“If I were given one hour to save the planet, I would spend 59 minutes defining the problem and one minute resolving it” — Albert Einstein.
Once upon a time, social workers from a development agency arrived at a remote village. They found that there were no boreholes, and women walked miles to the stream for water. To fix this problem, the social workers recommended the sinking of a borehole at an easily accessible location within the village — which was promptly done. Yet the women kept going to the stream. Finally, the social workers bothered to ask the women questions and found that while the borehole was a nice thing, they preferred the stream because the journey afforded time with other women and time away from the rigours of family life.
To solve problems effectively, we must understand the perspective of the people we are trying to help. Many times, when we assess a problem, we make assumptions about the situation and end-user and don’t try to validate them. Design thinking involves understanding the user, questioning assumptions, and redefining problems. That way, we can provide solutions that don’t just sound good to us but meet the users at their points of need.
ASKING THE RIGHT QUESTIONS
According to the World Bank’s 2017 Global Findex, individuals are financially included if they have “access to useful and affordable financial products and services that meet their needs, transactions, payments, savings, credit, and insurance.” It follows that a financially excluded person lacks this access and therefore enjoys none of the supposed benefits. But what is the nature of this exclusion? Are these services desired in the first place? Is exclusion a matter of choice or a result of systemic disadvantages? Are there any unintended consequences to worry about? Before pushing out “We should all be included” messages, it’s important to understand why people are and remain financially excluded.
EXCLUSION IS NOT A CHOICE; IT IS A CONSEQUENCE.
Ego Kudi is a 28 year-old man who sells plantain chips in Lagos traffic for 14 hours every day, leaving after traffic dies down at 10 pm. Assuming he makes a revenue of 15,000 naira, he can’t go to a bank at that time to deposit money. Even if he could, he would not want to go back at 5.30 am the next day to withdraw 14,000 naira to buy inventory for that day. If he goes to the ATM closest to him, his bank will fine him for using another bank’s ATM. From this scenario, we see that having a bank account with a traditional bank may seem impractical to Ego.
In a 2017 survey conducted by the World Bank, 64% of Nigerian respondents cited “having too little money to use an account” as a reason for not having a financial institution account. Low-income earners are more likely to be excluded than high-income earners. According to EFInA, 37.2% of financially excluded Nigerians earn below 15,000 naira monthly and 26.3% earn between 15,000 and 35,000 naira monthly. Only 1.6% of excluded Nigerians earn above 75,000. The minimum wage in Nigeria is currently 18,000 naira, so these figures should not be surprising. Of what use is a bank account to people who have little or no money to save and invest, no collateral for loans, no property to be insured, and no employer to set up a pension fund for them? Nigeria has a large informal sector. High levels of poverty and unemployment have ensured that many Nigerians resort to petty trading and subsistence farming to earn a living. 82% of Nigerians receive their main income in cash. For wage earners like Ego, savings is a secondary activity. They usually need cash in hand to pay for their daily expenses as their income is low and irregular, and most transactions in the economy still happen in cash. These factors make bank deposits unattractive to many excluded individuals.
In the pre-mentioned World Bank survey, 19% of respondents cited geographical distance from banks as a reason for not having bank accounts. While a street in an urban area might have up to 5 banks, some entire villages do not have any bank. In such places, mobile agent banking is poised to solve this problem by taking basic financial services closer to users. Commercial banks avoid setting up branches in many of these areas because they are not profitable. We can’t force banks to care more about poor people and run branches at a loss. After all, the whole point of business is profit maximization.
Banks require much documentation to open accounts for customers. For the KYC verification, you might be required to provide your driver’s license, international passport, or voter’s card, as well as utility bills. How do homeless people get utility bills? Obtaining identification documents in Nigeria costs a lot of time and money, and the process can be onerous. The national identity card should be the default ID for citizens. Yet it takes multiple visits over several weeks to get the temporary card. It costs over 20,000 to get a new driver’s license (driving school fees included) and 10,000 naira to renew an expired license. As the respondents to the survey claimed an average of 15,000 income, procuring a drivers licence to enable them to open a bank account seems unviable. Nigeria needs an aggregated national identification document that is affordable and easy to obtain.
For many financially excluded individuals, financial services are simply too expensive relative to income. Banks charge SMS alert, maintenance fees, VAT on maintenance fees, charges for using another bank’s ATM, to name a few. Half the time, bank charges are more than the interest earned on your savings. Considering the frequent use of savings accounts, many users don’t even earn interest. We cannot keep charging people who don’t have enough and expect them to keep using financial services. There is also some confusion at the policy level. The CBN’s recent announcement of charges on electronic transactions as well as the proposed communication tax bill only make inclusion more expensive, and less attractive.
DESIGNING THE SOLUTION
The most common reasons for exclusion are linked to poverty. To combat exclusion, we must explore sustainable economic empowerment initiatives. Programs that don’t just give people fish but teach them to fish. The federal government must bear in mind the goal of attaining financial inclusion when making policies. All new regulations and initiatives must be adapted to promote inclusion.
Nigeria’s formal financial institutions were not designed to cater to the excluded. There should be a separate set of financial institutions that are designed to tackle poverty and financial exclusion. This is the case for design thinking.
Take for instance the Grameen Bank in Bangladesh. Grameen Bank is a community development bank and microfinance organisation that provides financial services to the underserved — the poor, illiterate, women, and unemployed. It is the result of a research project by Muhammad Yunus, a Professor at the University of Chittagong in Bangladesh, on how to design a credit delivery system to provide banking services to the rural poor. For instance, the bank provides microcredit to the poor without collateral. The success of Grameen Bank earned Yunus a Nobel Peace Prize and has inspired similar projects in more than 64 countries around the world. As of 2017, the bank had about 2,600 branches and nine million borrowers, with a repayment rate of 99.6%.
Professor Yunus did not invent microfinance banks. He simply used design thinking to develop a version of the banking model that worked for his end-users. By taking a human-centred approach, Yunus created a unique combination of solutions that met the specific banking needs of the poor in Bangladesh. This is the approach that we need to adopt to combat financial exclusion in Nigeria. We can no longer use a “one-size-fits-all” solution. We also can’t adopt ill-fitting technology to solve exclusion. In designing products and services to solve exclusion, we must consider the unique needs and lifestyle of the unbanked and carefully design interventions that are focused on them. Zenith bank and GTBank offer free banking services to customers above 55 and 65 years old respectively. Is it possible to offer cheaper services to a wider range of customers? Just as many banks have separate departments and services for high net worth individuals, we may need to offer a new set of financial services for the erstwhile excluded.
The task now is to create a new range of financial products for people like Ego and revise the current banking system to accommodate the new products.
EFInA Access to financial services 2018 survey (2018) key findings