The Nigerian government is currently undertaking a range of measures to promote financial inclusion, and one of them is supporting the Financial Technology ecosystem (FinTech) in the country. Last weekend, the major regulators in the financial sector were present to support the launch of the Association of Financial Service Innovators (FSI) which was occasioned by the unveiling of a smart initiative to create a regulatory sandbox programme to support budding FinTech companies.
Representatives from the Central Bank of Nigeria (CBN) and Nigeria Interbank Settlement System (NIBSS) were present at the event to extend their support and guidance to help continuous innovation and growth in the FinTech sector. Initiating a regulatory sandbox was one of the most important parts of the event because of its potential to boost research, development and innovation.
Deputy Director, Banking and Payment System Department, CBN, Mr. Musa Jimoh said “the objective is to empower small companies, which we refer to as start-ups, innovators, technology companies and young Nigerians that have great ideas, but lack the financial wherewithal to bring out their products or even integrate with the banks and all that.” He further opined that the initiative is in recognition of the roles of FinTechs in the financial industry and the need for regulatory support, to assist them to play these roles.
A regulatory sandbox provides a flexible regulatory environment to drive innovative products. There are set rules in this environment that allow startups to test products and business models in a live environment with real market data.
Several countries have made use of these sandboxes to facilitate growth in their financial sectors. Nigeria is among the first African countries taking this progressive and supportive approach toward the idea of FinTech innovation. Earlier this month, the South African Reserve Bank also announced that it was assessing the applicability of a regulatory sandbox.
The original regulatory sandbox originated in 2004 in the Philippines for the purpose of financial inclusion. This programme allowed a telecom company, Globe, to use the “test and learn” approach of the environment to create a mobile money service independently. The service created, GCash, is one of the largest mobile money services in the country now, servicing up to 8 million overseas Filipino workers in international remittances.
The success of this approach has led many other countries, like the United States, United Kingdom, Canada and other developed countries to adopt it.
In 2012, the CBN launched the Nigerian National Financial Inclusion Strategy (NFIS) and set the target to reduce the percentage of adult Nigerians excluded from access to financial services from 46.3% in 2010 to 20% in 2020. As at 2016, the percentage of the financially excluded only dropped to 41.6%. This initiative, which will be managed by the newly created FSI community, under the supervision of the CBN and NIBSS could help unearth innovative ideas to reach the unbanked in the country.