In developing economies, many people are excluded in various ways from financial services. Including them is necessary for three main reasons. It allows financially vulnerable people to improve their lives through economic activity. Growth in the banking market can benefit financial service providers. And when citizens are financially enabled, a country’s economy can advance.
This is why financial inclusion continues to gain momentum in Africa’s policy and economic development. And to achieve it, banks need to reach out and engage with prospective customers who have been excluded from the financial system.
In our research, we looked at the ways three commercial banks and two microfinance banks in Nigeria engaged with financially vulnerable customers and potential customers. These may be petty traders in the informal economy, without bank accounts, living outside cities and relying solely on cash payments.
We approached the top managers of five institutions and asked how they create awareness of their products and services among these customers. Our study provides a picture of how financial products are being developed, marketed and delivered to this target market in Nigeria. We found that banks are using both innovative and traditional strategies and technologies to reach a variety of customers. The bank managers said their strategies were working and previously excluded customers could now access various financial products.
Nigerian banks are developing products specifically for financially excluded customers. These include “tier 1” bank accounts, which are entry-level accounts for individuals. A person can open the account with just a passport photograph and a bank verification number. Microfinance banks also provide business loans aimed at small business owners. Women in the informal sector, engaged in economic activities like petty trading, street hawking and food hawking, are also offered loans, credit facilities and grants. Often, these loans have low interest rates, to suit people with a low income and to support growth in economic activities led by women.