Banking The Unbanked At The Bottom Of The Economic Pyramid In Nigeria: Challenges And Opportunities For Profitable Growth

The implementation of the recent government Treasury Single Account (TSA) policy by the federal government of Nigeria and its agencies has brought to the forefront the vulnerabilities of our banks’ over dependence on public sector funds and large enterprises for business. However, while so much attention has been given by the media and professional discussants to the short-term impact of the policy on banks’ liquidity, stability and profitability, nothing has been mentioned of the window of opportunities it has presented. The primary objective of this paper is thus to highlight and discuss the huge market opportunity at the bottom of our economic pyramid begging to be harnessed by financial institutions that can more than fill the void created by the policy. The paper argues that the unexplored and uncontested massive goldmine at our economic base offers a market space for cheap and stable source of funds for profitable growth for financial institutions that are genuinely seeking economic profits. It however notes that the market segment is exclusively for financial organizations that are patient and innovative; that can create and capture new demands to create a leap in value for themselves as well as lift millions of households out of social exclusion, misery and poverty. For a better appreciation of its context, the paper provides an overview of the socio-economic lives of households at the foot of our economic ladder including their financial practices, preferences and behaviours such as; informal savings mechanisms, own-wealth creation, insurance against economic shocks and payments/remittances. It also highlights and reviews the challenges and risks of banking the segment and concludes with reference to existing literature that with appropriate customer value propositions (CVP), constellations and pricing strategy; financial institutions can profitably serve the segment at scale and take millions out of social exclusion and poverty. The paper then concludes with selected policy recommendations for practitioners and policy makers that are aimed at tackling the deeply rooted socioeconomic structural and institutional barriers that exacerbate financial exclusion, inequality, misery and poverty in Nigeria.