Effect of the Alternate Service Delivery Channels on Financial Inclusions in Nigeria

Introduction

Recent studies done by Mbutor and Uba (2013) have shown that gaining a proper understanding of the significant link between finance and the growth of the economy remains the chief concern for economists over the years. As a logical and professional extension of such form of inquiry, economists have increasingly shown interest in the techniques and financial inclusion, or the enhanced access to and the utilization of formal financial services (Huefner and Bykere, 2015). Economic policymakers have broadly embraced such lines of inquiry with urgency following the economic as well as financial crises, which has made them seek to understand the factors augmenting participation in the financial system and those deterring the efficient utilization of financial services. Leeladhar (2005) suggest that economic policies that tend to target the well-being of the banking systems in any country are always active as compared to the targeted strategies.

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Furthermore, recent surveys have shown that the shutdown of high profile banks has lower chances of using core financial products over a specified duration (Mbutor and Uba, 2013). In line with a broader scope of literature on financial inclusion as well as from nation with considerably well-established banking systems, over the decades, it has been noted that access to commercial goods raises with amount of income earned, employment opportunities, levels of education, ownership of a stable bank account, high level of knowledge about money, and proximity to different financial offices in the nation (Huefner and Bykere, 2015). In the modern times, financial inclusion is enhanced with the possession of a mobile phone, interest in monetary issues, the status of joblessness, but falls with the urbanization levels in the region (Mbutor and Uba, 2013). In the studies, Mbutor and Uba (2013) have suggested that inefficient supervision of the banking sector in Nigeria has been the leading cause of poor financial inclusion in the nation. However, the national government and the financial organizations are doing their best to adopt international strategies being utilized in other countries to enhance economic integration in all parts of the world.

Digital finance has been noted to be one of the essential tools for a considerable number of societies that lack proper access to conventional banking infrastructure (Leeladhar, 2005). In most cases, for instance in Nigeria, the clients are always seeking the disruptive solution that tends to bypass the culture of bricks and mortar. The reason is to try and provide boundless, branchless banking that helps in mitigating the financial barriers that are adversely affecting the lives of the people. ALAT by Wema bank was established in May 2017 as the highly digitalized bank in Nigeria. The ALAT system permits the customers to carry out banking transactions without necessarily visiting any branch in the country. ALAT was created to take care of the need for the modern day digital consumers who are in dire need of banking system that entirely understands as well as matches the financial customer's lifestyle in consideration to the value for time and higher levels of responsiveness. Recently, researchers claim that digital banking help people to save more money and time that they would have used to gain access to the banks in various parts of the world (Mbutor and Uba, 2013). For instance, banking customers using ALAT can save a lot of money with the simple automated saving plan and earn over 10% yearly interest, which is almost three times the rate offered by the standard banks. Furthermore, they help people to get financial loans on a short-term basis with no paperwork or collateral being provided before one can gain access to such services. Digital banking also allows the consumers to carry out some banking transactions such as personal savings, loans on objectives, card regulation, as well as the virtual dollar (Central Bank of Nigeria, 2013).

Nigeria is a nation that has a large number of youths as well as an active adult population, and ALAT will remain the solution to this demographics financial needs. It is worth noting that ALAT meets such strides in the banking sector because it is an innovative platform that is designed for the youthful generation in the world today (Central Bank of Nigeria, 2013). Thus, ALAT is intended for the students, young adults, youthful professionals, as well as businesspeople with an intention to try and ensure that they meet their dynamic needs in life. Most products offered by ALAT are an excellent tool that can be used to meet the ever-rising demand for the young Nigerians to save more money and lead a flexible lifestyle. The saving options are made up of three primary good such as the Flexi goals that permit the users to keep a certain amount of money on a daily basis but only withdraw fifty per cent of the overall amount once per month (Mbutor and Uba, 2013). The fixed goals allow for daily, weekly, or monthly saving of many without the user being able to withdraw any sum of money until he or she meets his or her objectives. ALAT has been diversified to a level that it provides short-term loans, virtual dollar converter cards, as well as payment scheduling services. Thus, all these flexible offerings have so far proven to be very helpful, and it will drive Nigeria towards attaining financial stability in the nation.

Since the launching of ALAT in 2017, the Nigerian market has responded positively resulting in the group attracting over two hundred and eighty thousand customers countrywide with a deposit of over two billion Naira being made by the consumers (Central Bank of Nigeria, 2013). This shows that there is still a lot of space to enhance the industries reach as they continue to create as well as an upgrade to offer more solutions that match the people lifestyles. The progress of ALAT can be marked by the fact that it has been one of the recipients of several awards for its digital services. All the success attained is credited to the innovative and aggressive team of employees who have vast skills in financial matters, particularly in the technological sector (Mbutor and Uba, 2013). The company also has partnered with technology-based firms that in turn have assisted in spearheading the growth of a vibrant financial technology ecosystem that can proficiently serve the entire nation. The collaborations have helped the country in meeting the various needs of the consumers through proper structuring of the ALAT project. It is essential to note that most financial institutions cannot offer long-term solutions to all the people in the nation but can facilitate it. WEMA bank through their ALAT digital program is trying to do their best to help the people in the country to have easy access to banking services at any time and place (Raina, 2015). ALAT has brought a great deal of influence on the local societies that stretch far beyond the provision of digital baking services. ALAT prides itself on the extensive corporate social responsibility plans that consist of small activities that when merged make a significant effect on the lives of the Nigerian people (Mbutor and Uba, 2013). Actions performed by the firm consist of cleaning of the coastal beaches, donation of learning materials to public institutions, and many more. The ALAT group also seeks to help the young people in Nigeria to gain access to higher education and job opportunities through their internship programs. ALAT also runs campaigns that are designed to expand financial literacy levels in the society, which is one of the vital tools that help people in proficiently running their activities in the nation (Raina, 2013).

Statement of the Problem

At the moment, when the Nigerian economy is falling, financial inclusion may not offer the full solution to all the problems facing the people at the moment. It is essential to note that financial inclusion makes sure that regardless of the people's income levels, all the people and business venture have equal access to the necessary financial services products. Provided that the fact that a significant fraction of the Nigerian population is made up of low-income earners holding an enormous chunk of the country's untapped funds, enhancing access will promote the accumulation of money, creation of loans, and stimulation of investment activities. Kwashie (2012) estimate that Nigeria could have noted a significant amount of growth on financial inclusion terms if all the social and political factors are held constant. Nigeria has realized great success in the area of financial inclusion, but this still leaves out over forty per cent of the adult population in the country and almost ten per cent of the people who do not have the necessary technology to use the digital banking services. This is the core reason why the government of Nigeria has decided to set financial inclusion as the central pillar of the Financial System Strategy 2020 whose primary objective is to make the nation one of the biggest economies in the world by 2020 (Huefner and Bykere, 2015). However, the plan is drawn back through lower literacy level, high inflation rates, inadequate salaries, and increasing poverty in different parts of the nation. For that reason, the federal government, as well as other financial bodies, must take proactive measure to make sure that there is increased financial inclusion, which may include eschewing any banking laws and regulation that tend to discourage people from saving their incomes in the financial institutions.

Statement of Purpose

The focus of this research will be aimed at ascertaining the effect of the alternate service delivery channels on financial inclusions in Nigeria. The dissertation will also seek to provide valuable information that can be used for future studies. Even though there is the availability of adequate evidence to support the need to transform financial system in Nigeria, less amount of in-depth studies has been carried out on the effect of alternative service delivery channels on financial inclusions in Nigeria.

The current day economic system of Nigeria is facing a significant amount of issues in its growth. Thus, one of the leading goals of the Nigerian financial system is to become one of the well-established ones in the world by the year 2020. The tasks guided by the process of digitalization of the banking system needs pedagogical enlighten as a tool for continuous searching for a mechanism for implementation of the best alternatives for service delivery in the nation. On that note, it seems vital to study the legacy of financial i...