria’s adult population, but about 40% of that number remain financially excluded compared to 32% for financially excluded males. Interestingly, adult women (about 15% of them) tend to use more informal financial services than men (about 12%). This situation invariably hampers women’s access to economic opportunities and further exacerbate poverty in the country. 

The rural population also remain financially excluded. About 44% of Nigerian adults living in rural areas are financially excluded (urban: 20%). Their exclusion is driven primarily by the shortage of traditional banks in the area, poor internet connectivity, and the sheer inability of rural dwellers to operate mobile banking applications. As a result, many rural adults (16%) rely on informal financial services such as cooperatives or social groups, nearly twice the proportion of 9% for urban dwellers. “Rural adults continue to be more likely than those in urban areas to rely exclusively on informal financial services,” EFInA noted. 

Further analysis reveals that nearly three-quarters (76%) of Nigeria’s adult population does not have access to any financial institution. In comparison, about 78% of the adult population in Nigeria are not aware of mobile banking. Another remarkable feature of financial inclusion in Nigeria is that it mirrors the poverty rate across geopolitical regions. Regions that have a high incidence of poverty tend to have a low financial inclusion rate. For instance, 43% of the 38 million financially excluded adult Nigerians live in the North West, coincidentally with the highest poverty rate of 64.8%. 

 source: NBS, EFInA, Naspire

The consequences of the high financial exclusion are broad, including the marginalisation of people, acting as barriers to their personal development, and stimulating their exclusion in the economic progress of the society. Efforts must be made by both the government and corporates to ensure that people have access to essential financial products like savings, insurance, account opening etc. 

Agency banking in Nigeria: The Journey So Far 

Agency banking is simply a type of branchless banking deployed by traditionally licensed financial institutions to cost-efficiently drive their retail banking segment through an authorised third-party network of agents. These agents usually transact banking businesses on behalf of a financial institution such as commercial banks, mobile money banks, primary mortgage institutions etc., for an agreed commission. 

Agency banking has become the new force propelling the inclusion of the vast number of unbanked populations in the Nigerian financial system. This is partly due to the limited reach of traditional banks to cater to many unbanked people’s banking needs, especially those in agricultural-dominated rural areas that are relatively underserved. Therefore, the success of agency banking in Nigeria depends on how well it can close the financial access gap in rural areas. 

Data from the CBN’s 2019 National Financial Inclusion Strategy report reveals that about five commercial bank branches serve about 100,000 Nigerian adults compared to Morocco, India, and Mexico, with about 25, 15, and 14 retail bank branches per 100,000 adults. In addition, only about 17 ATMs serve 100,000 Nigerian adults, with the majority concentrated in metropolitan areas like Lagos, Port Harcourt, and Abuja. Apart from unequal distribution, other issues such as frequent inability to dispense funds, debit card rejections and other dispensing errors render a significant number of ATMs unreliable. 

But how exactly is an agency banking solution expected to enhance financial inclusion? 

•  Agency banking provides the unbanked population access to bill and utility payments such as electricity bills, airtime purchases etc.

•  Agency banking brings essential financial services such as bank account opening, BVN registration, deposits and withdrawals, remittances closer to the people. The proportion of agents offering deposit-withdrawal or cash-in-cash-out (CICO) services has increased from 74% in 2017 to over 90% in 2020. Only about 19% of agents currently offer account opening services, down from 68% three years ago. 

• They introduce the unbanked/financially excluded population to mobile banking. The practicality of this becomes evidence given that about 35 million unbanked Nigerians own a mobile phone. Herein lies a great deal of opportunities for agent banking principals to explore. 

In Nigeria, agency banking operations kicked off fully in 2013 following the release of the Agent Banking Guideline by the CBN. Nigeria had about 236,940 unique agents in 2019 (2018: 83,560 unique agents) across the country, translating to about 228.8 agents per 100,000 adult population. This indicates that agency banking has 53 times more reach than traditional brick-and-mortar bank branches. As of May 2020, the total number of agents in the country stood at 326,444. About 19% of adult Nigerians currently use agency banking for their financial transactions, which is a laudable achievement compared to a meagre 3% recorded two years ago. 

                          Source: CBN, SANEF, Naspire  * inclusive of 38,416 agents not under SANEF  ** as of May 2020 


With such giant strides recorded within the first half of 2020, it is expected that the Shared Agent Network Expansion Facilities’ (SANEF’s) target of 500,000 financial access points and agents by December of the same year will be actualised if not surpassed. There are plans to add about 173,556 agents to achieve this target. 

Meanwhile, the total number of registered POS has more than quadrupled in just three years from 182,806 in December 2017 to 844,800 in April 2021, exceeding the CBN target of 795,858 POS units. Data from the Nigeria Inter-Bank Settlement System Plc (NIBSS) shows impressive POS transaction volume and value growth over the past five years. Only four states (Lagos, Rivers, Oyo and Delta) and the FCT accounts for over 80% of POS transaction volume in 2020, with Lagos alone accounting for more than two-thirds (69.2%) of the entire volume within the same period. 

Agency banking in Nigeria has been instrumental to the financial inclusion gain recorded so far, especially in rural areas where about 44% of the unbanked population resides. However, more work still needs to be done to create awareness. EFInA report reveals that at least 89% of the Nigerian adult population are unaware of banking agents even though they are only a walking distance from a potential agent location. 

Essentially, successes already recorded from agency banking and mobile money could be upscaled by leveraging on the country’s increased smartphone adoption and internet penetration. Data from the Nigerian Communication Commission (NCC) reveals 280 million active mobile SIM cards as of March 2021, while roughly 75.5% of mobile phone subscribers were connected to the internet in 2020. Meanwhile, about 81% of the Nigerian adult population own a mobile phone. According to estimates by Jumia, an e-commerce platform, the country’s smartphone adoption is expected to increase to 144 million by 2025, driven by the increasing affordability of smartphones and feature phones, improved distribution network and expansion of network service providers. 

Top Players in Nigeria’s Agency Banking Sector 

Nigeria’s agency banking landscape boasts prominent players, including commercial banks, telecom companies (Telcos) and financial technology (FinTech) firms. 


Each of these players has its inherent strengths and weaknesses. Commercial banks and Telecom companies like MTN, Glo, 9mobile etc., rely on their size and broad geographical reach. For instance, as of April 2021, Firstmonie reportedly had over 100,000 agents across 774 local government areas. Similarly, Access Closa has registered over 50,000 agents on its platform. 

However, recognising and exploiting areas where competitors fall short has proven a strategy to gain market share for rapidly expanding start-ups like PayCentre, which currently has a network of 60,000+ agents. Driving a solid value proposition, capitalising on innovative capability, and increasing the number of agents is helping it to bring down the cost of operations and boost profitability and overall efficiency. Personalised training for agents to keep them up-to-speed on industry trends, providing bespoke feedbacks, engaging in strategic collaborations, enhancing agency infrastructure, and expanding to other locations with a significant presence of the unbanked could prove a game-changer for PayCentre in the long term. 

“The market and potential for growth are huge,” PayCentre’s Olaoluwa Awojoodu explained, noting that although there were thousands of agents currently, even more, community members requiring access to financial services exist. 

Agency banking during the COVID-19 lockdown 

Following the outbreak of COVID-19 in Nigeria, the government swung into action by putting measures such as nationwide lockdown and movement restrictions to flatten the pandemic curve. These measures had far-reaching implications across diverse economic sectors. While some industries like healthcare, telecommunications, e-commerce and delivery logistics benefitted immensely from the lockdown, others such as hospitality and tourism, transportation, MSMEs etc., were hard hit. 

Financial service was one of the sectors that quickly adapted to the pandemic-induced changes in the business environment by adopting alternative banking channels like mobile and internet banking, agency banking and other e-banking platforms. 

The pandemic led to a surge in the popularity of agent banking, a model that simplifies access for the unbanked and underbanked. With limited activities in the banking halls, long queues, and sit at home orders, many customers shifted to bank e-channels and agent banking merchants because of their proximity. As a result, the number of agents rose sharply by about 38% to 326,444 within the first half of 2020, signifying the increasing appetite for agency banking. Accordingly, the total agent transaction volume stood at nearly 19 million as of April 2020 compared to 5.6 million in February 2020 (pre-pandemic period). 

During the pandemic, some agents discovered a new operating model – small, cash-based businesses serving local communities had difficulties depositing cash into their bank accounts. In contrast, agents experienced issues accessing cash from banks to rebalance their float. This birthed a new model to rebalance float and serve customers’ financial needs better. Agents collected money from these small business owners, distributed the cash to customers who needed to withdraw some money, and funded their agent accounts with those transfers to enable deposits in the small business owners’ accounts.


However, not all agents knew or benefited from this new operating model. A report by EFInA indicated that c.80% of financial agents surveyed experienced a negative impact of the pandemic on business. A reason for this could be the difficulties some agents experienced rebalancing float and having to depend on ATM withdrawals and borrowings from family and friends, which were largely unreliable and increased their cost of operation. 

According to Olaoluwa, while some agents could not operate during the lockdown, those who could work experienced a boom due to irregular bank opening times and people needed to send and receive money. PayCentre saw over a 100% increase in new agent signups in 2020 compared to 2019 and 13% in transaction values during the lockdown compared to the previous quarter. To help their agents make the most of the peculiar situation, they prioritised resolving customer disputes by reducing the resolution timeframe from 3 working days to 24 hours. The company also embarked on several COVID-19 community projects and invested in health and safety education for its agents. “We wanted our partners to be safe because they have a lot of physical contact in their operations. We also provided sanitisers at low prices and face masks as well,” he noted.


                          source: EFInA, Naspire


A look at one of Nigeria’s Agent Banking Providers: E-SL and PayCentre 

E-Settlement Limited (E-SL) is a diversified financial service provider focused primarily on transforming the payment services landscape in Nigeria and Africa. ESL is also a leading provider of mobile Point of Sales (mPOS) solutions in Nigeria as part of the company’s attempt to drive card acceptance at merchant points and boost online payment acceptance. ESL has been able to do this through a network of subsidiaries, including PayCentre, CashEnvoy and PayPal. 

PayCentre was established in 2016 as the agency banking arm of ESL, primarily focused on driving financial inclusion through financial agents. It enhances financial inclusion by converting existing retail businesses like pharmacies and supermarkets into financial access points across Nigeria and Africa. One of the agents interviewed during this research, Leonard, a microlending agent over the past ten years in the Ajegunle area of Lagos state, switched to PayCentre recently. Given the high loan default rate, he did so as a “Plan B” to augment his existing loan processing business. With a broad smile on his face, he said: “If Plan A (referring to the business of loan processing) did not work, Plan B (referring to PayCentre) would work.” 

PayCentre currently boasts nearly 50,000 network agents (2018: 1,300), with plans underway to increase this number in the future through disruption. PayCentre’s unique solution offering is seen from its leverage of different platforms (mobile POS, android phones, and mobile applications) easily accessible by the unbanked population in Nigeria.

According to PayCentre agent Edward, the portability of PayCentre’s mPOS, the speed at which transactions are processed, and their application’s inbuilt functionality that enables the agent to automatically login disputes are factors that distinguish PayCentre from competitors. This last distinctive feature pioneered by PayCentre has since been copied and implemented by other agency banks like Firstmonie and Access Closa. 

Transaction volumes and values have also increased dramatically on the PayCentre platform. About 7% of respondents in a 2020 survey by EFInA said they process their most transactions on PayCentre platforms, a significant performance relative to big incumbent financial banks like Access, Zenith, GTB, UBA, and fintech like Paga and MKudi. 


source: EFInA, Naspire


PayCentre has processed nearly N1 trillion in transaction value since 2018. Within the last three quarters of 2020, transaction value processed by PayCentre grew by an average of 29% quarter-on-quarter, bolstered by the COVID-19 pandemic that saw increased appetite for agency banking. Some of PayCentre’s offering includes cash deposit and withdrawals, bills payment, airtime recharge, fund transfer, loan application, account opening and insurance. PayCentre currently has about seven offices in Nigeria – Lagos, Abeokuta, Imo, Ibadan, Port-Harcourt, Abuja and Kano.

A shower of good things

PayCentre has distinguished itself as a pacesetter in the Nigerian agency banking space; a feat achieved less than five years after the company commenced operations. Besides pioneering the dispute-logging functionality, PayCentre was also one of the first agent banks to introduce the N15,000 bonus for the best agent every month. In addition, it was the first to introduce instant settlement in the industry. Speaking to a correspondent, Olaoluwa Awojoodu, the CEO of PayCentre, said: “Before we introduced instant settlement, the normal thing was for agents to do a transaction and get money the next day. We switched to an instant settlement because we discovered that agents needed the money instantly.”

Also, the process of onboarding a new agent onto the PayCentre platform is usually seamless and getting the mPOS is fast. “So far, PayCentre has elevated my business in the sense that there is no cumbersome procedure and unnecessary delay when getting the device,” Edward, a PayCentre agent, noted. “This has helped me to establish more outlets faster than I could if I was to depend on commercial banks.” For Leonard, another PayCentre agent, the company stands out from other platforms because they do not burden their agents with meeting unnecessary targets. Paycentre’s charges a relatively flat tariff rate and gives extra charges to process NEPA bills, GOtv/DStv subscriptions, unlike the other platforms.

What next for PayCentre?

The Nigerian agency banking space is changing rapidly, especially as new entrants with the financial muscle and solid infrastructure occasionally churn out disruptive ideas to challenge the power of incumbency of legacy financial institutions. PayCentre has the first-mover advantage, introducing the instant settlement system and the dispute-logging functionality in its agent application. One such benefit is that it encourages patronage and enhances loyalty to a brand. PayCentre should strive to ensure that it is ahead of the market in strategy, innovation, and creativity.

Olaoluwa told us that capturing the African market is the next priority for PayCentre. “Our research has shown that most African countries face almost the same challenges when it comes to financial inclusion, so we are working on pushing our product to other African countries”. Other projects in the works for the company include using their agent network as valuable infrastructure to push other financial services and products such as microloans, insurance, access to credit, and so much more to underserved communities.

A customer-focused strategy can become the secret sauce to PayCentre’s emergence as Nigeria’s fastest evolving agency bank. Considering the results from the surveys conducted and interviews held with selected agent banking merchants, solving the challenge of interconnectivity and technology interoperability allowing for ease of service delivery is vital for winning in the industry.

Delineating PayCentre agents into groups based on geographical location or size and creating local dedicated customer service personnel to each group could help the company swiftly settle disputed transactions and ensure adequate resolution.

PayCentre could also use this to gather data that would be crucial for application upgrades and other management decision-making. Given the evolving needs of customers’ demand regarding a swift, easy, and personalised financial service delivery, a blend of customer-focused strategy and innovation will sustain the company in the long term.

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