NIGERIA MOBILE MARKETING: Can Mobiles benefit Nigerian Micro Finance Banks?

Micro Finance Institutions in Nigeria, though still struggling to get a piece of the pie from stronger and more capitalized commercial banks, have still come up with impressive returns in the last few years. More than 840 MFIs are currently operating in the Nigerian market space while many others are getting ready to open to the public in the next few months.

Some viable MFI’s are posting results that are close to what established commercial banks, with over 50 branch networks, were earning before the pre–consolidation era when they had to increase their capital base.

Virtual banking and mobile banking will give massive leverage to the commercial banks in the next few months and this will massively differentiate them further from the MFIs and widen the gap. In the evolving scenario, what opportunities are open to the MFIs? Can they take on the mobile channel as a strategic channel to play catch up? Will the banks just use them as a cash in / cash out points for their mobile money roll out plans?

From the regulatory point of view, MFIs are allowed to play in the mobile landscape but Infrastructurally they are limited by their access to technology platforms like the financial switches. They still not directly connected and will have to get connection via a third party bank.

Mobile banking and mobile money is the easiest routes to go for any growth-oriented MFI in Nigeria with wide, disparate demographics and prohibitive costs for brick and mortar branch roll outs. Mobile presents a strong, compelling advantage for the MFIs.

Though the mobile is an unfamiliar terrain for most operators in the financial services sector, opportunities abound. The question is, what is out there?

64 million mobile subscribers is a significant number and potential customer base that can be engaged using the mobile channel. Network coverage is nearing 70 percent of total landmass in Nigeria, an extensive reach is what the mobile channel offers. Mobile phones are also what they already have with negative acquisition costs to enable potential customers to use the service.

Using mobile phones, the MFIs can develop independent collection points, therefore cash in / cash points using the human ATM models across areas of operations and in concentrated commercial areas like the major markets without a need to physically have a brick and mortar presence.

MFIs can increase their market penetration by serving the currently unbanked population, leveraging on their mobile and network coverage to bring services to this group who are financially excluded. This can be done at a significantly lower cost to the customer and less paper work which are always barriers for many semi-literate and illiterate citizens who mostly constitute the majority of the financially excluded.

Getting more products to the existing customers is a way to retain and keep customers. Many other products can be bundled into the mobile service provisioning of the MFIs to make it more attractive to existing customers.

Remittance business which has been the cash cow of commercial banks is an area where the MFIs can change the business models. Online remittance gives them the reach to the potential senders worldwide while the mobile phone of the local receiver is the connection point for engagement for the MFIs.

To save cost and achieve competitiveness in the face of biting global cash crunch and in local operating environment in Nigeria, virtual and mobile banking are not a question of when for the MFIs, more a question of how.

This article was written by Emmanuel Okoegwale of Mobile Money Africa.