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SMEs may be the key to financial inclusion in Nigeria

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Writer: Ebenezer Onyeagwu, Group Managing Director & CEO, Zenith Financial institution


July 11, 2022

The banking sector in Africa is rising reasonably strongly from the impression of the COVID-19 pandemic. Nonetheless, the truth that the pandemic has considerably altered the face of banking on the continent is definitely. Right now, the trade is witnessing an acceleration in digital transformation. By all accounts, the survival of the established order, which is bricks and mortar, is just not assured throughout this reawakening.

Whereas for many banks, COVID-19 activated the necessity to suppose in a different way, for Zenith Financial institution, this has been the norm. Even earlier than the pandemic, Zenith Financial institution has all the time been a technology-driven financial institution that thrives on innovation. In reality, placing expertise and innovation on the coronary heart of its operations was elementary in guaranteeing minimal disruptions on the peak of the pandemic when shutdowns and restrictions considerably affected giant corporates, small and medium enterprises (SMEs) and retail purchasers.

The financial institution has continued to speculate immensely in new applied sciences and digital options

Zenith Financial institution readjusted its technique to make sure it continued to create worth for purchasers, workers and buyers. A part of the measures included activating a strong enterprise continuity plan to make sure that vital programs remained operational, permitting clients to proceed finishing up their banking transactions seamlessly. With the pangs of the pandemic changing into much less extreme, the financial institution is domesticating a few of the key pandemic traits, together with clients’ desire for digital channels.

With expertise being on the core of Zenith’s enterprise technique, the financial institution has continued to speculate immensely in new applied sciences and digital options. Within the outgone monetary 12 months, the financial institution’s investments in expertise grew by 40 p.c year-on-year from $49m in 2020 to $68.9m in 2021. These investments have simplified processes like account opening, mortgage utility and complaints decision. Extra importantly, the transaction platforms and channels have been dependable, safe and handy for purchasers, thus driving the continued patronage of the Zenith model. That is evident within the financial institution’s worth and quantity of digital transactions, which grew by 73 p.c and 69 p.c, respectively, year-on-year, in 2021.

The pursuit of development
Since its inception, Zenith Financial institution has demonstrated an amazing presence within the company market. The financial institution is the popular monetary associate for many companies working throughout numerous sectors of the Nigerian financial system, together with oil and fuel, energy, building, manufacturing and normal commerce. Having maintained management within the company market phase, the financial institution has set its concentrate on the retail market as a part of its technique to increase its buyer base and create extra diversification.

The financial institution’s need to result in transformation meant exploiting huge alternatives offered by the web

Within the final couple of years, Zenith Financial institution has been leveraging its success within the company phase to attain important mileage within the retail phase by means of its ‘retail take-over’ technique. The target is to turn into the market chief within the retail market. To date, the technique has led to outstanding development in buyer base and the roll-out of progressive retail banking providers.

It’s necessary to notice that digital infrastructure and platforms have been central in enabling the financial institution to penetrate the retail market. The financial institution leveraged cutting-edge expertise to ship best-in-class retail services that suited the digital calls for of retail clients.

Zenith Financial institution’s pursuit for development is each outwards and inwards. Outwards, the financial institution harbours massive plans to increase past its Nigerian residence market and turn into a drive to reckon with on the pan-African entrance. Zenith Financial institution has already set its sights on different African markets, starting with the West Africa sub-region, the place its model is making important inroads. Within the Ghanaian market, which it entered in 2005, the financial institution already boasts of 38 enterprise places of work. In addition to Ghana, the financial institution additionally has operations in Sierra Leone and Gambia.

Betting massive on SMEs
Inwards, Zenith understands the significance of the Nigerian market to its development ambitions. Other than implementing the ‘retail take-over’ technique, the financial institution can also be specializing in SMEs, women-led enterprises and monetary inclusion. In Nigeria, the SME sector is very large, contemplating it contributes 48 p.c of the nation’s GDP and is a significant contributor to employment technology. Regardless of the sector’s significance, SMEs face challenges, high of which is entry to reasonably priced credit score. One of many largest impediments to their entry to credit score is their insufficient observe file.

Whereas that is the truth for SMEs, Zenith Financial institution sees monumental alternatives of their contribution to employment technology, wealth creation and total financial development. SMEs additionally present an enormous base to ship worth innovation and provide compelling propositions and engagements for enterprise development.

Consequently, Zenith Financial institution launched the SME Develop My Enterprise (SME-GMB) product. This progressive product creates a platform for SMEs to raised handle their enterprise, turn into extra aggressive and get extra visibility available in the market throughout the online and digital platforms. The financial institution can also be increasing credit score allocation to bridge the hole in entry to credit score between giant corporates and SMEs. On this, the financial institution rolled out the Zenith SME facility, which has made it attainable for a lot of SMEs to acquire loans at single-digit rates of interest.

Extra importantly, Zenith Financial institution is collaborating with service suppliers like digital and expertise corporations in partnerships that target addressing the key challenges of SMEs. These partnerships reduce throughout offering SMEs with digital abilities and sector-based coaching, providing options and instruments that assist them discover clients, construct loyalty, and allow them to entry loans extra swiftly and earn financial savings from discounted enterprise bills.

The issues dealing with SMEs are carefully intertwined with these besetting girls entrepreneurs who’re extremely represented within the SME phase. Their challenges are compounded by the truth that nearly all of the monetary services are gender-neutral and have a tendency to not favour girls’s entry to finance. Zenith Financial institution is on a mission to alter this narrative.

The financial institution launched the Z-Girl initiative to enhance entry to credit score for girls. The bundle comes with loans of as much as $24,000 at a single-digit rate of interest, free digital abilities coaching, and free exhibition stands at Zenith Financial institution occasions. In 2020, the financial institution prolonged $9.6m in loans beneath the initiative.

Finance for all
One other space that has turn into of paramount significance for Zenith Financial institution is monetary inclusion. In accordance with Enhancing Monetary Innovation & Entry (EFInA), Nigeria’s monetary inclusion charge stood at 64 p.c in 2020. Notably, Zenith Financial institution understands that bricks and mortar has largely failed in making it straightforward for almost all to entry monetary providers, extra so these residing in rural areas. Other than the big prices concerned in organising and working bodily branches, it’s a no-brainer that expertise has turn into a greater enabler of banking providers.

This explains why Zenith Financial institution has opted to go massive on expertise and improvements. For the financial institution, the digital stride has continued to evolve from conventional banking channels to creating progressive digital merchandise and options. In essence, digitisation is enabling the financial institution to achieve unbanked populations in each a part of the nation. Funding in expertise can also be serving to drive monetary inclusion, which is vital for the financial institution’s steady development.

The Nigerian financial system goes by means of a season of optimism since exiting one among its deepest recessions

When the financial institution began operations in 1990, there have been no ATMs, no debit or bank cards, and no digital networks. The financial institution’s need to result in transformation meant exploiting huge alternatives offered by the web. Consequently, the financial institution invested in a VSAT (very small aperture terminal) satellite tv for pc, giving clients the facility to deposit cash in a single a part of the nation and withdraw it in one other. This endeared the financial institution to clients and inspired many individuals to entry formal monetary providers.

Right now, the introduction of digital monetary options like unstructured supplementary service knowledge (USSD), cell apps and the web has opened the probabilities of near-universal entry to monetary providers. With a cell phone, anyone can entry monetary providers even within the remotest elements of the nation. With USSD, the unbanked can simply open financial institution accounts with minimal documentation and perform banking providers.

Champions of innovation
Zenith Financial institution will proceed to make the requisite investments in personnel and infrastructure to keep up the power to ship progressive options to the market and serve clients extra diligently. Through the years, the financial institution has strongly demonstrated its capability to churn out progressive services.

On expertise and innovation, the financial institution has opted to associate with fintechs. In reality, Zenith Financial institution has been a number one champion of the fintech house in Nigeria. The nation is residence to lots of Africa’s vibrant tech hubs and fintech start-ups. In accordance with a 2020 McKinsey report, Nigeria has over 200 standalone fintech corporations. Going by the quantity of overseas financing that fintechs have been attracting, the trade is tellingly vibrant. The McKinsey report reveals that between 2014 and 2019, Nigeria’s bustling fintech scene raised greater than $600m in funding. In 2019, the nation attracted $122m, 1 / 4 of the $491.6m raised by African tech start-ups.

Jim Ovia, Chairman and Founder of Zenith Bank
Jim Ovia, Chairman and Founding father of Zenith Financial institution

In contrast to in different international locations the place regulators stay extraordinarily cautious, resulting in the stifling of innovation, the Central Financial institution of Nigeria has been exemplary in embracing new concepts. A part of this has been setting up frameworks that regulate and spur improvements which assist to deepen digital finance. In 2020, the apex financial institution adopted a artistic method to regulating fintechs utilizing a sandbox and governing framework the place merchandise, providers and approaches are examined with clients and anxious stakeholders. The flexibility of the apex financial institution to be open-minded on monetary improvements has seen Nigeria lead the tempo in digital foreign money in Africa with the launch of the eNaira.

The regulator understands the way forward for cash probably rests within the broad-based adoption of digital foreign money to satisfy rising shopper calls for by establishing extra direct, clear and environment friendly fee programs. In essence, the eNaira opens a brand new sphere in digital funds by offering simplified, swift and secure transactional alternatives. General, it won’t solely be a game-changer for home funds processing however may even be used for overseas alternate transactions and cross-boundary funds.

The vibrancy of Nigeria’s fintech innovation house has seen Zenith Financial institution develop a sandbox infrastructure that permits it to interact with fintech companies. The sandbox facilitates compatibility and positions the financial institution in readiness to collaborate with totally different gamers within the ecosystem regardless of their product choices or wants. By the sandbox, the financial institution is ready to prolong governance and threat administration framework to fintechs. It additionally helps to deal with dangers associated to compliance failures and cybercrime.

As well as, the financial institution additionally supplies funding and banking assist that fintechs require to scale. Certainly, Zenith Financial institution’s continued push to increase its worth creation throughout its enterprise segments comes at a super time.

The nice restoration
The Nigerian financial system goes by means of a season of optimism. Since exiting one among its deepest recessions occasioned by the COVID-19 pandemic within the final quarter of 2020, the Nigerian financial system has continued on a optimistic trajectory. Knowledge from the Nationwide Bureau of Statistics present that GDP grew by a formidable 3.9 p.c within the final quarter of 2021, in comparison with 0.11 p.c from the identical interval in 2020 (see Fig 1).

Screenshot 2022 06 16 at 17.09.47

The financial system is projected to proceed on a optimistic trajectory within the rapid and medium-term, with the Worldwide Financial Fund forecasting a 3.4 p.c development in 2022. The Nigerian authorities is extra optimistic, with a 4.2 p.c development projection. Progress is predicted to be pushed by numerous initiatives to enhance the nation’s financial and funding local weather. A key focus has been a push to spice up investments in infrastructure and enhance overseas alternate earnings from non-oil exports. Little doubt, the banking trade will profit from development in numerous sectors of the financial system, notably from increasing credit score to the non-public sector. Final 12 months, banking sector credit score to the non-public sector stood at $84bn. With the financial rebound, development in credit score to the non-public sector is predicted to rise exponentially. One space of concern is Nigeria’s overdependence on the oil sector. The dangers related to this overdependence had been evident throughout the peak of the pandemic.

Nigeria, Africa’s high oil producer and exporter, depends on crude gross sales for about 90 p.c of overseas alternate earnings. A contraction of the oil sector attributable to low oil costs in 2020 was one of many key components that plunged the nation right into a recession.

The necessity for diversification is much more essential because the fortunes of crude oil are dwindling because the world begins to maneuver away from fossil fuels. For Nigeria, additionally it is crucial to rediscover the nation’s non-oil export potential. This won’t be new, contemplating the nation as soon as relied solely on non-oil export earnings. The necessity to enhance native manufacturing capability, create extra jobs and obtain total financial development requires diversification of Nigeria’s financial base by means of the promotion of non-oil exports.

Zenith Financial institution has already recognized the rising alternatives in stimulating non-oil exports and has developed strong monetary merchandise and incentives for operators outdoors the oil and fuel sector. A part of the interventions has been a gradual utility of the Central Financial institution of Nigeria’s discounted money reserve requirement (DCRR) coverage to disburse funds to non-oil exporters whereas considerably investing beneath the Non-oil Export Stimulation Facility. The financial institution has additionally launched an annual non-oil export seminar to deepen the discourse on selling non-oil export enterprise within the nation.

A sustainable future
Having been in existence for 3 many years, Zenith Financial institution has grown enormously to turn into a powerhouse monetary establishment in Africa. Right now, the financial institution is Nigeria’s largest financial institution, and additionally it is one among Africa’s largest monetary establishments by tier-one capital. Additionally it is unarguably essentially the most worthwhile financial institution within the nation. As a forward-thinking establishment, the financial institution is protecting a eager eye on the longer term and taking motion to stay sustainable.

A holistic method to enterprise has seen Zenith Financial institution decide to the adoption of accountable practices in its operations whereas driving progress in direction of the achievement of the Sustainable Improvement Targets (SDGs). Consequently, the financial institution has continued to leverage its commitments beneath numerous native and worldwide sustainability frameworks, together with the Nigerian Sustainable Banking Ideas and the Ideas for Accountable Banking of the United Nations Surroundings Programme Finance Initiative, to align its actions and people of its purchasers with the tenets of sustainable banking.

The financial institution has additionally efficiently built-in environmental, social and governance (ESG) concerns into its financing and investing choices by screening initiatives. That is consistent with its strong E&S framework. At the moment, Zenith Financial institution is ready to assess greater than 90 p.c of all credit score transactions for E&S dangers.

Placing sustainability on the coronary heart of operations has led to accolades from each inside and with out. The financial institution has acquired a number of awards and recognitions because of its sustainability efficiency. These embrace the Finest Company Governance ‘Monetary Companies’ Africa 2021 (Moral Boardroom), Most Accountable Organisation in Africa, Finest Firm in Reporting and Transparency, Finest Firm in Infrastructure Improvement and Finest Firm in Promotion of Gender Equality and Ladies Empowerment.

By all accounts, the awards display that adopting sustainability as a enterprise technique mixed with a dedication to wonderful service supply and finest practices units a enterprise aside as a market chief. Whereas being pleased with its success, the financial institution can not afford to relaxation on its oars. So far as sustainability is anxious, the financial institution’s profitable mentality is to attain continuous enchancment, realizing that the sustenance of the enterprise is immediately associated to the sustained worth that it creates for the folks, buyers, society and all stakeholders.

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