Microinsurance requiring effective system to benefit vulnerable poor

By Modestus Anaesorony, Business Day Online

The Central Bank of Nigeria (CBN) on January 1, 2012 flagged off mobile money in Nigeria, with Lagos as the starting point. The policy decision was in view of increasing dominance of cash in the economy with its implications for cost of cash management to the banking industry. The policy is therefore aimed at reducing the volume of cash flow in the economy.

But for the policy to succeed, small businesses in the country need to be carried along, especially with regard to how the policy can impact them. This was the position of experts at the 5th edition of BusinessDay SME Forum held in Lagos recently.

Speaking in a welcome address, Jemie Onwuchekwa, Editor-in-Chief of BusinessDay, said, “For the policy to succeed, there must be knowledge and information on how it can impact businesses, herein SMEs.” He informed that the objective of the forum was to explore ways small businesses in the country could benefit from the cashless policy, especially with their prominent role of stimulating positive economic growth.

Chidi Umeano, head of Shared Services at CBN, said in a keynote speech that the apex bank understands the importance of SMEs as engine for growth and thus aims to curb some of the negative consequences (high cost of cash) associated with the usage of physical cash in the economy.

“The CBN embarked on a shared services programme to enable greater financial inclusion and integration of financial services into the economy, including reducing industry cost-to-serve by 30 percent,” he explained, adding that “an efficient and modern payment system is positively correlated with economic development, and a key enabler for economic growth”.

On his part, Ausbeth Ajagu, president, Academy for Entrepreneurial Studies, said, “SMEs are critical to the economic development of any nation, and in Nigeria, they represent a sizeable percentage of the informal sector which can be used to drive and sustain the penetration of the cash-lite policy of the apex bank.” According to him, the policy will provide new statistical data on businesses as previously unrecorded informal (SME) transactions will become recorded. “These data can be useful for SMEs to understand business trends that would help develop their businesses,” he explained.

Highlighting the infrastructure gap which includes poor service network, ATM failures, communications (POS) failure, and power as some of the challenges, Ajagu called on stakeholders to address the problems so that the system can operate effectively.

Akin Oyebode, head of SME Banking at Stanbic IBTC, who was represented by the bank’s segment manager, Lanre Odufuwa, in a statement lamented that Nigeria, with growth projection of 7 percent (third fastest growing economy in the world) still lags behind in terms of employment opportunities, including SME market. The seasoned banker noted the reason for the drawback as lack of access to finance, stating that “SME financing in the country is below what it should be”. He, however, affirmed that the bank has supported about 200 small businesses in the country to the tune of N400 billion.

Commenting, the CEO of National Association of Small and Medium Enterprises (NASME), Eke Ubiji, said: “Cash-lite economy is a good opportunity for SMEs in the area of finance, and will help in resolving the issue of credit information and profile of SMEs.”

Equally, Akin Lawal, director, Payment Infrastructure and Processing at Interswitch, in a presentation on “Value Creation to Foster Compliance of Cash-lite Policy”, stated that “with Nigeria as the world’s third fastest growing economy, electronic-based payment system is the way to go”, adding that “adopting an electronic and modern payment system for organisations is advantageous, irrespective of any cashless society”.

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