Abstract
Financial exclusion in Africa has been a major research issue over the last decades. A significant proportion of adults in Sub-Saharan countries engage in informal banking services to support their families. Nigeria is among the African countries with the highest rate of financial exclusion attributed to the country’s marginalized communities. Africans living in racially diverse countries face financial inclusion in formal banking systems. The historic growth of religious communities in Nigeria has a huge role in the country’s sluggish growth in financial inclusion. Women are at the highest risk of financial exclusion in Nigeria and are mainly involved in informal financial networks to access credit and make savings. Nigeria’s persistent financial exclusion since the pre-colonial error results from socio-economic characteristics.
Introduction
The World Bank and United Nations recommend countries and regions invest largely in financial institutions by availing credit to the larger population to enhance productivity through poverty reduction. The microfinance industry is ranked as the most inclusive, targeting marginalized groups to offer them access to loans. In the early years before 1980, poor people had limited access to borrowed money because most credit unions targeted salaried persons. Though credit unions in most countries have enhanced access to finance for marginalized groups, some financial institutions in African countries, such as Nigeria, continue to hold on to the historically-rooted prejudices. The main reasons for the financial exclusion faced by the poor in Nigeria are race, class, gender, and religion.
Effect of Race on Financial Exclusion
The problem of financial inclusion is worldwide but is more acute in developing and African countries. Research shows that a large population of African countries relies on the use of informal financial services (Central Bank of Nigeria, 2013, p. 13). The insufficient financial infrastructures in these nations, specifically in Nigeria, have been attributed to racial discrimination from global institutions supporting financial inclusion. The lack of goodwill by the developed countries towards Nigeria has led to a lack of financial sophistication in the country. Despite significant efforts by the country, the majority of Nigerians lack knowledge of access to financial services. According to the Central Bank of Nigeria (2013), Nigeria and other African countries are exposed to extortion and abuse by global financial regulators leading to heighten financial exclusion in these countries (p. 35). Fight against racial discrimination is a significant factor to consider in promoting financial inclusion among Sub-Saharan countries.
Limited access to financial services limits the Blacks in Guyana from building a financial history, making them unsuitable loan borrowers is a demonstration of racial discrimination. The senior management in the micro-credit institutions believed that the Afro-Guyanese were unbankable and loan defaulters (Hossein, 2014, p. 88). The same trend is experienced in the US, where 13.8% of Black and 12.2% of Hispanic households are unbanked (Sanchez-Moyano & Shrimali, 2021). The oppressive racialized environment supported the Indo-Guyanese bankers in their biased lending practices (Hossein, 2014, p. 88). The lack of fair microfinance policies and lending regulations is a significant factor that can be adopted to eliminate racial disparities in a country like Guyana.
Effect of Class on Financial Exclusion
Despite the global consensus on the importance of realizing financial inclusion, social-economic characteristics such as social class significantly influence financial exclusion in most sub-Saharan countries. Nigeria’s efforts towards financial stability started before the colonial period among the Ngwa community. This community established isusu, a means of raising capital for all their undertakings (Nwabughuogu, 1984, p. 54). The isusu was an informal financial system that the Nigerians used to enhance their economic stability.
In Kenya and Uganda, employment or income source is a significant factor influencing the access and exclusion of financial services. In Kenya, low and middle-income earners, including domestic workers and those who depend on pension transfers, are likely to be excluded from financial services compared to the high-income group (Johnson & Nino-Zarazua, 2011, p. 12). This is similar to Nigeria, which is considered one of the unequal societies globally (Dauda, 2021, p. 3). Nigeria’s poverty rates are as high as 40.1%, implying that about 80 million individuals in the country are either moderately or extremely poor (Osakwe, 2020, p. 6). Equally, the high unemployment rates in Nigeria at 27.1% explain the wide gap between the current financial inclusion rates and the national targets (Osakwe, 2020, p. 6). Class inequality causes limited access to financial products and services in the country.
Effect of Gender on Financial Exclusion
The gender gap in financial inclusion is the largest in African countries. According to Hossein (2013), most poor women in these countries join organized mutual aid groups because they are exempted from formal development programs intended to promote financial inclusion (Hossein, 2013, p. 424). Nigeria has the largest gender gap to resolve to achieve the country’s National Financial Inclusion Strategy target (Central Bank of Nigeria, 2019, p. 2). The differences in usage, access, and supply of financial services between Nigerian men and women are attributed to the income and education disparities and low trust in financial service providers towards women (Central Bank of Nigeria, 2019, p. 3). Therefore, most women in Sub-Saharan countries react to exclusionary finance by depending on informal banking systems to meet their needs.
The Caribbean banker ladies, representing poor black women, adopted viable grass-root banking systems to provide community-based solutions for black women and eliminate financial exclusion. The banking systems were meant to provide low-income female entrepreneurs with financial services, including collecting their savings and lending them monies (Hossein, 2013, p. 428). Despite the lack of trust in FSPs, most Nigerian women express the need for financial services to meet their needs (Central Bank of Nigeria, 2019, p. 17). Women in this country exhibit high access to and usage of informal financial services compared to their male counterparts.
Effect of Religion on Financial Exclusion
Religion is among the major factors hindering financial inclusion in most African countries. The growing religious movements in developing countries, specifically in Nigeria, continue to shape socio-economic processes within the informal sector. The conservatism of these religious movements has led to resistance towards economic processes, which they believe as western. For instance, the Muslim community avoids any forms of financial transactions involving a predetermined rate of return because they consider such engagements unfair or exploitative (Umar et al., 2019, p. 284). The informal religious and commercial groupings and their conservatism contribute immensely to financial exclusion in Nigeria.
The growth of Christian religious movements in Nigeria has been central to the country’s rising financial exclusion. The country’s political elites and entrepreneurial religious leaders have actively thwarted the religious networks for self-gains (Meagher, 2009, p. 420). The instrumentalization of the Nigerian Christian and Islamic movements hugely affects the country’s financial exclusion.
Conclusion
Delayed achievement of financial inclusion in Nigeria can be attributed to several factors, including gender, religion, class, and race. The Blacks in racially diverse countries belong to the marginalized groups whose limited access to micro-finance programs is limited. On the other hand, managers and other financial leaders tend to deny low-class individuals access to micro-credit resources leaving them to depend on informal financial systems. Similarly, Nigerian women experience financial exclusion more than women. Religious movements, including Islam and Christianity, have a huge role in the gap between financial inclusion in Nigeria and the targeted level. The four factors collaboratively influence Nigeria’s access to and utilization of financial services and products.
References
Central Bank of Nigeria. (2013). Financial inclusion in Nigeria: Issues and challenges. Web.
Central Bank of Nigeria. (2019). Assessing of women’s financial inclusion in Nigeria. Enhancing financial innovation and access. Web.
Dauda, R. (2021). Poverty and inequality: The challenges to sustainable development in Nigeria. Ilorin Journal of Economic Policy, 8(2), 1-16.
Hossein, C. S. (2013). The Black social economy: Perseverance of banker ladies in the slums. Annals of Public and Cooperative Economics, 84(4), 423-442.
Hossein, C. S. (2014). The exclusion of Afro-Guyanese Hucksters in micro-banking. European Review of Latin American and Caribbean Studies/Revista Europea de Estudios Latinoamericanos y del Caribe, 75-98.
Johnson, S., & Nino-Zarazua, M. (2011). Financial access and exclusion in Kenya and Uganda. The journal of Development studies, 47(3), 475-496. Web.
Meagher, K. (2009). Trading on faith: Religious movements and informal economic governance in Nigeria. The Journal of Modern African Studies, 47(3), 397-423. Web.
Nwabughuogu, A. I. (1984). The isusu: An institution for capital formation among the Ngwa Igbo; its origin and development to 1951. Africa, 54(4), 46-58.
Osakwe, S. (2020). How can developing countries reduce financial exclusion? A critical review of Nigeria’s financial inclusion strategy. A critical review of Nigeria’s financial inclusion strategy. Making Finance Work for Africa.
Sanchez-Moyano. R., & Shrimali, B. P. (2021). Community development: the racialized roots of financial exclusion. Federal Reserve Bank of San Francisco. Web.
Umar, U. H., Ado, M. B., & Ayuba, H. (2019). Is religion (interest) an impediment to Nigeria’s financial inclusion targets by the year 2020? A qualitative inquiry. Qualitative Research in Financial Markets, 12(3), 283-300.