Limiting Bank Charges To Boost SMEs’ Financial Inclusion

Several reports have indicted banks in the country for charging customers above regulatory limits, hence, making them pay undeclared charges, thereby, hampering policymakers’ efforts to reduce financial exclusion.

The bank charges range from SMS charges, to maintenance fee, management fee and withdrawal charges even when the Micro, Small and Medium Enterprises (MSMEs) are price-sensitive and averse to these charges as the charges will deplete working capitals and render businesses redundant in the long run.

By and large, the Central Bank of Nigeria (CBN), recognises the impact of product pricing on financial inclusion outcomes and reviewed pricing guidelines in 2019, issuing lowered pricing caps for electronic banking transactions effective January 2020. In addition, CBN encouraged financial service providers to restructure transaction fees and limits.

MSMEs belongs to the productive sector of the economy and as such, should be given financial literacy programmes to learn appropriate ways of transacting businesses to manage their cost and bills.
Stakeholders believes that the level of literacy amongst the MSMEs are extremely low and to restore confidence in the MSMEs space, there’s need to drive financial literacy programmes by ensuring that a lot of SMEs participate to close the exclusion gap

Stakeholders Views

Speaking in a media chat recently, Economist and senior commercial account manager, Business Development Bank of Canada (BDC) Wole Odeyemi said, the SMEs particularly are price sensitive and averse to multiple charges by the banks because they have limited amount of money in their possession.

According to him, “the high cost of financial services and multiplicity of charges by the banks creates financial exclusion for the SMEs and under-banked population while maintaining that this has made it look difficult to promote financial inclusion for SMEs whose working capital are tied down to their daily businesses.”

He reiterated the need to revolutionise digital banking for the non-digital and under-banked population in the SMEs ecosystem, noting that ,this would bring them formally to close the exclusion gap.
Odeyemi posited that, in this cashless policy era, there is need to educate the SMEs on financial literacy to integrate the unbanked population on the need to operate within the digital banking ecosystem.
He affirmed that the CBN needs to pay more attention to promoting the ease of doing business by driving financial inclusion for SMEs while positing that the level of financial inclusion amongst the SMEs and business stakeholders is extremely low.
He added that the aim of financial inclusion is to drive financial literacy amongst the traditionally under-banked population by fixing them among the digital space to enhance recovery.
He urged government to incentivise and remove the binding constraints that limits the day-to-day survival of the sector by addressing the challenges facing the sector, such as; lack of business plan, poor research, faulty business structures, multiple taxation, foreign exchange constraints, illiteracy amongst others.
Odeyemi lamented that these vulnerabilities and economic shocks affecting the MSMEs remained elevated such that the ease of doing business ranking has plummeted drastically while calling on the CBN to drive financial literacy programmes to close the exclusion gaps in the informal sector.
While addressing the issues concerning the CBN monetary policy, Odeyemi said the CBN monetary policy did a lot of damage to rural economy such that the Naira scarcity caused paralysis to SMEs in the rural sector.
Odeyemi hinted that the online fintech banks have done greatly to restore confidence in the ease of doing business as more businesses transition to digital banking platforms during the peak of cash crunch and Naira Swap to manage their transactions and bills, hence, leaving the conventional banks with their numerous charges.
He, however, called for increased broadband penetration in the digital economy to boost digital payments, across the financial services sector in urban, rural, and hard-to-reach areas across the country.
Also speaking, national president Association of Small Business Owners of Nigeria (ASBON), Dr. Femi Egbesola has stated that, the protracted and prolonged naira scarcity plummeted the ease of doing business ranking in the country noting that a large number of unbanked SMEs fell into a large swoop of redundancy.
He added that financial literacy was crucial to closing Nigeria’s financial exclusion gap on the informal sector and unbanked SMEs in the country while maintaining that the failures of SMEs to adopt financial literacy and digital banking platforms interrupted businesses and forced a lot of SMEs to run out of ideas, thereby, creating more redundancy and labour lost.
According to him, about 60 per cent of 40 million MSMEs fell into a large swoop of redundancy and labour lost during the peak of the cashless monetary policy implemented by the CBN which resulted to about 25 million MSMEs forced into a total decline of inactivity and business closure.
He bemoaned that the ease of doing business ranking has dropped to an all-time low because of the government policy which he said was killing businesses and hemorrhaging the economy.
He, however, urged the government to improve the statistics of ease of doing business in the country by putting round pegs into round holes to manage the affairs of the MSMEs sector, believing that, the SMEs are drivers of growth in the economy and the federal government must pay crucial attention to them.
He affirmed that financial literacy was crucial to closing Nigeria’s financial exclusion gap on the informal sector and unbanked SMEs in the country.
On the business side, he said the Business Management Organisation (BMO) must take pride to educate the financially excluded and the unbanked SMEs by letting them know the importance of bringing them on board into the financial ecospace.
He charged the BMOs and corporate organisation to educate the SMEs on financial literacy programmes by organising seminars and symposia to formally train the SMEs on the need to embrace digital banking and online transactions.
Similarly, immediate past president of National Association of Small Scale Industrialists, (NASSI), Kuti George said, the provision of Business Facilitation Act Bill signed by the Buhari administration will improve the ease of doing business in the country such that business registration and documentation with ministries and MDAs will be properly legislated.
On his part, he said: “we need to sensitise the SMEs in particular about the provisions of the Act to facilitate the ease of doing business and ensuring that they take advantages of the legislative bill to resuscitate the SMEs