An escape from poverty through microfinance and remittance?

Poverty in a postcolonial nation-state like Nigeria and indeed most of Africa may not be easy to eradicate but not trying at all is almost a crime to humanity… In Nigeria, the typology of poverty is pathetic. There are the shirtless poor, the poor, pregnant and powerless. In addition, there are citizens who inherited poverty and appear trapped for life except a destiny helper shows up.

SAVINGS, withdrawals and trust are the pillars of banking anywhere in the world. To most people in rural areas, the Baba Alajo (money collectors) are the first systematic forms of saving money for rainy days. These individuals were very trusted in the communities. They went around their clients collecting contributions for the day or the evenings and meticulously recording each contributions. Disputes were minimal if at all.  As society grew more complex, the concept of micro financial institutions started to take root. One of the websites informs us that, “[m]ost of the microfinance programs and activities in Africa are focused on the sub-Saharan region.  It is one of the poorest regions in the world, where only 5% to 25% of people have access to financial services. The region is substantially underserved by microfinance, with only 2% of the world’s microfinance institutions.”

The question to raise is why are most countries in sub-Saharan Africa under-banked?

Since what I do best is crawl the web for information, the website of Elixirr puts this question in context. It starts with what happened during the World Economic Forum on Africa in 2017 in Durban, South Africa:

“inclusive and sustainable growth was top of the agenda. Financial inclusion, which is critical to the long-term reduction in poverty and achievement of economic growth, was discussed at length. By enabling and broadening access to a wide range of financial services, people are not only better able to manage their day-to-day finances, but also plan for the future and cope with the financial impact of unexpected life events more successfully.

Access to banking has improved significantly over the past few years and, as we discussed in our podcast Fintech in Africa, there have been developments in the fintech landscape. But there is still a large proportion of the African population who remain unbanked. Banking in Africa still faces many challenges, from the lack of infrastructure to insufficient financial education. So how can the unbanked continent become banked?”

Another response to the old idea termed financial inclusion, which according to a World Bank site, is “accelerated by mobile phones and the internet, but gains have been uneven across countries. A new World Bank report on the use of financial services also finds that men remain more likely than women to have an account.”

The gender dimension to the equation of savings may not be so true in places like Nigeria where most of the sellers in the markets are women. As we all know and in support of Kofi Annan, the 7^th United Nations Secretary General “there is no tool for development more effective than the empowerment of women.”

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NIGERIA as we all know defies generalisations, it needs nuances to better comprehend even the most simple idea or phenomenon.

Ms. Bunmi Lawson, a microfinance expert, helps with a contextualization: “women’s access to finance is particularly important in Nigeria as they are considerably more financially excluded than men. The EFInA Access to Financial Services in Nigeria 2018 Survey shows that the national financial inclusion rate for women is 58.9% compared to the inclusion rate of 67.4% for men, giving a gender gap of 8.5%. This gap is particularly acute in rural areas where 24% of women report ownership of formal accounts, as opposed to 54% of men. Women have limited access to credit, insurance, savings, and other products, owing to different physical, cultural, religious, and social barrier.”

As an insider in the microfinance industry, Ms Lawson is of the view that “financial inclusion remains low in Africa due to high levels of poverty and low-income levels.”

On the same subject, Dr. Wale Adeduro presents a macro perspective of the Nigerian situation;

“A bird’s eye view:  Microfinance business in Nigeria is a highly regulated mass market, low budget and low margin business.

“Currently, Fintech Companies are threatening the traditional MFBs with the advantage to speed in granting loans, large asset base (largely from equity), efficient credit administration system and lean staff strength.”

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IN a twist of fate, we came across Ms Ayo Aladekomo, the Marketing and outreach Manager of SympliFi- a company interested in value-added remittances. Prior to this new job, she worked with Zmirage Multimedia Limited on a part time basis. Her present tasks include planning and executing marketing strategies for new and existing products and services, including multi-channel digital engagement; Working with the team to deliver the brand strategy; Promoting financial products and services; Developing and implementing an integrated strategic communications plan to advance brand identity, broaden awareness of products and increase visibility across key stakeholder audiences; Guiding the day-to-day activities of the marketing team; Reviewing changes to the market, consumer trends and the activities of competitors.

The market niche of SympliFihas more to do with value -dded remittances and financial support. To understand the implicit differences in microfinance and what SympliFi sets out to do; Ms Bunmi Lawson gives an informed opinion, “while having access to financial services could help reduce poverty by providing access to credit etc. where there is no income having a bank account is not likely to have much impact on very low-income levels. The cost of maintaining an account becomes too high relative to the income levels.”

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THE product on offer by SympliFiis to provide funds to those in need. To have a good grasp of what SympliFi intends to do we put a few questions to Ms. Aduke Aladekomo:

Can you introduce your two founders to us, what did they do before now?

Ms. Aladekomo: Our founders Maurice Iwunze and Gregoire Lecomte have both worked in the financial services sector across the globe, in corporate finance and capital markets. They met 5 years ago while working together for a financial services company focused on advancing financial inclusion in Africa. Their time there helped spur the idea for SympliFi.

They worked together for 4 years at Baobab Group (ex-Microcred), one of the largest microfinance groups in Africa and China. In their roles at the firm, they were in a unique position to learn first-hand the challenges faced by financial institutions in trying to provide access to finance and the challenges individuals faced in accessing finance.

What is  your business concept?

SympliFi is a financial technology company that was founded with one goal in mind — diaspora around the world to build prosperity in their home country. We realise that the diaspora’s financial needs are not singular in nature (just sending money), and that diaspora want more impactful, aspirational financial solutions for themselves and their family in their home country. Our technology platform eliminates borders to unlock opportunities and provide diaspora seamless access to these solutions, from credit to insurance and savings. This is important to us because we believe the people best positioned to drive economic prosperity in a community are the people from the community. Our job is to empower them. SympliFi’s solution is designed to increase access to finance for individuals in developing countries, while alleviating financial burdens faced by migrants. 

What has been the challenges so far?

What we are trying to do is new, redefining how people in the diaspora support loved ones back in their home country that ensures a win-win situation for all. Because it is new, people find it hard to believe at first, but gradually we are changing the narrative. The moment people try out the platform and they realise how brilliant the idea is, they love it and continue to use. So, what seems like a challenge now, is getting this new idea across to everyone but we are working on that one step at a time.

Our idea is powered by the essence of community and the desire to empower people in the diaspora to get financially involved in their home countries with ease. In the next five year, we will see more diaspora communities around the world embracing the products on our platform with great enthusiasm.

Our vision is “SYMPLE” — Provide people in the diaspora with financial solutions to create prosperity in their home countries.

As far back as November last year, to achieve their aim SympliFi is now collaborating with United Nations Capital Development Fund (UNCDF) to facilitate digital finance solutions to migrants.

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SINCE this is an initiative that needs expert analysis, we again reached out to Dr. Adeduro to help us understand the terrain of funds transfer as different from microfinance,

“This is a financial solution that I believe is needed at this time. However, for it to be successful its Unique Selling Point should be that it is robust enough to help the target customers to make investments decisions as well as monitor investments (in real estate, stocks and other financial instruments). It shall also be helpful for the company to deploy a technology that also allows the people in diaspora to borrow short-term funds from Nigerian financial system with ease and speed.

For those who desire to directly pay for the utilities (electricity, water, toll fares, waste disposal, medical bills etc.) of their loved ones in Nigeria, there should be one dial or programmed solutions that will enable them to meet these needs. These are my initial thoughts.”

Lest we forget, Dr. Victoria Voelwoen Danaan (2017) reminds us that “[v]arious indicators  suggest  that  poverty  is  a  major  obstacle  to  Nigeria’s  socio-economic  development.  Poverty  has  persisted  and  several  interventions  have  failed  to  yield  significant  improvement  in  Nigeria’s  Human  Development  Index  even  in  periods  of  economic  growth.  Plagued with the challenges of unemployment crises, climate change, conflict, fragility and violence, Nigeria (the most populous country in Africa) stands at a grave risk if poverty is not tackled.” 

Conclusion

POVERTY in a postcolonial nation-state like Nigeria and indeed most of Africa may not be easy to eradicate but not trying at all is almost a crime to humanity. It is true that the Holy Book says the poor you will always have with you; it does not in any way suggest that state and non-state actors should not attempt to solve the enormous challenges of poverty in its different manifestations. In Nigeria, the typology of poverty is pathetic. There are the shirtless poor, the poor, pregnant and powerless. In addition, there are citizens who inherited poverty and appear trapped for life except a destiny helper shows up. According to the vision of SympliFi “access creates opportunity.” The company then goes on to state its belief in empowerment as a means of readdressing a part of the financial burden poor people have to bear on a daily basis.

“Their fee-free platform enables [people in the] diaspora to help family back home access a small microfinance loan to start or grow a business, by serving as a guarantor on the loan. Eliminating the need to [constantly] send money.”