A Look on Why PoS Agents Are Struggling to Drive Financial Inclusion in Nigeria

According to the Nigerian Financial Service Market study, one of the primary reasons why people in Nigeria do not have a bank account is a lack of closeness to a financial institution.

Nigeria has a population of more than 100 million people and 4,437 commercial bank branches. This means that a single bank branch will service more than 27,000 customers.

Although financial authorities have attempted to push digital finance systems to compensate for the low number of physical bank branches, many financial institutions have failed to establish low-cost digital finance systems outside of their core regions.

Adults in Nigeria having bank accounts climbed from 33% to 45% between 2012 and 2020, according to the National Financial Inclusion Strategy 2022 (PDF).

Why Are Point-Of-Sale Agents Unable to Promote Financial Inclusion?

When the CBN issued rules for agency banking in 2013, the objective was to increase financial inclusion in the country.

While one bank branch must serve 27,000 individuals, one PoS agent must serve only 80 people. This is because, while there are only 4,437 bank branches in the country, there are 1.5 million PoS agents.

With data like these, it's easy to see that PoS agents or agency banking constitute the key to financial inclusion in Nigeria. However, these PoS agents have the same challenge that bank offices do which is location.

PoS agents are commonly found in locations where individuals already have bank accounts. 70% of persons without bank accounts live in rural regions, but most PoS agents and banks are in cities.

Lagos is known as the home of 30% of Nigeria's 4,437 bank branches. Similarly, the top states for PoS agents are Lagos and Abuja. Lagos has 322,266 agents, accounting for 21% of the total agents in the country.

Why Do the Majority of PoS Agents Like Cities?

Profitability is one of the primary reasons why PoS agents favour cities. The CBN underlined in its National Financial Inclusion Strategy for 2022 that these agents have few reasons to open up shop in rural regions.

While PoS agents prefer to work in cities, there are still a considerable number of them in less developed regions who can help people financially. This is because 75% of people who do not have bank accounts have used a PoS agent in the past.

PoS agents can provide financial services such as deposits, withdrawals, bill payments, and account opening, however, they are best recognized for providing cash-in and cash-out services only. According to the Nigerian Financial Service Market study, the majority of those who utilize these agents do so to transfer or receive money.

As a result, the CBN concedes that financial literacy is one of the main obstacles to financial inclusion. If PoS agents are to aid with financial inclusion in Nigeria, there must be a reason for them to set up shops in rural regions. Users in these places should also be aware that the agents provide additional services in addition to deposits and withdrawals.