Leeds Metropolitan University Faculty of Business & Law

MA International Business

A Comparative Analysis of Financial Inclusion: A Study of Nigeria and the UK

A research project submitted in partial fulfillment of the requirements for the:

Masters Degree in International Business

By: IBEACHU E. HENRY

September, 2010.

FACULTY OF BUSINESS AND LAW

Postgraduate Scheme Programme/course: . Statement of Originality and Authenticity
This dissertation is an original and authentic piece of work by myself. I have fully acknowledged and referenced all material incorporated form secondary sources. It has not, in whole or part, been presented elsewhere for assessment. I have read the Examination Regulations and I am aware of the potential consequences of any breach of them. Signature: Name: IBEACHU E. HENRY Date: 15th September, 2010

ACKNOWLEDGEMENTS
I want to give Glory to God for His daily strength and motivation to be able to complete my Masters degree and to submit my research. I want to appreciate the help of my family in their prayers and good wishes towards me, notably to my parents; Mr. & Mrs. L.N Ibeachu, and to my siblings, Kosi, Dozie, Chika, Rachel, Vivian and Helen. It was by their motivations and assistance that all of my endeavors came through. To my tutors and especially my Supervisor; Mr. Peter Chippindale. He guided me through all the difficulties of carrying out a masters dissertation. To my course administrator; Mr. Gary Carr and all my tutors. They filled me with the knowledge through their lectures and teachings. To all my great friends; Akash, Jorge, Vincent, Nomso, Shuji, Ejila, and many more, I am very grateful. To Emem; I appreciate all the prayers and support.

ABSTRACT
The study and survey of financial inclusion is useful for both policy makers and bank service providers to make strategic decisions. This dissertation attempts to provide a snap shot of the extent of financial inclusion i.e. the level and expansion of access and capability of the Nigerian public in finance utilization. It identifies the main types, causes and factors that motivate or hinder financial inclusion. The research states the drive of financial inclusion and bank outreaching as a strategic move of financial providers (banks) to seek out strategic customers. It shows financial inclusion as a growth strategy for banking institutions. It also assessed the capability of the Nigerian banking industry with the use of Porters diamond model. This provided a plain look at the general strength of the industry. With the use of questionnaires administration and several other data collection methods, the research compared the results from Nigeria and the UK. This was to generally assess the expansion of financial inclusion of Nigerian from benchmarking a more highly included economy.

Table of Contents CHAPTER ONE ........................................................................................................................... 10 1.1 INTRODUCTION ............................................................................................................... 10 1.2 1.3 Objectives ....................................................................................................................... 11 Financial inclusion ......................................................................................................... 11 Financial Exclusion ................................................................................................. 12 Banking the Unbanked ............................................................................................ 12 Basic banking Services ........................................................................................... 13 Service quality in Finance Inclusion ....................................................................... 13 Financial Outreach .................................................................................................. 13 Non-bank Institutions for Finance Inclusion .......................................................... 13

1.3.1 1.3.2 1.3.3 1.3.4 1.3.5 1.3.6 1.4 1.5

Introduction to the Problem............................................................................................ 13 Background .................................................................................................................... 14 Nigeria..................................................................................................................... 14 Banking ................................................................................................................... 14 Developments of the Nigerian Banking Sector ...................................................... 15 Unbanked areas in Nigeria ...................................................................................... 15 The Nigerian Micro Finance Policy, Regulatory and Supervisory Framework ..... 16 Overview of the Nigerian Micro Finance/Community Banking Provision ............ 16 Operations of Nigerias Microfinance/Community Banking Sector ...................... 17 Problems of the Non-bank System in Nigeria ........................................................ 17

1.5.1 1.5.2 1.5.3 1.5.4 1.5.5 1.5.6 1.5.7 1.5.8 1.6 1.7

Summary of Hypothesis ................................................................................................. 18 Research Structure.......................................................................................................... 18

CHAPTER TWO .......................................................................................................................... 19 2.1 2.2 LITERATURE REVIEW ............................................................................................... 19 Financial Exclusion ........................................................................................................ 20 Types of Financial Exclusion.................................................................................. 20 Causes of Financial Exclusion ................................................................................ 20

2.2.1 2.2.2 2.3 2.4 2.5 2.6 2.7 2.8

Critical Success Factors of Financial Inclusion ............................................................. 23 Financial Inclusion as a Generic Competitive Strategy ................................................. 24 Financial Inclusion as a means of reaching the Strategic Customers ............................ 24 Rural Financial Inclusion Policy as a Focus Strategy in bank outreaching ................... 25 Financial Access ............................................................................................................. 25 Quality Bank Service for Financial Inclusion ................................................................ 25
5

2.9

Success Factors of Service Quality ................................................................................ 26 Core service or service product............................................................................... 27 Human element of service delivery ........................................................................ 27 Systematization of service delivery: (non-human element).................................... 27 Tangibles of service ................................................................................................ 28 Social responsibility ................................................................................................ 28

2.9.1 2.9.2 2.9.3 2.9.4 2.9.5

2.10 Bank Branches................................................................................................................ 28 2.11 Automated Services........................................................................................................ 29 2.12 Quality Service as a Differentiation Strategy in bank Inclusion .................................... 29 2.13 The importance of Microfinance Institutions in Financial Inclusion ............................. 30 2.14 Micro Finance as a Low Cost Strategy in bank outreaching.......................................... 30 2.15 Financial Indicators of Financial Inclusion .................................................................... 31 2.15.1 2.15.2 2.15.3 2.15.4 Currency in circulation to Money Supply ............................................................... 31 Currency outside Banks to Money Supply ............................................................. 31 Currency Held by Banks ......................................................................................... 31 Total Deposits & Loans .......................................................................................... 32

2.16 Covering unbanked areas as a competitive strategy for banks ....................................... 32 2.17 Problems in delivering to the unbanked ......................................................................... 32 2.18 Assessing the Nigerian Banking System ........................................................................ 32 2.18.1 Porters Diamond Model......................................................................................... 33

2.19 Competitive Advantage of the banking sector ............................................................... 35 2.20 Solutions to Financial Exclusion .................................................................................... 36 2.20.1 2.20.2 2.20.3 2.20.4 2.20.5 The E-banking Solution .......................................................................................... 36 Financial Education and Community Development ............................................... 36 Subsidized Credit Approach ................................................................................... 37 Employment Creations............................................................................................ 38 Consumer Protection ............................................................................................... 38

2.21 Conclusion...................................................................................................................... 38 CHAPTER THREE ...................................................................................................................... 40 3.1 3.2 3.3 3.4 METHODOLOGY ......................................................................................................... 40 Research Paradigms ....................................................................................................... 40 Research Approach ........................................................................................................ 41 Data Collection ............................................................................................................... 42
6

3.5

Data Analysis ................................................................................................................. 42 Analytical Framework ............................................................................................ 42

3.5.1 3.6 3.7 3.8 3.9

Justification of UK in the survey ................................................................................... 43 Justification of Nigeria in the survey ............................................................................. 44 Questionnaire ................................................................................................................. 44 Hypothesis ...................................................................................................................... 44

3.10 Ethics .............................................................................................................................. 45 3.11 Limitation ....................................................................................................................... 45 3.12 Possible Sources of Bias ................................................................................................ 45 3.13 Conclusion...................................................................................................................... 45 CHAPTER FOUR ......................................................................................................................... 47 4.1 4.2 DATA ANALYSIS ........................................................................................................ 47 Measuring Financial Access........................................................................................... 47 Bank Account owners ............................................................................................. 47 Use/Access to Microfinance/ Community Banks ................................................... 48 Bank Distance and Access ...................................................................................... 49 Access to Automated and Credit/lending Facilities ................................................ 50

4.2.1 4.2.2 4.2.3 4.2.4 4.3

Measuring Financial Inclusion ....................................................................................... 53 Extent of Financial Inclusion .................................................................................. 56

4.3.1 4.4 4.5 4.6

Effect of factors .............................................................................................................. 62 Measuring Service Quality ............................................................................................. 65 Monetary Measures of Financial Inclusion .................................................................... 66 Ratio of Money supply to gross domestic product (M/GDP Ratio %) ................... 67 Ratio of Currency outside Banks to Money Supply (COB/M Ratio %) ................. 67 Ratio of Currency in Circulation to Money Supply (CIC/M Ratio %) ................... 68 Loans to customers and Deposits ............................................................................ 68

4.6.1 4.6.2 4.6.3 4.6.4 4.7

Summary of Findings ..................................................................................................... 69

CHAPTER FIVE .......................................................................................................................... 71 5.1 5.2 5.3 DISCUSSION ................................................................................................................ 71 RECOMMENDATIONS ............................................................................................... 73 CONCLUSION .............................................................................................................. 74

BIBLIOGRAPHY77 Figures Figure 1: Financial Access of Developed and Developing Countries .......................................... 10
7

Figure 2: Components of Financial Inclusion ............................................................................... 12 Figure 3: Financial Inclusion as a Generic Strategy ..................................................................... 24 Figure 4: Rural Financial Inclusion Policy as a Focus Strategy in Bank Outreaching ................. 25 Figure 5: Quality Service as a Differentiation Strategy in bank Inclusion ................................... 30 Figure 6: Micro Finance as a Low Cost Strategy in bank outreaching ......................................... 31 Figure 7: Porters Diamond Model ............................................................................................... 35 Figure 8: Mobile Cellular Subscription per 100 people. ............................................................... 36 Figure 9: Nigerian Deposit and Lending Rate .............................................................................. 38 Figure 10: UK Use/Access to Financial Institutions..................................................................... 49 Figure 11: Nigerian Use/Access to Financial Institutions ............................................................ 49 Figure 12: Bank Branch Distance ................................................................................................. 50 Figure 13 & 14: Users and Non-users of other Banking Services ................................................ 54 Figure 15: Level of Familiarity of Loan Services ......................................................................... 56 Figure 16: Level of Familiarity of Internet Banking Services ...................................................... 57 Figure 17: Level of Familiarity of Mobile Banking Services ....................................................... 58 Figure 18: Level of Familiarity of Debit Card Services ............................................................... 59 Figure 19: Level of Familiarity of Credit Card Services .............................................................. 60 Figure 20: Level of Familiarity of Bank Mortgage Services ........................................................ 61 Figure 21: Effect of Employment Status on Use/Access of Financial Services ........................... 62 Figure 22: Effect of Income Level on the Use/Access of Financial Services .............................. 63 Figure 23: Effect of Interest Rate and Charge on Use/Access of Financial Services ................... 64 Figure 24: Effect of Level of Identification on Use/Access of Financial Services ...................... 65 Figure 25: Overall Perception of Bank Quality Service .............................................................. 66 Figure 26: Money Supply to GDP Ratio Percentage (%) ............................................................. 67 Figure 27: Currency outside Banks to Money Supply Ratio Percentage (%)............................... 68 Figure 28: Ratio of Currency in Circulation to Money Supply (CIC/M Ratio %) ....................... 68 Figure 29: Loans and Deposits to bank customers ....................................................................... 69 Figure 30: Loans and Deposits from Rural bank branches ........................................................... 69

Tables Table 1: Distribution of Microfinance Banks by Geopolitical Zones........................................... 17 Table 2 & 3: Data on Bank Account Owners ............................................................................... 48 Table 4: Data on Use/Access of Financial Institutions ................................................................. 48 Table 5: Data on Bank Branch Distance ....................................................................................... 50 Table 6: Data on Automated Teller Providers .............................................................................. 51 Table 7: Data on Automated Teller Users .................................................................................... 51 Table 8: Data on Availability of ATMs ........................................................................................ 51 Table 9: Data on Providers of Credit Services.............................................................................. 52 Table 10: Data on Non-users of Credit Services .......................................................................... 52 Table 11: Data on Reasons for ATM Non-users .......................................................................... 53 Table 12: Data on Users of other Bank services ........................................................................... 53 Table 13: Data on Reasons for other Financial Service Non-users .............................................. 54
8

Table 14: Data on Level of Familiarity of Loan Services ............................................................ 56 Table 15: Data on Level of Familiarity of Internet Banking Services .......................................... 57 Table 16: Data on Level of Familiarity of Mobile Banking Services........................................... 58 Table 17: Data on Level of Familiarity of Debit Card Services ................................................... 59 Table 18: Data on Level of Familiarity of Credit Card Services .................................................. 60 Table 19: Data on Level of Familiarity of Bank Mortgage Services ............................................ 61 Table 20: Data on Effect of Employment on Use/Access of Financial Services.......................... 62 Table 21: Data on Effect of Income level on Use/Access of Financial Services ......................... 63 Table 22: Data on Effect of Interest Rate and Charges on Use/Access of Financial Services ..... 64 Table 23: Data on Effect of Level of Identification on Use/Access of Financial Services .......... 65 Table 24: Data on Overall Perception of Bank Quality Service ................................................... 66 Table 25: Monetary Measures of Financial Inclusion .................................................................. 67

List of Appendix Appendix A: Sample of Research Questionnaire Appendix B: Research Proposal Appendix C: Subgroup Percentages

CHAPTER ONE
1.1 INTRODUCTION
The story of finance starts where there is a general acceptance of what is being offered as services. There have been various studies in the different financial access. The World Bank financial access 2009 looked at financial access differences between developed and under-developed countries. Their findings were very distinctive. They discovered (obviously) that the developed European countries were better exposed to financial services and accounts ownership. They collected some set of indicators of financial access in countries around the world. Such indicators included the number of deposit accounts and loans, the number of deposit clients and borrowers, and the number of financial access points, such as branches, agents, and automated teller machines.

Figure 1: Financial Access of Developed and Developing Countries

Source: World Bank Financial Access (2009)

The Italians studied, with the use of a survey on their different territories. This was to better understand the new typology of customer who could be more effectively integrated into society and the ordinary financial system. It is also seen as a policy objective for national policymakers, multilateral institutions, and others in the economic development field. According to Mitchell, (2003), a developed financial system on its own cannot bring about economic growth but it can contribute to it.

10

1.2

Objectives

The objective of the research is to assess the level of financial inclusion in the Nigerian context in comparison to that of the UK thereby stating from findings the nature of both countries financial accessibility. 1) 2) 3) 4) 5) 6) Identify the nature of the Nigerian banking Industry. Identify the Microfinance Scheme as an instrument of financial inclusion. Identify various literatures on the success factors, causes of financial exclusion/inclusion. Pinpoint literatures on service quality as a factor of financial inclusion. Assess financial inclusion as a strategy for growth for banking institutions. Using a theoretical underpinning: Porters diamond model to assess the competitiveness of the Nigeria banking industry. 7) 8) Run a test of the critical factors of financial inclusion through a survey. Comparing surveys descriptively from the UK and the Nigerian banking customers.

1.3

Financial inclusion

Financial inclusion is a state in which all people have access to appropriate, desired financial products and services in order to manage their money effectively. It is achieved by financial literacy and financial capability on the part of the consumer and financial access on the part of product, services and advice suppliers (Transact, the national forum for financial inclusion, 2007). The effort of all institutions both financial and developmental is aimed at encouraging inclusion. The use and access of financial services has been at the stem of study for major regulatory financial institutions. Some developed countries report annually on the level of access of finance for economic and social developments. Technology is gaining grounds on banking services through the use of ICT devices. Some of the various ways of encouraging and ensuring financial inclusion is in the circulation of deposit accounts, loans, insurance and automated electronic transfers.

11

Figure 2: Components of Financial Inclusion

Source: Karmakar K.G. 2010

1.3.1 Financial Exclusion

The exact opposite of inclusion but could also be termed in the deprivation to social, health and educational infrastructures. Knowledge of this helps economies and firms alike to understand the various opportunities for development. It allows policy makers to make better and accurate decisions. Ways of which this problem can be resolved is through the assessment of affordable banking services and free financial advice. According to the employees forum on disability (2007), access to finance services like bank accounts, is a fundamental step towards the attainment of broader indicators of social and economic inclusion. According to Olsen (2001) financial exclusion of the poor in the UK is generally considered to mean a lack of access to banking services. It has been interpreted as being caused by the closure of bank branches and building society offices and thus ignores the possibility of informal-sector lending offering a substitute for bank services in remote areas.

1.3.2 Banking the Unbanked

Banking today is seen as a means of economic advancement. The level of advance banking is seen as a competitive edge over competitors. Various banks want to expand and dominate thereby gaining market grounds.

12

1.3.3 Basic banking Services

The importance of basic banking services aims at reducing the cost of using banking services. Banks, especially in developing economies have these basic services in place to encourage the access of financial services to the public. The World Bank (2009) found that financial inclusion policies such as offering basic accounts, transferring government payments to individual accounts, and encouraging saving through matched and tax-advantaged savings accounts are concentrated in high-income countries and far from widespread. When implemented in developing countries, they usually work only if participating financial institutions see them as a viable business proposition.

1.3.4 Service quality in Finance Inclusion

According to the World Bank (2009), getting financial services to rural clients is the biggest challenge in the quest for broad-based financial inclusion. The understanding of service quality is paramount to attracting and retaining customers.

1.3.5 Financial Outreach

One of the main barriers to financial inclusion in rural areas is the great distances that rural residents must travel to reach a bank branch. There are various ways with which this can be resolved. One of which is through non-bank institutions that close the gap that commercial banks have by spreading bank branches across areas. Other ways are through technological means like mobile and internet banking. Banks have sort to expand their technology in the administration of automated services and devices to broaden their reach of the unbanked sectors.

1.3.6 Non-bank Institutions for Finance Inclusion

According to the World Bank financial access (2009), lower income clients are served mainly by nonbank financial institutions, including cooperatives, specialized state financial institutions, and deposit- taking microfinance institutions, where average deposits are smaller. It also states that regulated nonbank financial institutions cater to poorer clients than banks and provide smaller loans. The importance of microfinance banks cannot be under-emphasized. These institutions are the bankers of the poor. In some areas of the world they are funded by charitable institutions and by government to encourage and empower the lower and under-privileged society.

1.4

Introduction to the Problem

According to Oluba, (2008), Millions of adult Nigerians do not have any kind of dealing with financial institutions even at the community banking. The Nigerian banking survey states that more than 53% of Nigerian adults lack access to finance. Only 3% of the adult population uses a microfinance bank. Santiago el al., (2005 cited in Oluba, 2008) noted that the access to financial 13

services in developing countries is limited and it would be useful to provide wider access to those services as it can be helpful to reduce the volume of currency outside the banks and also enhance the development and use of financial products. The Nigerian banking system has gone through various reforms. Nigeria has the fastest growing banking system in Africa. The success of the financial sector reforms and consolidation in the banking industry is very critical because like the UK financial system, the sector plays a catalytic role in the economy.

According to FSA (2000), the increase in financial inclusion in the case of the United Kingdom has been boosted by significant developments in the financial services sector which included re-regulation of the UK financial markets; developments of information technology; and the 1990s recession. Leyshon and Thrift, (1995 cited in Amaeshi et al., 2007) stated that these factors spurned a flight of quality approach to servicing customers.

1.5

Background

1.5.1 Nigeria
According to Smith A. and Aigbe K. (2010), one of the key drivers of the Nigerian banking performance in 2009 was the flight of depositors. They stated that while some banks experienced declines in their deposit base, there was a boost in the deposit base of banks that were perceived to be stronger. Sanusi L. S (2010) also stated in his address of the public that one of the factors that brought about a downturn in the Nigerian banking sector was the lack of consumer sophistication. He said that banks failed to impose market discipline and take advantage of the consumers. Augusto O. (2005) stated that one of the problems of the Nigerian banking sector is the failure of banks to see from the perspective of the customers. They failed to analyze the customers need for better services and diversified delivery channels. They also failed to ensure that banking customers can access services at lower costs.

1.5.2 Banking
According to the National Bureau of statistics (2010), the history of banking in Nigeria dates back to 1892. Until, 1959, the banking system remained unregulated. After the consolidation reform in 2004, today, Nigeria has a total of 25 banks operating independently but being supervised by the Central Bank of Nigeria.

14

1.5.3 Developments of the Nigerian Banking Sector

According to CBN statistical bulletin (2007) the Nigerian banking industry has experienced an excessive amount of growth. In 1990, the number of banks increased from 42 to 107. The number went upwards in 1992 to 120 banks in total. At the time of 2004, this amount fell to 89 due to bad fortunes. Today the country has 25 banks. This was shortly after the consolidation reform that witnessed several banks either liquidating or merging with one another to survive because they couldnt meet the 25 billion naira capital base. Consolidation is a term used by the central bank of Nigeria (CBN) to describe the coming together of some banks within the country to become one bank and be able to meet CBNs requirement for capitalization to a minimum of 25 billion naira. After the consolidation of the banking system, it is expected that the services rendered by the joined banks will be improved. Phillips (1997 cited in Oke. A 2006) stated that the more capital a bank has at its disposal, the more losses it can sustain without going bankrupt capital thus provides the measure for the time a bank has to correct for lapses, internal weakness or negative developments. Possessing adequate capital also offers other benefits like protecting the depositors and creditors of banks in cases of failure and also enables banks to attract funds and to subsidize the charges on their services at lower cost. According to Oke .A (2006), adequate capitalized banks that are well managed are better able to withstand losses and provide credit to consumers and businesses alike throughout the business cycle including during downturns. Adequate capital thereby helps to promote confidence in the banking system. Consolidation of banks also helps to create opportunity for banks to carry out diversified operations. Oke .A (2006) said that banks should diversify their services by devising creative means of offering services. These means of offering services can also be channeled towards the unbanked areas and thereby generating returns to the banks. In the banking bid of generating large amount of returns, those financial institutions should not neglect their backyards. The country is over-dependent on the oil sector which accounts for 20% of GDP, 95% of foreign exchange earnings and about 65% of government revenue. The Nigerian nature of oil dependency has spawned other economic distortions. It would be good that other avenues of research in the non-oil sectors of Nigeria e.g. banking sector should be encouraged to enable future growth of the economy.

1.5.4 Unbanked areas in Nigeria

The unbanked areas in the whole of Africa remain so due to geographical inaccessibility, lack of infrastructure, the high cost of banking services and lack of financial understanding (Standard Chartered Asia, Africa and the Middle East; Guide to working capital Management 2009/10). According to the Central Bank of Nigeria (2009), about 83.9% of the money in circulation in the country is still outside the banking system. Banks will therefore, need to come up with innovative ways of tapping into those market segments to mobilize the huge pool of funds that are there.

15

1.5.5 The Nigerian Micro Finance Policy, Regulatory and Supervisory Framework
Microfinance policy in Nigeria is part of the global financial integration in the provision of tailor made financial services to those outside the catchments of the big banks either as a result of their income, location, literacy level or discrimination. As at 2008, 127 private investors applied for micro finance licenses. The Central bank of Nigeria, (2009), recognized 840 micro financed banks, the number is relatively small if compared to the population of the country where majority of the people reside in rural areas. With the creation of the micro finance policy, the question that remains is if the act can cause a transformation in those rural areas.

1.5.6 Overview of the Nigerian Micro Finance/Community Banking Provision

Oluyombo (2007) made note that microfinance institutions and banks are fast becoming a household name globally due to its acceptance as a means of reaching those people that were not served by the conventional big banks. During the year 2008, the Corporation extended deposit insurance cover to licensed microfinance banks (MFBs) thereby keeping with the provision of the National Deposit Insurance Corporation (NDIC) Act No 16 of 2006. Microfinance banking was an initiative designed to help the poor and economically vibrant Nigerians to have access to credit and reduce the level of poverty in the country. The specific objectives of microfinance policy are as follows: Make financial services accessible to a large segment of the potentially productive Nigerian population which otherwise would have little or no access to financial services; Promote synergy and mainstreaming of the informal sub-sector into the national financial system; Enhance service delivery by microfinance institutions to micro, small and medium entrepreneurs; Contribute to rural transformation;

In terms of the spread across geo-political zones, the North central states had 101 MFBs in 2008 i.e. 13.2% of the total which was 768 at that time. Also, about 39.7% or 305 MFBs were located in the South West geopolitical zone followed by South East with 21.6% or 166 MFBs. North East Zone had the least with 3.9% or 30 MFBs. The South-South Zone has 14.3% or 110 MFBs and the North West with 7.3% or 56 MFBs. This is shown below:

16

Table 1: Distribution of Microfinance Banks by Geopolitical Zones

Geo-political Zone North-East South-East South-West North-West North Central South-South Total Number of MFBs 30 166 305 56 101 110 768 Percentage (%) 3.9 21.6 39.7 7.3 13.2 14.3 100.0

Sources: The Nigerian Microfinance Newsletter. May 31st, 2008.

1.5.7 Operations of Nigerias Microfinance/Community Banking Sector

The Microfinance Policy was launched on the 15th December, 2005 by the Central Bank of Nigeria (CBN) to complement the banking sector reforms. According to the policy framework, MFBs were promoted to provide financial services to the economically active poor in the society. The policy was targeted at creating an environment of financial inclusion to boost capacity of micro, small and medium enterprises (MSMEs) to contribute to economic growth and development through job creation that would lead to improved standard of living and poverty reduction.

1.5.8 Problems of the Non-bank System in Nigeria

The microfinance and community institutions are faced with several issues in their attempt to be a means of outreach to the general poor. According to the National Deposit Insurance Corporation (2008), some of these issues are:

1.5.8.1

High Operating Cost

Here, the cost operating grew largely because of the also high cost of accommodation in urban areas and high wage bills. This resulted in the reduction of loan able funds available to the general poor and also to the micro, small and medium enterprises.

1.5.8.2

Lack of Microfinance Experience

The idea of micro financing was a new concept in Nigeria. Majority of the staff of MFBs did not have requisite knowledge and skills in microfinance.

1.5.8.3

Contagion of Risk

After the failure of most community banks and finance houses, the general public is growing weary of the micro finance banks. This caused a great problem for these banks to be able to mobilize loans. 17

1.5.8.4

Collateral Security Challenges

This is due to the problem of poor borrowing nature of Nigerians and that many microfinance banks had not embraced the culture of the lending practice. This was also due to the slow judicial process of settling the loan recovery process.

The Nigerian banking system is growing but at a semi fast rate when compared to other international institutions. This is perhaps due to the limited level of exposure of its services to the public thereby resulting to a low level of access to these facilities. Access and use of the services that banks have to offer is one of the primary driving factors of further growth. The main push towards this study was the curiosity to how far these services are being utilized and what the factors are that makes them useable and appreciated.

1.6

Summary of Hypothesis

The study is based on the summaries that bank charges; economic status; financial complexity; quality of service; financial education and income are positively related to the problem of financial exclusion.

1.7

Research Structure

The research is structured in the following format for better comprehensiveness of the study. Chapter one is to give a general introduction to the topic by defining terms and explaining topics. Chapter two is a capture of literatures on the topic to further validate the study. Chapter is an outline of the methods and analytical approach of the research. Chapter four is a description of the findings. Finally, chapter five is for the discussion, conclusions and recommendations.

18

CHAPTER TWO
2.1 Introduction
For banks to stay competitive, they must look to differentiate itself from its competitors. One of those diverse ways is through their inclusion strategies. The importance of banks cannot be underemphasized. The same can be said about the communities that they serve. Banks face a challenge with the winning over, satisfaction and the retention of their customers. They are also faced with the challenge of bringing unbanked households into the banking system and also not forgetting their duties to their owners and shareholders. According to Nigeriatelecoms, an online magazine, banking the unbanked will not be achieved if African Banks continue with same strategies that shut out potential new customers base that constitute 70% of the continents population. Santiago et al (2005 cited in Oluba, 2008) noted that in developing countries, access to financial services is typically limited and therefore providing wider access to such services can aid financial and economic development. According to the House of Commons Treasury Committee 2005/06, banking services are central to the challenge of financial inclusion. These stress the importance of quality of services in financial inclusion banking. Al-Hawari et al., (2005), also made it known that service quality has received much attention because of its relationship with cost, financial performance, customer satisfaction and retention and also with competitive advantage.

LITERATURE REVIEW

In banking worldwide, the service environment is becoming very competitive and is featured by many demanding customers and banks are seeking various ways of getting more unreached areas. Even so, many parts of the underdeveloped world do not share a similar view in terms of the availability of banking services at their disposal. Africa has been at the center of attraction in terms of this. In some areas of concern, there is the issue of long distances between communities and bank branches and also the unavailability of cheaper banking facilities. Some of them incur some amount of cost on wanting to have access to ATMs or other banking services. Sometimes, the issue could be that some people do not see the need for these services and so banks have to device several means of easing off the pressures of accessing these services. Therefore, the quality of service becomes an integral part of the financial institutions attempt to reach the unbanked. The attitudes of banks and non-banking institutions should be channeled towards seeing these unreached areas as a competitive edge as they constitute a majority of the population in underdeveloped areas. There is a need to further look into the matter of financial exclusion/inclusion, service quality and strategies that will help in customer outreaching.

19

2.2

Financial Exclusion

According to Kendall et al., (2010), in developing countries there is an estimate of 0.9 accounts per adult and 28% banked adults. He stated that the rise of financial inclusion as an important policy goal is due in part to mounting evidence that access to financial products can make a positive difference in the lives of the public. The European Commission Manuscript 2008 defines financial exclusion as a process whereby people encounter difficulties accessing and/or using financial services and products in the mainstream market that are appropriate to their needs and enable them to lead a normal social life in the society in which they belong. They also stated that there is some widespread recognition that financial exclusion can be referred to as part of a much wider social exclusion, faced by some groups who lack access to quality essential services such as jobs, housing, education or health care.

2.2.1 Types of Financial Exclusion

Kempson and Whyley (2000), in their study, established six types of financial exclusion: Physical access exclusion: This, they stated, is brought about by the closure of local banks or building societies and lack of reliable transport to reach alternatives. Access exclusion: This type of access is restricted through risk assessment, with people being denied a product or service as they are perceived to be high risks. Condition exclusion: This is when conditions are attached to products or services thereby making them inaccessible to some. Price exclusion: This occurs when products are available but at a price that is unaffordable. Marketing exclusion, where sales and marketing activity is targeted on some groups, or areas, at the expense of others. Self exclusion, when individuals do not seek financial products and services for reasons including fear of failure, fear of temptation or lack of awareness.

2.2.2 Causes of Financial Exclusion

According to the World Bank (2008, cited in Honohan and King, (2009), the causes of financial exclusion were broken down into: insufficient income; discrimination; contractual/information framework; and price and product features. In their research, Honohan and King (2009) looked to see the reasons that none financial user give for not using financial products. He asked if it could be fixed by the financial providers in terms of quality of service, location or relevance of product. Kempson (2006) gave some explanations to the reasons why people are financially excluded. He said that these reasons could vary from country to country. He stated the importance of bank required identification and documents, the terms and conditions of bank accounts, levels of bank charges, physical access and cultural barriers in financial inclusion.

20

2.2.2.1

Required Identification

Kempson (2006) stated that various types of people with the right means of identifying themselves fail to meet the banks requirements to open an account. People like the homeless and unemployed. Everywhere around the world, banks require a certain proof of identity before some kinds of services can be offered. This was also attributed to stricter money laundering rules by Brussels (2006) stating that it is in response to avoid terrorist attacks, with some people being unable to satisfy required identification. Leyshon and Thrift (1995, cited in the European Commission, 2008) stated that

people with limited income and with some disabilities represent a high risk to the financial institutions, who then avoid such geographical locations where these people reside. 2.2.2.2 Financial Liberalization and Over -complexity

Kempson et al., (2000, cited in, The European Commission 2008) gave financial liberalization as one of the societal factors that limits financial inclusion. Shehzad and De Haan (2008) argued that financial liberalization reduces the likelihood of financial crises. Contrary to this, it was stated in the European Commission (2008) that financial liberalization has led to an increase in the complexity of financial products and providers. The liberalization of the financial system is comprised of high levels of administrations of financial institutions, which according to Shehzad and De Haan (2008), is measured with the presence of interest rate controls, credit controls, entry barriers, capital account restrictions and supervision of the banking sector.

2.2.2.3

Terms and Conditions of Bank Accounts

Different banks across the world have different terms and conditions to opening accounts with them. Such terms as amount of money to open with, the amount of minimum/maximum balance e.t.c. This goes a long way to having an effect on the extent of financial inclusion. Kempson (2006) explained that these different types of terms and conditions can deter or prevent people with low incomes to open an account. Some accounts come with certain contracts that establish the rules on which the accounts are controlled.

21

2.2.2.4

Income Inequality and Unemployment

Kempson (2006) stated that countries with low levels of income inequality tend to have lower levels of financial exclusion, whereas high financial exclusion is found in least equal countries. In most areas of the world, a person who is unemployed and with no source of income is most likely to be excluded from the use of financial facilities. It is also likely that this will be due to self-exclusion.

2.2.2.5

Levels of Bank Charges

OFT (1999, cited in Wallace and Quilgars, 2005) stated that the fear of getting overdrawn and incurring high bank charges was a major discouraging factor for many people on low or modest incomes to obtaining an account. Kempson et al, (2000, cited in Wallace and Quilgars, 2005) supported by saying that low income earners prefer bank services that complies with the needs of low income households.

2.2.2.6

Lack of Physical Access

The inability to have access to certain financial services could be due to various reasons like; travel distance, disabilities, or level of knowhow. According to Kempson (2006), it can also be caused by bank closures which are due to the intense level of competition and economics in international banking. The World Bank financial access (2009) stated that the main barrier to financial inclusion in rural areas is the great distances that rural residents must travel to reach a bank branch.

2.2.2.7

Cultural Barriers

In countries with high levels of financial exclusion, self exclusion by individuals with low or no income is more of the reason for lack of access to banking services than direct exclusion by the banks refusing to open accounts (Kempson, 2006). Help the aged (2005) noted that cultural and language barriers is one of the issues that minority community dwellers face in accessing financial services.

2.2.2.8

Lack of effective demand for services

Sinclair et al., (2009) explained that low income means a lack of adequate demand for services. He stated that such a lack of demand can be attributed to the failures and limitations of services from current providers of such services. According to the House of Commons Treasury Committee 2005/06, banking services are central to the challenge of financial inclusion.

22

2.2.2.9

Lack of financial education

A credit union also has an obligation to educate their members in effective and responsible management of money, and credit unions offer debt and money advice to their members alongside financial goods and services and insurance products (Credit Unions Act 1979, cited in Commission of Rural Communities, 2007). The absence of this will inevitably lead to an exclusion from financial facilities and services.

2.3

Critical Success Factors of Financial Inclusion

For financial inclusion to be successful in a targeted area, there factors that need to be considered, such factors like the customer considerations, availability of low cost services, wide spread customer information and transparency on the part of the service providers, e.t.c. Certain sacrifices to meet these needs also have to be made. The need for sacrifices is all due to the flight in quality of the mainstream service providers. Kempson et al., (2000, cited in Sinclair et al., 2009) explained that the financial needs of low income customers are regarded by many suppliers as uneconomic because their needs are modest and the profit margins small. Tagoe et al., (2006) gave several success factors as essential for a good and well conclusive inclusion of individuals in the utilization of financial facilities and services. Having access to financial services requires one to be well knowledgeable about the services at stake. There is a high requirement for the availability of basic banking services. Non-bank institutions like building societies have to be readily available as they are the bankers of rural inhabitants. According to Tagoe et al., (2006), by increasing the availability of basic bank accounts and increasing the capacity of credit unions to provide similar products will serve as critical for the success of financial inclusion. Bank branches and service points also have to be at strategic points for individuals to be able to locate them. According to the World Bank financial access (2009), one of the main issues of financial inclusion policies is the distance the individuals have to travel to be able to access these facilities. Lewis (1955 cited in Nwachukwu & Odigie, 2009) noted that people would save more if saving institutions were nearer to them than if they were farther. Technological means like ATMs, Internet banking, debit cards and mobile banking facilities that allow bank customers to easily reach and utilize banking can also be in place to help and encourage people of the benefits of banking.

23

Banks can also reduce their levels of identification as some people mostly the unemployed and homeless might not have adequate sources of proving their identity. It is also important to note that such a bank policy should not be totally removed to ensure safety for all. Unemployment is also a factor in financial inclusion. When one does not have an adequate and steady source of income, there is no need to patronize banking services that encourage savings. The level of charges that a bank offers can also be considered.

Figure 3: Financial Inclusion as a Generic Strategy

Quality Service

Differentiation

Low Cost

Non-bank Institutions

(Rural/Urban Poor)

Focus

Source: Porter (1980) Generic Strategy

2.4

Financial Inclusion as a Generic Competitive Strategy

The above diagram illustrates financial inclusion policy as a generic strategy. Porter (1980) created three generic strategies; cost leadership, differentiation and focused strategy. In financial inclusion, the first of the strategies can be expressed through non-bank or low-cost financial institutions e.g. Microfinance banks, community banks e.t.c. The second is the differentiation strategy i.e. by producing services which are perceived by the customers as unique or different through quality services or through technology enhancements. The last of them is the focus strategy which states that an organization should target a segment or a small market; by which in financial inclusion is done through targeting the under-developed areas or unbanked markets. According to Hansemark & Albinsson (2004), customer satisfaction and retention is an important aspect in banking industry as customers tend to provide a large share of the profits.

2.5

Financial Inclusion as a means of reaching the Strategic Customer s

According to Johnson et al (2009), a strategic customer is one at whom the strategy is primarily addressed to. It is good to note that the term financial inclusion is one usually used to address development schemes. The opposite; financial exclusion is used to identify that under-developed areas dont have access to financial services. In market segmentation by geographic location of rural, rural/urban and urban areas, financial inclusion stands as more effective in both the rural and rural urban areas. Therefore, seeing these areas as opportunities is crucial for developing the appropriate strategic capability.

24

2.6

Rural Financial Inclusion Policy as a Focus Strategy in bank

outreaching
Financial inclusion is aimed at a set of customers who, voluntarily or not, do not have access to banking services. Porter, (1990) argues that focusing on a narrow segment or a niche of the market will allow a firm to be better placed to meet the needs of the customers. In this case especially when the financial exclusion could mainly be found in rural or underdeveloped areas of the world.

Figure 4: Rural Financial Inclusion Policy as a Focus Strategy in Bank Outreaching

Differentiation Low-Cost Strategy

Competitive Scope Source: Porter (1990) Generic Strategy

Focus Strategy (Rural/Urban Poor)

2.7

Financial Access

This is the ability to make use of financial services without experiencing any barriers to opening an account or lending from financial institutions. Understanding levels of access may therefore require insight of barriers to opening and using a bank accounts, such as cost and physical proximity of bank service points (branches, ATMs, etc) and also accessing quality lending facilities. According to the World Bank Financial access 2009, a very basic measurement of financial access can be derived through the number of opened accounts across financial institutions and estimating the proportion of the population with an account and also through the number of loans. Access to financial services is a stepping stone towards both social and economic inclusion.

2.8

Quality Bank Service for Financial Inclusion

The European Commission Manuscript 2008 stated that financial products/services will be considered appropriate when their provision, structure and costs do not lead the customer to encounter access and/or use difficulties. These difficulties are caused by the characteristics of the products and the way they are provided. The confidence that customers derive from the use and access of financial services is one of the factors of financial inclusion. The nature of financial services and products is more of a motivating factor of usage of such products and services than many other factors. By differentiating, one is trying to make the quality of service provided to stand out of the ordinary. Zineldin (1996, cited in Jama M.H 2010) said that banks need to focus on acquiring and maintaining their market value by making sure that threats are not encountered by their competitors. All banks 25

have to realize that they have to maximize all possible benefits of their customers. One way of doing this is by improving the quality of the services and products rendered. He also stated that the banks that are likely to fail are those that dont consider or prepare themselves to generate a competitive spirit and to develop those differentiated strategies to make their position in the market stronger. According to Jama M.H (2010), the main issue while looking at quality of service comes from the economy itself and its operations. He added that the solution to the problem is to interlink more significant factor like competitive ranking, customer relations with the quality of services. According to Jobber (2004), making customer value the main focus of a firm enables them to attract and to retain customer loyalty. The main objective is to provide the targeted customers with more value added services. Once this is achieved, the firm adopts a marketing concept that takes customer value in context. Therefore, an exemption of this method will very well lead to the path of exclusion of financial credibility. Yavas et al., (1997), investigated the effect of service quality on commitment. He stated that service quality in the banking sector is an effective predictor of customer commitment. This sort of commitment can also be interpreted as inclusiveness. Mouawad and Kleiner (1996 cited in Al-Hawari et al., 2005), noted that it has been proposed that customer perception and preference of service quality has a significant impact on banks success. According to Sureshchandar G.S. et al., (2003), one way of critically evaluating the effectiveness of banking in developing countries is through the research of the issue of quality of banking. In the research of car servicing, Bouman and Van der Wieles (1992), identified three factors of service quality in customer kindness, tangibles and faith, and stressing the importance of customer kindness as the most important factor that creates a significant relationship. Lewis and Soureli (2006 cited in Poolthong, Y et al., 2009), stated that certain unique characteristics in the financial industry can affect how a customer evaluates a firms quality of service.

2.9

Success Factors of Service Quality

According to Phillip, Chang and Buzzell (1983, cited in Bolton and Drew 1991), companies have become convinced of the strategic benefits of quality. As a result of this many literature has been based on the measure of quality in their services. Parasuraman et al., (1988) used five factors to measure service quality, namely: reliability, responsiveness, assurance, empathy and tangibles. This has been the basis on which other works has been built. Sureshchandar et al. (2001) by criticizing the above work identified five factors of service quality. These factors are: 26

2.9.1 Core service or service product

Product and service development are vital for growth of a firm or organization. Perceived value of a service is the customers overall evaluation of the utility of a product based on the perception of what is given and what is received (Zeithaml, 1988). According to Gronroos (1987), most services are bundles of core, facilitating and supporting services. In banking, the core service is the business that the bank carries out with its retail and small business customers which is depositing and lending transactions. The level of a banks core performance is measured by this.

2.9.2 Human element of service delivery

Sureshchandar et al. (2001) explains this to be all aspects that fall under the domain of the human element i.e. reliability, responsiveness, assurance, empathy, moments of truth e.t.c. According to Shostack, (1977), with services, each member of an organization represents the firm and defines the product. It is important to consider the role the employee behavior plays in the process of overall service personality Parasuraman et al., (1985). The human element is specifically explaining all aspects of service that has to do with human beings. For example, according to the House of Commons Treasury Committee 2005/06, people who do not have access to banking services are limited to undertaking a wide range of financial transactions and those limitations are increasing as such transactions are becoming sophisticated. Also, a customers assessment of the level of service given to him is as a result of the warmly attitude that he is addressed with.

2.9.3 Systematization of service delivery: (non -human element)

According to Sureshchandar et al. (2001), this has to do with the process, procedures and the technology that would make a service very attractive to the customers. He added by stating that customers are always expecting their service to be at a high standard also that they be streamlined and simplified without any hassles. Frei & Harcker (1996) made note of the importance of design and implementation in the service delivery process. They noted that traditional studies measure the performance of a firm by its ability to transform inputs into outputs and that they neglect the actual way in which these inputs are transformed. Roth and Jackson (1995) provide evidence that process, capability and execution are major drivers of performance due to their impact on customer satisfaction and service quality. Therefore, a study of the efficiency and quality of service organizations must focus on the role of process design and performance. In the service delivery in the banking area, the process and technology is very important because it can allow the firm to assess its operations and be able to make better adjustments for the future.

27

2.9.4 Tangibles of service

According to Bitner (1990 cited in Jamal and Anastasiadou 2009) stated that customers make inferences about the quality of service based on tangibles such as equipments, buildings and physical layout that surrounds the environment. Wakefield and Blodgett (1999 cited in Jamal and Anastasiadou 2009) also found that the tangible aspect of a service environment was critically effective in the response of the customers. In banking literature, Arasli et al., (2005) found that tangibles are important indicators of customer satisfaction. Wong and Sohal (2003) said that it is the most significant indicator of customer loyalty. Research from Wakefield and Blodgett (1999) has shown that tangibles influence the customers responses such as pleasure, relaxation and feelings of excitement. It was also found by Bang et al., (2005) that the use tangibles in advertising can help improve the effectiveness of service advertising by reducing the amount of uncertainty involved.

2.9.5 Social responsibility

According to Zhonglei and Qigang (2008), corporate social responsibility means that the same time that enterprises are creating profits and are being responsible to their shareholders; they should also bear the social responsibility of their staffs, customers, community and environment. They stated the importance of social responsibility in the quality of service when they stated that social responsibility is subdivided into ten and products and service of sustainable development being one of them. A banks quality of service and products owes it customers that social responsibility through quality control and environmental protection. Amaeshi et al., (2007) noted that there are market benefits and competitive advantage for firms whose business policy integrates corporate social responsibility. Stafford (1996) reported seven distinct elements in bank service quality. The first one is bank atmosphere: which is made up of cleanliness, as well as an overall positive and courteous attitude by employees (kindness, friendliness, and pleasantness). The second is relationship: he indicated the importance of a personal relationship with the bank employees, where customers are recognized easily by long-term employee. The third is rates and charges: it indicates that low costs and high interest rates can affect an individual's perception of bank service quality. The fourth is available and convenient services: it indicates a full array of services that available, easily accessible and convenient. The fifth element is ATMs: indicates available, convenient, and working automatic teller machines. The sixth element is reliability and honesty: indicates the importance of a solid bank rating and honest, reliable employee. And the seven one is Teller: indicates adequate and accessible teller.

2.10 Bank Branches

Cohen et al., (2006), in their findings of customer satisfaction, wrote that the presence of bank branches is essential for the convenience of customers. Becks et al., (2007) discovered a negative

28

relationship between barriers to banking access and bank branches. Financial inclusion entails the access of basic services and as such bank deposits, loans, e.t.c. The deliberate expansion of these branches, though quite costly will be one of the important measures to ensure an almost full banking inclusion.

2.11 Automated Services

Service organizations are increasingly utilizing advanced information and communication technologies, such as the Internet, in hopes of improving the efficiency, cost-effectiveness, and/or quality of their customer-facing operations. More of the contact a customer has with the firm is likely to be with the back-office and, therefore, mediated by technology (Froehle and Roth, 2004). They constructed a usefulness belief model to explain that a customer will be more motivated to use a service again when they benefit or derive value from it. For financial inclusion to be possible to an extent there is the place of technology to aid the process. A will find it easier using computerized and technology aided means of controlling his finances.

2.12 Quality Service as a Differentiation Strategy in bank Inclusion

According to Henry, (2008), the differentiation strategy involves the organization competing on the basis of a service or product that is recognized by customers and they must be valued by the customers. Differentiation strategy creates brand loyalty and it protects the organization from the use of substitutes. Aaker et al., (1991 cited in Jamal. A 2009), said that greater customer loyalty can lead to lower marketing cost and it is also important to brand equity, which in turn is significantly important for creating differentiation and competitive advantage. Some financial institutions are ranked on several criteria such as total assets, total earnings, credit and deposits. These rankings are based on financial aspects and not on the quality of services rendered. An analysis on the service quality aspect might give banks the details that will allow them to achieve competitive edge in seeking new customer horizons. This supports that quality of service which is one of the ways with which a firm can be differentiated. Banks should ensure that in administering the quality of their services, that it be differentiated from that of its competitors to sustain competitive advantage in the service department.

29

Figure 5: Quality Service as a Differentiation Strategy in bank Inclusion

Competitive Advantage Differentiation (Quality Service) Low Cost Strategy

Focus Strategy

Source: Porter (1990) Generic Strategy

2.13 The importance of Microfinance Institutions in Financial Inclusion

According to Conroy (2008), a lack of access to certain credit services is a constraint to many especially the poor, a simple and direct remedy is to provide micro-loans to them. Aportela (1999) defined increasing access of financial services to the poor as microfinance and stated that the development of this type of institutions has been an active strategy/policy for most governments. Microfinance is about providing financial services to the poor who are traditionally not served by the conventional financial institutions. According to the World Bank Financial Access Survey 2009, lower income clients are served mainly by nonbank financial institutions, including specialized state financial institutions, and deposit- taking microfinance institutions.

2.14 Micro Finance as a Low Cost Strategy in bank outreaching

Microfinance institutions usually have a very high cost of operations due to the high level of human intervention that is required to serve their clients. Leveraging on information and communication technology, however, can, in the long term, significantly reduce costs of operations, which will go a long way to ensuring sustainability. The micro finance system is characterized by three things and they are; small amount of loans and savings provided; the absence of asset based collaterals; and the simplicity of operations. In order for this to be possible, government has to implement some means of generating funds that are not cost intensive. In the case of the Nigerian micro finance policy, regulatory and supervisory framework, the government has put in place a public funded micro/rural credit policies that is targeted at the poor.

30

Figure 6: Micro Finance as a Low Cost Strategy in bank outreaching

Differentiation Low Cost Strategy (Micro Finance Policies) Competitive Advantage

Focus Strategy

Source: Porter (1990) Generic Strategy

2.15 Financial Indicators of Financial Inclusion

Some monetary values can also be applied as a determinant of inclusion of the general public in the use of bank facilities. Such values are in this position because of their meanings and what they measure.

2.15.1

Currency in circulation to Money Supply

According to Simwaka (2006), currency in circulation can be used as an indicator of cash utilization in two ways; i.e. share of currency in circulation in Money supply and in ratio of currency in circulation gross domestic product (GDP) of a country. He said it is an indicator of transaction. He stated that an increase in the currency in circulation denotes a decrease in the deposits and subsequently available loans. The later sets have been stated by World Bank financial access (2009) as a major indicator of financial inclusion.

2.15.2

Currency outside Banks to Money Supply

This is the amount of money that isnt in the banking system but still going through some set of transactions. This could be due to level financial accessibility of the public. The CBN annual report (2008), defines this as an intermediation efficiency indicator. It stated this as an indicator reflecting the level use of electronic forms of payment, particularly the use of ATMs and other card products as well as improved banking habits among the public.

2.15.3

Currency Held by Banks

This is the amount of money held in the vaults of banks. A high value of this shows the amount of deposits made by the public and the amount of loan able funds that are available.

31

2.15.4

Total Deposits & Loans

The World Bank Financial Access (2009) stated that the best indicator for measuring access to financial services is the number of depositors and borrowers.

2.16 Covering unbanked areas as a competitive strategy for banks

According to Amaeshi et al,. (2007), it has been widely recognized that the increasing competition among banks is causing them to seek new, more and effective unbanked customers to compete. By so, supporting the neoclassical economic theory that states that the low-wage/cost areas offer a higher return on investments. The banking arena is crowded by sophisticated customers who have clear understandings on the financial products and services. These institutions should learn to understand the potential of the unbanked areas. These areas have not been fully integrated. One of the measures of financial performance is the amount of deposits that a bank can muster. According to the World Bank (2009), in underdeveloped nations, the number of deposits per adult is lower than that of developed nations. If these underdeveloped nations can reach those without bank accounts, this will give them some reasonable competitive edge.

2.17 Problems in delivering to the unbanked

According to Eseigbes (2010), one of the supposed issues of consolidation is efficiency challenge. The argument has been that bigger banks might not necessarily be more efficient, since they have no incentive to improve efficiency within the limited competitive field. Observers of Nigerian banking have noted that the big banks (perhaps because of the increase in the number of customers) have slipped back to their erstwhile habits before the advent of the new generation banks. According to Morawczynski, (2009), some of the problems of delivering to the unbanked areas of Africa could be attributed to the fact that many preferred to keep their money in circulation rather than saving their cash.

2.18 Assessing the Nigerian Banking System

According to Kendall et al., (2010) a necessary step towards achieving an inclusive financial system is to evaluate its status in each country. In other to help understand the position of the Nigerian banking industry in a case global competition, the research uses Porters Diamond model in explanation. Assessing the position of the banking industry is useful as it will help to gain insight on the ability and power of banks in total to carry out their functions and ensure financial inclusion is increased in the country.

32

2.18.1

Porters Diamond Model

Porter (1990), states that the rule of competitive advantage of nations is the outcome of four interlinked and advanced factors. He also said that these factors can be influenced by government of a nation in a proactive way.

2.18.1.1

The strategy, structure and rivalry of firms

Porter (1990) stated here that it is direct competition that makes firms to work for increases in productivity and innovation. The Nigerian banking industry has gone through reforms of consolidation. This has caused the number of banks to shrink tremendously to 25 banks in total. This amount of banks was derived from various mergers and acquisitions of both small and big banks. With each banks meeting the capital base minimum requirement of 25 billion naira, the strength of each bank is now thought to be almost equaled thus depicting direct competition and making rivalry a lot stronger. Accord to Henry, (2008), the existence of strong domestic competitors is the most important factor for the creation of competitive advantage. Competition of banks is more or less based on the kind of value that customers perceive. This shows where the focus of each bank is directed towards. The strategy that each bank uses is that which will create easy banking for the customers. Strategic alliances have also been a method of growth for the Nigeria banking industry through various mergers of banks. According to Adelakun .A (2009), it is a form of strategy used by firms to be formidable in the global market and for increasing market shares. For the structure of banks, the amount of branches has also grown considerably taking for instance First Bank of Nigeria PLC; one of West Africas oldest and most influential banks. It has over 400 branches and still growing.

2.18.1.2

Demand Conditions

From understanding, the high demand of customers for a particular product/service has a very direct effect on the quality of that service. According to Porter (1990), if the customers of an economy are very demanding, the pressures facing firms to continue to improve their competiveness will be high. This is also in line with Porters Five forces. Porter (1990) states that where there is a high concentration of buyers this means that the bargaining power of the buyer is high. The Nigerian banking industry is comprised of large amount of banks all supplying an almost similar level of services and products. The cost of switching from one bank to another is relatively low. Therefore banks are faced with the issue of working to continuously improve their quality of services so that they can compete with for their customers. There is an adequate amount of growth in the middle class of the set of people that reside in the country due to the increase in the demand for loans for establishing business and also for transactions, speculative and precautionary motives.

33

2.18.1.3

Related Supporting Industries

Unfortunately, there is a small amount of match between the Nigerian banking industry and other real sectors like the agricultural, manufacturing, communications, mining and others in terms of investment opportunities and volumes of business. Porter defined this to be upstream and downstream industries that facilitates the exchange of information, innovation and ideas. According to Uzor .M (2006) one of the issues facing the Nigerian banking industry is that reforms and micro economic policy measures are only limited to the banking sector and do not address the real sector-linked challenges facing banks. He also noted that without a clear vision of where the other key economic industries are headed and how far they can go the banking industry will have a limited impact. Even with the amount of unrelated industries in the nation, the Nigerian banking sector has seen a lot of positive changes in the past decade, this has been both profitable to the banks and the economy in general, there have been rapid product development in the other industries and sectors making it viable and able to compete with other international competitors. This is because the banking industry is constituted by a large number of other related financial institutions. Such institutions like Microfinance Banks (MFB), Development Finance Institutions (DFI), Primary Mortgage Institutions (PMI), .e.t.c. with the Central Bank of Nigeria (CBN) as the apex bank.

2.18.1.4

Factor Conditions

According to Okuda and Saito (2001), the bank industry just like other industries can be thought as an organization that uses factors of production as inputs and produces final services as outputs. Major factors of production include raised funds, physical capital, and labor. Porter (1990) made note of more specialized factors. This he stressed cannot be by any other and are difficult to duplicate. The Nigerian economy is one that is dominated by oil and petroleum industry. The Governor of the Central Bank of Nigeria; Sanusi (2010), stated that due to the fiscal policies in place, the excess liquidity from the oil sector inevitably reached the domestic banking system causing an abundant amount of capital. Along with the banking consolidations, the banking sector can boast of the speed in credit creation. Bank deposits and credits have grown four-fold from the year 2004 to 2009 and banking assets increased on average of 76% per annum. The economies abundance of oil is surely a specialized factor. Porter further noted the role of the government in his model. He stated that they serve as a catalyst and a pusher of firms (in this case, banks) to raise their aspirations and grow to high levels of competitive performance. The Nigerian banking industry has the Central Bank (CBN) as its Apex bank; one that oversees all the affairs of the countrys financial position. As a bankers bank, the CBN has a mandate to promote monetary stability and also as an advisor to the federal government.

34

According to the Fitch Ratings (2010), the Nigerian banking industry is historically weak and it will be beneficial to the banks compliance functions to the set regulations of the CBN be strengthened. According to Nigeria best forum magazine, the banking system is still highly risky and very low compared to other banks of the world. In view of the above assessment, the Nigeria banking industry is still an infant in the banking system. There quite a lot that needs to be done to ensure the general effectiveness of banks to reach a high standard.

Figure 7: Porters Diamond Model 2.19 Competitive Advantage of the banking sector
In the writings of Landeiro de Vaz, J.J. (2000), size of a banking firm represents a source of competitive advantage. He also said that if banking firms exist through imperfections in the functioning of financial markets, the most appropriate strategy should consist in delving more deeply into them in order to find dominant competitive positions which would enable them to obtain extraordinary results. The absolute size of the institutions would be the most important competitive advantage in this sector and the economies of scale and scope would assure the results of the financial institutions and defense of their positions in this sector. He also stated that scrutiny of resources and an analysis of organizational capacity would prove to be a conceptual frame and the reference argument to enhance strategic behavior and the development of depository institutions like banks. Therefore the success of the industry should not just be focused on absolute size but also on efficiency. All these stipulate just how attractive the banking industry should be.

35

2.20 Solutions to Financial Exclusion 2.20.1 The E-banking Solution

The mobile phone is having a dramatic effect on the lives of Africans and is proving to be a lifetransforming device. Limited by weak physical infrastructure but supported by their ingenuity, the people of Africa are turning to mobile phones to improve their living standards. Banks are recognizing the potential of the unbanked and are introducing resourceful methods of bringing them into the formal economy on the back of mobile telephone. (Standard Chartered Asia, Africa and the Middle East; Guide to working capital Management 2009/10). The country has been encouraging the use of telecommunication over the years since the year 2000. The country today has more than 30 million cellular subscribers. (See Figure 8)

Figure 8: Mobile Cellular Subscription per 100 people.

45 40 35 30 25 20 15 10 5 0 2001 2002 2003 2004 2005 2006 2007 2008

Source: World Bank Database.

2.20.2

Financial Education and Community Development

According to Oluba (2006), the Nigerian governments pursuit of poverty reduction is in line with the Millennium Development Goals (MDGs) and the National Economic Empowerment and Development Strategy (NEEDS) driven reform programme as a sure medium-long term strategic approach to financial inclusion for many Nigerians. One of the ways through which the government has been involved in the inclusion of underprivileged in the financial sector activities is through universal basic education. According to Oluba (2006), it is clear from sufficient evidence that education is a major determinant of earning capacity of an individual. It is also a necessary condition for understanding and use of financial institutions and processes to ones advantage.

36

According to the House of Commons (2006), financial advice would represent a key building block in an effective financial inclusion strategy. Increasing enrollment in education should therefore increasingly produce more literate Nigerians to work in the financial institutions; to earn more through improved skills and competencies; and increase the awareness of the use of financial institutions and its products (Oluba 2006). The literacy rate in Nigeria is 68% making majority of the countrys citizens relatively uneducated.

2.20.3

Subsidized Credit Approach

According to McAteer, (2008), the main cause of exclusion is income/ asset related i.e. Large groups of consumers cannot afford financial services. The general public can therefore be reluctant to engage in any financial transaction which could be collecting of loans, depositing and savings because of the cost of these services. According to the Zenith Economic Quarterly (2006), the amount of NGOs involved in microfinance activities in Nigeria have increased significantly due to the ability of the formal sector to provide services needed by the low income groups. These NGOs are charity based and they obtain their funds from grants, fees, interest on loans and contributions from their members. The Neoclassical economic theory states that all economic systems will eventually reach a natural equilibrium where forms of capital will flow from the high-wage/cost to the low-wage/cost areas. This could also be determined by the rate of interest provided both for loans and for deposits. The deposit rate in Nigeria has been performing rather slowly and should be taken into account as it is very important to the level of financial inclusion. This is because the higher the rates of depositing, the more willing people are willing to save and the lower the lending rates, the more people are willing to loan.

37

Figure 9: Nigerian Deposit and Lending Rate

Nigerian Deposit and Lending Rates: (2001-2008)

45 40 35 30 25 20 15 10 5 0

Deposit Rate Lending Rate 2001 2002 2003 2004 2005 2006 16.9 2007 2008

Deposit Rate 15.256 16.67 14.218 13.698 10.533 9.743 10.288 11.9708 Lending Rate 23.438 24.771 20.714 19.181 17.948 16.939 15.4798

Source: World Bank Database

2.20.4

Employment Creations

In Oluba (2006), he noted that the Nigerian governments plans and macroeconomic reforms to initiate more employment are targeted at improving the value-adding capacity and economic profitability of the private sector; the growth of new firms particularly the small and medium scale enterprises; as well as outright divestiture of the public sector from ownership of businesses is expected to create more employment and financial empowerment.

2.20.5

Consumer Protection

As more people enter the financial system and credit products become more complex, regulations to protect consumers need to be put in place. Bank customers need to be protected from over indebtedness due to the high rates on lending or loss of collaterals. Bank customers also need to be informed of the financial systems and transactions. This will help to increase financial literacy and ease the entry of new customers. One way of ensuring the good flow of customer protection is by adhering to a disciplined and transparent financial system and this can only be done through supervision and regulation of the system.

2.21 Conclusion
Literatures have gone as far as recognizing the various success factors of a good financially inclusive system in an economy in bank charges, complexity, economic status, service quality e.t.c. It is now the time to test how significant they are. Plenty of literature have tested these factors on a large scale and with cross country comparisons. The research will intend to answer all relevant questions related to the topic. 38

As the concept of financial inclusion continues to gain ground, it has become much more critical to estimate the level of which the public are being serviced financially. The literature review explains the factors in general and tried as much as possible to structure them accordingly. The literature review gave a brief account of the research problem stating that the issue of financial inclusion as a symbol of financial deepening and a sign financial development. It looked at the nature and developments of the Nigerian banking system. It gave evidence that the Microfinance system is a tool to banking the unbanked. It explained the system of Microfinance in Nigeria; stating its trends and geopolitical segmentation. This is in order to give a background on the expected system of banking in Nigeria. It defines the terms that are involved in the research like financial inclusion/exclusion. The research stated Kempson et al (2006) causes and types of financial exclusion. It explained service quality as one of the major factors that drives financial inclusion. The literature review explained the concept of financial inclusion in the context of Porter (1990)s generic strategy of low cost, differentiation and focus. It also assessed the nature of the Nigerian banking system using Porter (1990)s Diamond Model. It finally gave a brief set of solutions that can be implemented to ease the level of financial exclusion, while giving account to Nigeria.

39

CHAPTER THREE
3.1 Introduction
The task of actually selecting a method of research is the core of any dissertation. The chosen methodology, when implemented needs to be able to answer the question at hand and also are in accordance with the statement of the research. This is an exploratory/deductive research. The objective is to measure the level of financial inclusion in a small partial area. This chapter of the research seeks to use a mixed methodology to display the main objectives of the research. According to Creswell et al., (2007), a mixed method research is a research design with philosophical assumptions as well as methods of enquiry. Moon (2004) argued for the application of mixed methodology and provides a paradigm for its defense. He stated that the application of separate methods seeks to answer raised questions concerning the validity and accuracy. Bryman (2001, cited in Moon 2007) stated that the application of the two are equally informing. Deetz (1996, cited in Krauss 2005), stated that different modes of research allows one to understand different phenomena and for different reasons.

METHODOLOGY

3.2

Research Paradigms

According to Saunders et al. (2003), a research philosophy has three main classifications; realism, positivism and interpretivism. According to Lythcott & Duschl, (1990, cited in Krauss 2005), qualitative research is based on a relativistic, constructivist ontology that posits that there is no objective reality. Rather, there are multiple realities constructed by human beings who experience a phenomenon of interest. Positivism predominates in science and assumes that science quantitatively measures independent facts about a single apprehensible reality. In other words, the data and its analysis are value-free and data do not change because they are being observed. That is, researchers view the world through a one-way mirror (Healy & Perry, 2000). It is a position that holds that the goal of knowledge is simply to describe the phenomena that we experience. The purpose of science is simply to stick to what we can observe and measure. Knowledge of anything beyond that, a positivist would hold, as impossible (Trochim, 2000).

40

According to Healy & Perry (2000, cited in Krauss 2005) the factor that differentiates the positivists from other researchers is that they separate themselves from the world they study. Interpretivism promotes the value of qualitative data in pursuit of knowledge (Kaplan and Maxwell, 1994). Husserl (1965) stated that interpretivists believe that reality is not objectively determined but is socially constructed. Williams (2008) noted that it is often those who define themselves as interpretivists (as opposed to more generic qualitative researchers) who deny the possibility of generalization. He followed by stating that papers reporting on results of research using interpretive methods will make generalizing statements about findings whilst not commenting upon the basis upon which such generalizations might be justified. He continued to say that interpretive research is similar to generalization since the later is taken in a broad scientific sense to mean a general proposition. The research is in place to employ a more interpretive approach of describing the state of financial inclusion and its effects using a set of factors from an administered survey.

3.3

Research Approach

According to Saunders et al. (2003), the two approaches available for research are Inductive and deductive approaches. The former being the invention of theory while the later is the application of theory. This research aims at deducting theories and hypothesis in application to different scope. The research is also administered in a qualitative form. According to Meyer et al (2003), the qualitative approach focuses on words and feelings, the quality of an event or experience. As a descriptive study and insight on a phenomenon, the research aims at shedding light on the various factors of consumer behavior in access and use of financial services. The research will also make use of quantitative values in describing the phenomena of the study, thereby making it a mixed methodological approach.

41

3.4

Data Collection

In collection of data, the research makes use of a set of survey questionnaires to create primary data and some secondary data from regulatory institutions. This is to validate in information and findings that will be foundation of the research.

3.5

Data Analysis

The research is analyzed mainly with the use of questionnaire surveys. The sample size covers a large number of people residing both in the UK and in Nigeria. The aim of the survey is an attempt to determine the extent of financial inclusion/exclusion in both these countries for the sake of comparison and recommendation. The results of the survey will be analyzed using statistical graphs, charts and histograms which help in painting a vivid picture. These statistical instruments will then be further explained with qualitative means. According to Jankowicz (2000), it will be helpful to have a description of the sample responses followed by an indication of the existence of analytical statistical measures.

3.5.1 Analytical Framework

From the literature review, it was seen that various critical factors have effects on the level of financial inclusion/exclusion. Factors like income, employment, bank charges, quality services, level of complexity, required identification, financial education, and level of physical access. This will be administered through questionnaire survey to describe and weigh the importance and effects of these factors to financial inclusion. The survey is also used to determine the type and extent of exclusion (if any) that exists among these areas. Using a survey from two distinct areas; Nigeria in comparison to the United Kingdom will be the two sample sets. With the use of both primary and secondary data, the research aims to measure the level of financial inclusion in these regions. The ability of the questionnaire to use comparison is in its quality to identify easy comparators that match the two sets of population samples. This technique of comparison might show a limited level of impact due to the differences in systems and level of advancements in the two sets of populations. Therefore some of the indicators and factors like household comparisons, and cultural differences might be inaccessible.

42

3.5.1.1

Measuring Financial Inclusion

The research employs various standard means of measuring financial inclusion with key indicators, in accordance with Kaplan and Norton (1996, cited in Thompson, 2001), stating that organizations should focus their efforts on a limited number of specific, critical performance measures which reflect stakeholders key success factors. According to Kendall et al., (2010), a necessary step towards achieving an inclusive financial system is to evaluate its status in each country. The research does this through the analysis of set questionnaires to determine the levels of inclusion for each country.

3.5.1.2

Measuring Accessibility

According to the European Commission 2008, lack of access to a bank account can lead to additional costs of operating a cash budget, such as bill payment or check cashing which can make a bad financial situation became worse thereby making an individual over-indebted. In measuring the level of accessibility the survey will try to cover factors as level of bank outreach by distance of bank branches and accessibility to ATMs. According to the World Bank financial access 2009, measuring the level of access in a country will enable policy makers to be able to reach effective policies and track the progress of the their financial institutions. It states that the first step is to start regularly collecting a set of standardized indicators for all regulated financial institutions in a country. These indicators include the number of deposit accounts and loans, the number of deposit clients and borrowers e.t.c. Among these the research also employs the use of other indicators that measure various levels of financial deepening in a country.

3.5.1.3

Measuring Quality Bank Service

In measuring the level of service of banking, the research looks at factors used by Parasuraman et al., (1988) namely: reliability, responsiveness, empathy and assurance. This will be determined with the use of the survey questionnaires. The purpose of this is to validate the place of quality service in including individuals in the banking system.

3.6

Justification of UK in the survey

The UK economy is the sixth largest in the world. The service sector is 76.2% of the GDP. The UK companies operating in the financial services market are noted for deploying generic marketing strategies, particularly the Big 4 retail banks. There has been a large amount of enquiry into the level of financial exclusion in the UK. According to the Financial Times (2010), UK banking has experienced some improvements owing to the reduction in loan impairment charges and to retail and commercial business. A country of dynamism should be symbolic for comparison to a lesser state of economic level and also for the purpose of research. 43

3.7

Justification of Nigeria in the survey

Nigeria is Africas most populous country. The Nigerian service sector is 32.5% of GDP. In order to achieve gains in the all sectors, the Nigerian banking system has undertaken various reforms. One of which is the Rural Access and Mobility project which aims to enhance rural mobility and access to markets and services. In general the banking system in the country is seen to be very poor and needs to be upgraded. Seeing its differences from that of the UK will be a point of contrast as to how indepth and how far along the country has come financially.

3.8

Questionnaire

The questionnaire was created based on some of the factors stated Kempson (2006) and other stated literatures. A variety of response formats are used in the questionnaire. Formats like multiple choice formats, ranked format, free choice format, and rating format. The questions will be administered with the use of postal, email and internet mediums. This will allow a regulation of the various sampling issues that are related with the various methods. Anderson and Gansneder, (1995 cited in Jankowicz, 2005) reported a 76% email return rate. According to Saunders et al., (2003 cited in Jankowicz, 2005), the internet response has a reporting rate of 10% making it an unsuccessful medium.

3.9

Hypothesis

The research seeks to validate the effects of financial inclusion factors on the various levels of access and use of financial services. Financial inclusion/exclusion is positively related the given factors. This will be judged by the following criteria. Is a persons level of financial inclusion/exclusion positively related to the banks charges and rates? Is a persons level of financial inclusion/exclusion positively related with his/her employment status? Is a persons level of financial inclusion/exclusion positively related to the quality of services that he/her receives? Is a persons level of financial inclusion/exclusion positively related to the complexity of the financial service? Is a persons level of financial inclusion/exclusion positively related to his/her level of financial knowhow? Is a persons level of financial inclusion/exclusion positively related to his/her level of income? Is a persons level of financial inclusion/exclusion positively related to required level of identification?

Any objective results from the survey will be eliminated as an alternative hypothesis; (

). 44

This will be further illustrated with the help of the findings.

3.10 Ethics
The aim of the research is to assess the general level of financial inclusion in Nigeria in comparison to the level in the UK. The research would have liked to make it possible to include a postal medium in the case of Nigeria, but due to the high amount of cost and time involved, the Nigerian survey was limited to the email and internet medium. Still yet, the desired respondents will give a good account of what is expected of the research. The research gave a careful statement of who the researcher is and what the purpose of the questionnaire was for. Before the administration of the questions, it was made clear that the study does not conflict with the general values. The questions given will ensure the anonymity of the respondents thereby not providing any information that will be detrimental or embarrassing to them.

3.11 Limitation
Given the time scale of the research, it was expected that the respondents had to complete the questions promptly. Some of which had to be followed up to ensure due completion. Some information that was required had some minor implications to respondents full corporation; this is due to the ongoing level of identity theft in contention; others being reluctant to provide their levels of income and employment status for the sake of embarrassment. Apparently, not all respondents were corporative but given the measurement of the required sample size, the research cannot be said to be a total floor.

3.12 Possible Sources of Bias

The research may face certain aspects of bias due to the method of questionnaire distribution. The sample size may not reflect the nature of the research answer. Even so, secondary data will be used in support of the research objective.

3.13 Conclusion
The purpose of this chapter is to broadly explain the methodology of the research. It starts by giving an introduction to the implemented research paradigms. It states this to be an interpretive research paradigm. It distinguishes the research as a mixed methodological approach through its adoption of both qualitative and quantitative methods of interpretation. It summarizes the data collection process as through the use of primary and secondary data; attempting to validate the findings. Data will be analyzed on a comparative base between two large sample sizes; Nigeria and the UK. The analytical framework will be based on factors that have been 45

explained in the literature review. All the factors are backed by a set of hypothesis which will help to answer the research question.

46

CHAPTER FOUR
4.1 Introduction
This chapter is the descriptive interpretation of the data derived from the survey and a description of various quantitative measures. According to Jankowicz (2005), the value of structured approach is that it allows one to standardize questions making a more numerate statistical based analysis possible. The research questionnaire aims at covering various factors using a set of structured questions. Some of the questions are unnecessary to the research question but are useful to initiate the respondents into the survey. The survey is drafted in two set of samples i.e. the UK and Nigeria. Questions were directed towards eliciting each respondents level of financial inclusion or capability and the effects of some factors on their inclusiveness. The factors covered are bank charges/rates,

DATA ANALYSIS

economic/employment & income status, complexity of services, level of financial knowhow, identification requirements and perception of quality of service. Each research relevant question will be outlined statistically and described qualitatively.

4.2

Measuring Financial Access

To measure the levels of financial access, the research has analyzed the following:

4.2.1 Bank Account owners

The first step of financial inclusion is having access to banking services. In showing the amount of people who had access to bank accounts, the survey gave the following results.

47

Q.1: Do you own a bank account?

Table 2 & 3: Data on Bank Account Owners

Nigeria: Bank Account Owners Yes No Total Sample/Respondents 52 100% f 52 0 % 100% 0 Bank Account Owners Yes No Total Respondents Total Sample UK: f 72 1 73 80 % 90% 1.25% 91.25% 100%

The interpretation of the above shows that the Nigerian financial system has grown sufficiently that all respondents owned a bank account of their own. Nigerians compared to the UK bank users all see the need for a bank account as this is the first step towards an inclusive financial capability.

4.2.2 Use/Access to Microfinance/ Communi ty Banks

Assessing the use of microfinance banks in each country explains how in-depth the countrys financial system is in cultivating people into financial inclusion. Using microfinance banks is an instrument for increasing the publics access to financial facilities. The respondents were given the choice to select from a set of options (not mandatory) to choose the type of financial institution that they use and have access to. They survey gave the following results.

Q. 4: Which one of the below best describes the type of financial institution that you

patronize? Table 4: Data on Use/Access of Financial Institutions

Use/Access Institutions Micro Finance Bank Commercial Bank Community Bank Total to Financial Nigeria: f 9 43 0 52 % 17 83 0 100 UK: f 29 46 5 80 % 36.25% 57.5% 6.25% 100

48

Figure 10: UK Use/Access to Financial Institutions

Community Bank 6% Commercial Bank 58% Micro Finance Bank 36% Micro Finance Bank Commercial Bank Community Bank

Figure 11: Nigerian Use/Access to Financial Institutions

Community Bank; 0%

Micro Finance Bank; 17% Micro Finance Bank Commercial Bank Community Bank

Commercial Bank; 83%

From the above, the Nigerian context shows that most Nigerians from the survey choose to patronize the use of commercial banks more than their choice for microfinance institutions or community banks. This only shows that the growth of microfinance institutions though substantial has not been able to reach a larger share of the public. The use of microfinance institutions as an instrument for financial inclusion hasnt fully been actualized compared to the UK where people show a general acceptance of building societies and community banks.

4.2.3 Bank Distance and Access

Given the World Banks emphasis on bank distance and financial access, the research choose to employ a set indicators stating the level of banking outreach, such indicators as the respondents perception of bank distance and cost intensity. The following questions were used in the analysis.

49

Q. 5: Rate the distance of your nearest financial bank from your place of residence.

Table 5: Data on Bank Branch Distance

Nigeria: Bank Branch Distance Far away Distance 1 2 Average Distance 3 4 Very near Total 5 f 1 8 24 11 8 52 % 2% 15% 46% 21% 15% 100% UK: f 6 11 28 31 4 80 % 7.5% 13.75% 35% 38.75% 5% 100%

Figure 12: Bank Branch Distance

Very near UK Average Distance Nigeria

Far away Distance 0% 10% 20% 30% 40% 50%

The distance of the banks from the public is a factor to consider while estimating financial exclusion but due to the increased use of technological means of banking, this is no longer seen as a predominant factor. Seeing from the above, not many of the respondents demonstrate that the finance institutions are actually near or far away for them to access them.

4.2.4 Access to Automated and Credit/lending Facilities

In order to assess individual access to credit facilities and to automated facilities, the questionnaire comprised of a set of questions prompting the respondents to specify access or non-access to these services and also from a list of multiple options to state reason(s) for non-access. The results of the survey are as follows.

50

Q. 7: Does your financial institution provide automated services?

Table 6: Data on Automated Teller Providers

Nigeria: f Automated Providers Yes No Total 50 2 52 Teller % 96.2% 3.8% 100% 70 10 80 % 87.5% 12.5% 100% UK: f

Q. 8: If yes, do you use these services?

Table 7: Data on Automated Teller Users

Nigeria: f Automated Teller Users Yes No Total 34 16 50 % 65.3% 30.7% 96% 63 7 70 UK: f % 78.75% 8.75% 87.5%

Q. 10: If you answered yes to question 8, are the automated teller services at your disposal? Table 8: Data on Availability of ATMs
Nigeria: f Availability of ATMs: Yes No Total 27 7 34 % 51.6% 13.4% 65% 57 6 63 UK: f % 71.25% 7.5% 78.75%

51

Q. 18: Does your bank provide avenues for credit/lending services?

Table 9: Data on Providers of Credit Services

Providers of Credit Services Nigeria f Yes No Total 49 3 52 % 94.20% 5.80% 100% UK f 75 5 80 % 93.75% 6.25% 100%

Q. 19: If yes, do you use these services?

Table 10: Data on Non-users of Credit Services

Non-users of Credit Services Nigeria f Yes No Total 8 41 49 % 15.40% 78.60% 94% UK f 27 48 75 % 33.84% 60.14% 94%

The above illustrations are used to ascertain from the sample, the amounts of people of the two sets are actual users of the given financial services of ATMs and credit services. From the tables, it shows that 96% of Nigerian respondents who stated that their finance institutions provided them with automated services; only 65% of them were actual users of these services. While for the case of the UK respondents, a large amount of the respondents were users. The respondents perception of availability of ATM services was smaller in Nigeria compared to the UK as a larger percentage of the Nigerian ATM users stating that they were not readily exposed to the services. In the use of credit facilities, the Nigerian respondents showed a high rate of non-users with 79% of the 94% indicating that they do not use credit facilities. This signifies a small view of the level of inclusiveness of the UK system compared to that of Nigeria and stating that the UK public, generally are more financially inclusive than the Nigerians in terms of availability of ATMs and credit facilities. The respondents also indicated on their perception of the rates of interest as to high or low it is in effect of their use, but due to the fact that it is not of importance to the research but in the findings can be used for further research. The proceedings of this can be found in the research appendixes.

52

4.3

Measuring Financial Inclusion

The research sort to display from majority of respondents opinions; the reasons from given factors for the lack of access and use of financial services. Given the questions, the survey shows the following results:

Q. 9: If no, please select the reason that suits your situation more appropriately.

Table11: Data on Reasons for ATM Non-users

Nigeria: Reason for ATM Non-Users Physical Disability Lack of Knowhow Lack of Access Over Complexity High Amount of Charges Unnecessary Total Sample Total Respondents f 0 1 7 11 3 7 16 52 % 0 6.25% 43.75% 68.75% 18.75% 43.75% 181.25% UK: f 0 0 2 6 2 5 6 80 % 0 0 33.3% 100% 33.3% 83.3% 249.9%

[Respondents selected more than one from a check box, so the percentage added up to more than a 100%]

Q. 12: Do you patronize the other products provided for you by your financial institution?

Table 12: Data on Users of other Bank services

Nigeria: f Use of other bank % 19 33 52 36.50% 63.50% 100% 27 53 80 % 33.75% 66.25% 100% UK: f

services Users Non-users Total

53

Figure 13 & 14: Users and Non-users of other Banking Services

UK

Nigeria
Users 36% Users Nonusers 64% Non-users

Users 34% Users Nonusers 66%

Q.13: If no, please state which one of these reasons suits your situation.

Table 13: Data on Reasons for other Financial Service Non-users

Reason for other Financial Service NonUsers: Lack of knowhow High amount of charges Unnecessary Over complexity Total frequency of Respondents Total Sample f 4 8 25 11 33 52 Nigeria % 12.12% 24.24% 75.76% 33.30% 145.42% f 7 24 31 26 53 80 UK % 13.20% 45.28% 58.50% 49.10% 166.10%

[Respondents selected more than one from a check box, so the percentage added up to more than a 100%]

From the above tables, respondents were made to choose from a multiple set of options, their perceived reason for their exclusiveness. For the case of over complexity, the UK respondents showed a higher indication of this as a factor as a 100% of them in the use of ATMs stated over complexity as their reason and the Nigerian respondents showed an almost similar figure except for the unequal amount of respondents. The aggregate of this factor backs the work of Kempson (2006) that the breadth and complexity of banking services has undoubtedly contributed to banking exclusion in highly banked countries. This allows the research to therefore state that the hypothesis; service? will cannot be eliminated. Is a persons level of financial inclusion/exclusion positively related to the complexity of the financial

54

Looking into the case of lack of access, the set of Nigerian respondents indicated that as very much a cause of their exclusiveness. According to Kempson et al, (2000, cited in Kempson, 2006), this due to the increased competition of international banking and it tends to be prominent among the poor and small rural communities. It coincides with what Kempson and Whyley (2000) called access exclusion. The charges involved in the use/access of these services is not very well discovered but is significant when seeing that a small amount of the respondents pointed out that this also is a cause of their exclusiveness. The works of Kempson (2006) and that of Wallace and Quilgars, (2005) stated that the fear and cost of getting overdrawn and incurring high bank charges was a major discouraging factor for many people on low or modest incomes to manage their day-to-day finances. This also backs the work of Kempson and Whyley (2000) as what they called price exclusion and occurs when services are available but at prices that are unaffordable. From this the research chooses not to the hypotheses;

Is a persons level of financial inclusion/exclusion positively related to the banks charges and

rates? cannot be eliminated. Some respondents in given their perceived reasons pointed out their reluctance in the use of these services as they are unnecessary to them. This type of exclusion is what Kempson and Whyley (2000) called self exclusion, when individuals voluntarily do not seek financial services. For the cases of lack of knowhow, just one respondent from Nigeria pointed this out as a factor. Though not sufficient for significance is very well a factor as many reports like that of the Norwich City council (2009) pointing out the need for financial guidance and education to enable people to make better use of financial services. With this, there is no significant evidence to acknowledge or eliminate the hypotheses; Is a persons level of financial inclusion/exclusion positively related to his/her level of financial knowhow?

55

4.3.1 Extent of Financial Inclusion

The research uses a set of indicators to help determine the extent of financial inclusion/exclusion that is prevalent in the two sample sets. The results of the following are indicated below:

Q.14: Please state your level of familiarity of the following services.

Table 14: Data on Level of Familiarity of Loan Services

Level of familiarity of Banking Services Loans Nigeria f Poorly aware Fairly aware Aware Very aware Total 15 12 18 7 52 % 28.90% 23.10% 34.60% 13.50% 100% UK f 11 21 34 14 80 % 13.75% 26.25% 42.50% 17.50% 100%

Figure 15: Level of Familiarity of Loan Services

50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Poorly aware Fairly aware Aware Very aware Nigeria UK

The table and diagram above shows in general the publics perceived knowledge of loan services granted by banks. The set of Nigerian respondents indicated a higher value for being poorly aware of these services while the UK respondents showed a higher level of general awareness in the use of bank loans. Seeing from this, the Nigerian banking system though growing hasnt generally attracted the knowledge of the public in the use/access and the benefits of the given service compared to that of the UK.

56

Table 15: Data on Level of Familiarity of Internet Banking Services

Level of familiarity of Banking Services Internet Banking Nigeria f Poorly aware Fairly aware Aware Very aware Total Sample 10 17 11 14 52 % 19.20% 32.70% 21.20% 26.90% 100% UK f 1 5 23 51 80 % 1.25% 6.25% 28.75% 63.75% 100%

Figure 16: Level of Familiarity of Internet Banking Services

70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Poorly aware Fairly aware Aware Very aware Nigeria UK

In the use of internet banking, the Nigerian respondents indicated a lower level of knowledge while the UK respondents showed that their awareness of this type of service is very high. According to the Financial Times, (2010), online buying and selling has grown with the proportion having doubled since the last four years in the UK.

57

Table 16: Data on Level of Familiarity of Mobile Banking Services

Level of familiarity of Banking Services Mobile Banking Nigeria: f % Poorly aware Fairly aware Aware Very aware Total 10 14 15 13 52 19.20% 26.90% 28.90% 25.00% 100% 14 13 44 9 80 UK: f % 17.50% 16.25% 55.00% 11.25% 100%

Figure 17: Level of Familiarity of Mobile Banking Services

60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Poorly aware Fairly aware Aware Very aware

Nigeria UK

For the case of mobile banking inclusion, the Nigerian respondents share an equal level of awareness. This could be because, many banks in Nigeria have imbibed the system to the public, with the rising use of telecommunication in Nigeria since the year 2000 (check World Bank data base). And also the partnerships between Nigerian banks with mobile network operators. The CBN (2009), in its statement to the general public stated that it has recognized mobile telephony as a veritable avenue for advancing financial inclusion and has moved to encourage the payment system through mobile phones.

58

Table 17: Data on Level of Familiarity of Debit Card Services

Level of familiarity of Banking Services Debit Cards Nigeria % Poorly aware Fairly aware Aware Very aware Total 9 11 16 16 52 17.31% 21.15% 30.77% 30.77% 100% 0 0 29 51 80 UK % 0.00% 0.00% 36.25% 63.75% 100%

Figure 1148: Level of Familiarity of Debit Card Services

70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Poorly aware Fairly aware Aware Very aware Nigeria UK

In the use of this type of service, the UK respondents are generally very aware of the system. According to the Financial Times, (2010), debit card spending is on track to overtake cash spending in the UK.

59

Table 18: Data on Level of Familiarity of Credit Card Services

Level of familiarity of Banking Services Credit Cards Nigeria % Poorly aware Fairly aware Aware Very aware Total 20 16 10 6 52 38.50% 30.77% 19.23% 11.50% 100% 8 11 44 17 80 UK % 10.00% 13.75% 55.00% 21.25% 100%

Figure 1159: Level of Familiarity of Credit Card Services

60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Poorly aware Fairly aware Aware Very aware

Nigeria UK

The Nigerian economy is still very much a cash economy with a high amount of the public unexposed to the advanced technological system of banking. This is shown in the graph as the Nigerian respondents indicated a high level of unawareness of bank credit card services.

60

Table 139: Data on Level of Familiarity of Bank Mortgage Services

Level of familiarity of Banking Services Mortgage Nigeria % Poorly aware Fairly aware Aware Very aware Total 31 10 8 3 52 59.60% 19.23% 15.40% 5.77% 100% 37 27 11 5 80 UK % 46.25% 33.75% 13.75% 6.25% 100%

Figure 20: Level of Familiarity of Bank Mortgage Services

60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Poorly aware Fairly aware Aware Very aware Nigeria UK

:
According to the Financial Times, (2010), mortgage lending for house purchases in the UK has increased since November, 2009. This indicates that the level of familiarity with the UK public of such services is very dominant.

61

4.4

Effect of factors

Q. 16: In your opinion, do you feel that your employment status plays a role in your use/access of these services?

Table 20: Data on Effect of Employment on Use/Access of Financial Services

Effect of Employment status on

use/access of Financial Services Nigeria f Yes No Don't know Total 31 8 13 52 % 59.60% 15.40% 25% 100% UK f 46 16 18 80 % 57.50% 20.00% 22.50% 100%

Figure 2161: Effect of Employment Status on Use/Access of Financial Services

60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Yes No Don't know Nigeria UK

A high response of the sample of both the UK and that of Nigeria agree that employment status has a great effect to their exposure and use of financial services. With this slight significance, the research designates that the hypotheses; Is a persons level of financial inclusion/exclusion positively

related with his/her employment status? cannot be eliminated.

62

Q. 17: In your opinion, do you feel that your level of income plays a role in your use/access of these services?

Table 21: Data on Effect of Income level on Use/Access of Financial Services

Effect of Income on use/access of Financial Services Nigeria f Yes No Don't know Total 29 8 15 52 % 55.80% 15.40% 29% 100% UK f 43 17 20 80 % 53.75% 21.25% 25.00% 100%

Figure 2172: Effect of Income Level on the Use/Access of Financial Services

60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Yes No Don't know

Nigeria UK

Respondents perceived their level of income, whether high or low to one of the major determinants of inclusion into the use of financial services. This is also what Kempson (2006) stated that countries with low levels of income inequality tend to have lower levels of financial exclusion, whereas high financial exclusion is found in least equal countries. This affirms that the hypotheses; Is a persons level of financial inclusion/exclusion positively related to his/her level of income? cannot be eliminated.

63

Q. 21: In your impression, do you feel that the rate of interest and bank charges play a role in your choice and use of the credit services?

Table 22: Data on Effect of Interest Rate and Charges on Use/Access of Financial Services
Effect of interest rate and charges on use/access of Financial Services Nigeria f Yes No Don't know Total 37 9 6 52 % 71.15% 17.31% 11.54% 100% UK f 51 19 10 80 % 63.75% 23.75% 12.50% 100%

Figure 23: Effect of Interest Rate and Charge on Use/Access of Financial Services
80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Yes No Don't know

Nigeria UK

From the respondents, it is generally approved that bank charges and interest rates is a factor of financial inclusion. The research no sees that the hypotheses, Is a persons level of financial inclusion/exclusion positively related to the banks charges and rates? will not be eliminated.

64

Q. 24: In your own view, does the required identification deter you from accessing or using bank services?

Table 23: Data on Effect of Level of Identification on Use/Access of Fi nancial Services

Effect of level of identification on use/access of Financial Services Nigeria f Yes No Don't know Total Respondents Total Sample 1 17 7 25 52 % 1.90% 32.70% 13.50% 48.10% 100% UK f 0 43 13 56 80 % 0.00% 53.75% 16.25% 70% 100%

Figure 24: Effect of Level of Identification on Use/Access of Financial Services

60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Yes No Don't know Nigeria UK

From the responses gathered, it is shown that required identification isnt a limiting factor for financial inclusion. The respondents from the sample sets indicated this from the illustration above. Therefore the research eliminates the hypotheses; Is a persons level of financial

inclusion/exclusion positively related to required level of identification?".

4.5

Measuring Service Quality

Q. 29: From the above questions (25, 26, 27 & 28), will you say that this has an effect in your choice and use of bank facilities?

The quality of banking services has been stated as a driving factor towards financial inclusion. With the help of certain questions from the sample, the research elicited how much of an effect this is on the use and access of banking services. 65

Table 24: Data on Overall Perception of Bank Quality Service

Respondents Overall perception of Bank Quality Service Nigeria f Strongly Disagree Disagree Unsure Agree Strongly agree Total 1 4 11 29 7 52 1.90% 7.70% 21.20% 55.70% 13.50% 100% 1 0 18 48 13 80 1.25% 0 22.50% 60% 16.25% 100% % UK f %

Figure 2185: Overall Perception of Bank Quality Service

70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Strongly Disagree Disagree Unsure Agree Strongly agree

Nigeria UK

Yavas et al., (1997), investigated the effect of service quality on commitment. He stated that service quality in the banking sector is an effective predictor of customer commitment. The research elicited from the sample, what effect this factor has on the respondents levels of use and choice of banking services. A high proportion of them agree to this as a motivator to the use of banking services. It can then be concluded that the hypotheses; Is a persons level of financial inclusion/exclusion positively related to the quality of services that he/her receives? is significant.

4.6

Monetary Measures of Financial Inclusion

Some financial ratio trends can indicate the level and amount of financial deepening in a country. Such ratios as money supply (M) to gross domestic product, currency outside banks (COB) to money supply (M) and currency in circulation (CIC) to money supply (M).

66

Table 245: Monetary Measures of Financial Inclusion

2003 M2/GDP Ratio % COB/M Ratio % CIC/M Ratio % 20 20.8 25.3 2004 19.8 20.3 24.1 2005 19.3 20 22.8 2006 19.5 16.2 19.3 2007 28.1 12.7 16.5 2008 38.1 9.7 12.6

Source: Soludo, C. (2009) p. 5.

4.6.1 Ratio of Money supply to gross domestic product (M/GDP Ratio %)

According to the CBN (2008), this indicator measures the depth of the financial sector in banking and shows the capacity of the banking sector to provide liquidity for the exchange of goods and services. This is shown in the figure below.

Figure 196: Money Supply to GDP Ratio Percentage (%)

40 30 20 10 0 2003 2004 2005 2006 2007 2008 M2/GDP Ratio %

Source: Soludo, C. (2009) p. 5.

According to the central bank of Nigeria annual report (2008) and from the diagram, there is an upward trend from 2006 till 2008. From the data, it shows improvements in the Nigerian financial system to control funds and bank reserves to enable financial capability among the public as well as to issue credit facilities and provide micro services.

4.6.2 Ratio of Currency outside Banks to Money Supply (COB/M Ratio %)

The CBN annual report (2008), defines this as an intermediation efficiency indicator. It stated this as an indicator reflecting the level use of electronic forms of payment, particularly the use of ATMs and other card products as well as improved banking habits among the public. This is illustrated in the figure below.

67

Figure 27: Currency outside Banks to Money Supply Ratio Percentage (%)
9.7 2006 2003 0 5 10 15 12.7 16.2 20 20.3 20.8 20

COB/M2 Ratio %

25

Source: Soludo, C. (2009) p. 5. Comparing the change from 20.8% in 2003 to 9.7% in 2008 shows a drastic improvement. This displays that the Nigerian financial sector have seen the importance and have taken an initiative to improve general capability of the public in the financial sector.

4.6.3 Ratio of Currency in Circulation to Money Supply (CIC/M Ratio %)

An increase in the currency in circulation indicates a decrease in the available deposits and loan able funds. This is shown graphically for the case of the Nigerian financial sector.

Figure 2208: Ratio of Currency in Circulation to Money Supply (CIC/M Ratio %)

30 25 20 15 10 5 0 2003 2004 2005 2006 2007 2008

CIC/M2 Ratio %

Source: Soludo, C. (2009) p. 5.

The diagram shows a decreasing trend of the ratio, signifying improvements in the banking sector indicating the downward fall of the currency in circulation ratio to money supply and an increase in loan able facilities to the public.

4.6.4 Loans to customers and Deposits

In order to guide monetary policy to encourage financial inclusion, the Financial Access (2009) stated that regulators collect data on the values of deposits and credits. The progression of this is shown for the case of Nigeria in the graph below. 68

Figure 29: Loans and Deposits to bank customers

2007 2006 2005 2004 2003 2002 2001 0.00 1,000,000.00 2,000,000.00 3,000,000.00 4,000,000.00 5,000,000.00 Demand Deposits Loans and Advances to Customers

Source: CBN Statistical Bulletin (2006/07), pp. 47-48 From the trend above, its shows a progression for the value of deposits and loans that has been available for bank customers seeing the development of the banking financial sector in including the public in the financial system. The graph below shows the trend of loans and deposits that has been available for rural bank branches in Nigeria. The graph shows an up and down progression for both cases. With deposits growing

Figure 30: Loans and Deposits from Rural bank branches

2007 2006 2005 2004 2003 2002 2001 0.00 10,000.00 20,000.00 30,000.00 40,000.00 50,000.00 60,000.00 70,000.00

Loans to Rural Branches By Banks Deposits of Rural Branches By Banks

Source: CBN Statistical Bulletin (2006/07), pp. 47-48

4.7

Summary of Findings

The research began with tabular illustrations showing various frequencies of respondents answering of the administered questionnaires. This was followed by various graphical and chart illustrations of the findings. The findings were grouped into various segments for clearer understanding. These grouped segments were; (i) measuring of financial access through indications of bank accounts ownerships and the distance of the banks from the respondents; (ii) reasons/causes for the respondents exclusion from services like ATMs and other bank services; (iii) levels of awareness of the different types of basic bank services; and (iv) using various indicators of country financial deepening.

69

In measuring financial access, the research looked at the respondents who indicated that they had access to bank accounts. The findings from this was deducted that almost a total amount of the sample had access to a bank account. The subgroups segmentations of the findings into age groups, sex and monthly income are illustrated in the appendixes. The research also validated the existence of various types of exclusion like; self exclusion, access exclusion and price exclusion. This was ascertained in the findings that some of the reasons for exclusion from the sample are high amount of charges, over complexity and lack of access. It was deducted from the findings with the use of superlative opinion that the factors; bank charges, service quality, income and employment status are critical to the levels of financial inclusion and exclusion except for the factor of required identification. According to Honohan and King (2009) the reasons that non-users give for not accessing bank services could be useful to drive market research and market development. The expansion of financial inclusion/exclusion of each set of samples could only be determined from the questions attaining their level of familiarity with certain various services like mobile banking, internet banking, loans, debit cards, credit cards and mortgage. With this method, it was deducted that the Nigerian respondents showed a lower level of familiarity to the normal accustomed banking services except in the use of mobile banking which is a rising means of banking in Nigeria. In the use of country indicators of financial depth, the research sort to display the level of financial access and inclusion in the Nigerian system of banking. This is not a significant proxy for displaying financial inclusion, but with the combination of the survey, one can envision the extent of financial access in the Nigerian system. The research was based on previous works from literatures of Kempson et al., (2000), Kempson and Whyley, (2006), Kempson (2006), Honohan and King (2009) e.t.c. The summary of the findings can be useful for further research with surveys taking into consideration, overall population of the country of study, division of survey into household study and also a look at the supply side of problem of financial inclusion i.e. from the perspective of the service providers.

70

CHAPTER FIVE
DISCUSSION, RECOMMENDATIONS and CONCLUSION 5.1 DISCUSSION

The results of the survey suggest that developing countries have lesser financial capability and access than compared to the more developed nations; in this case it was in the study of the UK and Nigerian point of view. This is shown from various factors like the display of utilization microfinance service where the Nigerian respondents showed a low appreciation of this type of institution with only 17% of respondents. This can be interpreted to mean a low penetration of the micro service into the financial system and a less acknowledgement of microfinance as an effective tool and instrument of financial inclusion. For the extent of financial inclusion, the UK showed a high penetration as all respondents were familiar with the services that they were asked to identify. The respondents were asked in the research questionnaire to give indications on their levels of familiarity with services like mobile banking, internet banking, loans, mortgage, debit cards and credit cards. For the case of internet banking, 19.2% of the Nigerian respondents demonstrated a poor level of awareness in internet banking (26.9% showed high awareness) while the UK respondents showed a lower level with 1.25% (63.75% showed high awareness). 19.2% of the Nigerian respondents gave a poor awareness for mobile banking (25% showed high awareness), while 17.5% of UK respondents showed that they have a poor awareness of that service (11.25% showed high awareness). Finally, in the case of poor awareness of mortgage services, 59.6% of Nigerian respondents were confirmed (5.77% showed high awareness), while 46.25% of UK respondents indicated that they were poorly aware of the services (6.25% showed high awareness). Knowing the extent of exclusion in a country helps policy makers and service providers to proceed more strategically at tackling the problem. This type of information coupled with market segmentation research can give room more developments. Asking the question of if an individual utilizes a product or service helps the research to state that he/she is financial included in that product. This is the snapshot of the topic as this informs about levels of exclusion or inclusion. The research acknowledged prior statements of Kempson (2006), about the causes of financial exclusion. This can be a drive towards more marketing development by providing the respondents with questions about the causes of their exclusion. By deriving the causes of exclusion, the research also displays what type of exclusion. For example, an individual might experience financial exclusion due to the high amount of charges. As shown in the investigation, 78.6% of Nigerian respondents answered, that they do not use credit services and 18.75% of them stated that they do not use them due to the high amount of charges. This was interpreted to be the type of exclusion that Kempson (2006) called price exclusion. This tells those involved that cost of

71

services require some subsidizing and emphasizes the importance of micro credit and services. For the case of respondents that linked their reason for inaccessibility to the reason of lack of knowhow, (for example; 6.25% of the Nigerian non-user respondents indicated this to be their reason for exclusion in the use of ATMs), this is interpreted to mean a presence of a lack of financial education. 43.75% and 33.3% of both Nigerian and UK non-user respondents gave their reasons to be lack of access of ATM services. This is interpreted to be a low level of penetration in that respect and is interpreted to represent what Kempson and Whyley (2000) called a state of access exclusion. This research also found some reasons to be linked to the over complexity of the services (33.3% of Nigerians and 49.1% of UK non-user respondents stated this as a reason for non-utilization of other services). The research interpreted this to be due to the increased level of developments in the financial sectors and financial liberalization. The research also noted a case of respondents being self exclusive stating that they found some financial services unnecessary with 75.76% and 58.5% of Nigerian and UK non-user respondents indicating this. The research was constituted of various questions patterning to the effects of certain factors like interest charges, economic status of employment and income as well as amount of required identification. These factors are defined as limiting factors that cause a state of exclusion. The research tested just how true it is in the cases of the two sample sets. It was established that interest rate, and economic status both have existing effects on the level and extent of financial inclusion/exclusion. 56.9% of the Nigerian respondents and 57.5% of the UK respondents agreed that their employment factor has an effect on the access and use of financial services (15.4% and 20% of Nigerian and UK respondents respectively disagreed to this effect). Contrary to the amount of significance of the previous factors, the factor of amount of identification was highly negative with 1.9% of the Nigerian and 0% of UK respondents stated positive to this effect (32.7% and 53.75% of both Nigerian and UK respondents stated that this had no effect). The research, on indicating the significance of quality service in financial inclusion, included various questions that are an indication of bank customers perception of quality service. Such questions indicated a show of banking empathy, responsiveness, and soundness. These are some of the success factors of quality service indicated from the literature review. In summation of the above, the respondents were stated to indicate the effect of such factors in the use and accessibility of financial services. 55.7% and 60% of Nigerian and UK respondents agreed to the effects of these factors. In summation of the findings, the research chose to state the significance of the following hypotheses criteria; Is a persons level of financial inclusion/exclusion positively related to the banks charges and rates? 72

Is a persons level of financial inclusion/exclusion positively related with his/her employment status? Is a persons level of financial inclusion/exclusion positively related to the quality of services that he/her receives? Is a persons level of financial inclusion/exclusion positively related to the complexity of the financial service? Is a persons level of financial inclusion/exclusion positively related to his/her level of financial knowhow? Is a persons level of financial inclusion/exclusion positively related to his/her level of income? And to eliminate the stated hypotheses question: Is a persons level of financial inclusion/exclusion positively related to required level of identification?

The expansion of inclusion/exclusion in Nigeria was further demonstrated with ratios of currency in circulation to money supply (CIC/M Ratio %), money supply to GDP (M2/GDP Ratio %), and currency outside banks to money supply (COB/M Ratio %). This was to provide a look at the financial deepening of the Nigerian banking system.

5.2

RECOMMENDATIONS

According to Duncombe and Boateng (2009), the significance of effective deprivation assessments of financial services before adopting new innovations is emphasized by Hulme & Mosley (1996), and it is noted by Matin, Hulme & Rutherford (2002) and Ghate (1992) that the people; especially the poor tend to have little interaction with formal financial institutions and systems. By providing a snapshot of the level of financial inclusion in a country, one is contributing to further research into illuminating and solving the generally acclaimed problem. Researches can look into the issue and compare other countries into various single benchmarks. It provides the policy makers with the answers to the questions and the factors that they need to tackle in order to administer full growth in both economical and sociological aspects of the nation. Total financial inclusion is a target that all governing bodies of a country drive to attain. It is a display of the effect policy application that has been applied which has been targeted at the general welfare of the public. Various national authorities can use this information to effective construct policies.

73

As apex institutions look into the ratios of financial deepening such as currency in circulation to GDP, this informs them of the results (whether a growth or a decline) of their financial improvements and the general capability of the public. Financial providers can use the acquired data to look for better ways to link their need to make profit with also their obligation for better welfare. This can be done by reducing the barriers of financial access to the general public on equal grounds whether the poor or the more comfortable groups. They can utilize the information of financial inclusion for the positive promotion and construction of marketing initiatives i.e. through the use of subsidies and incentives that can be targeted towards the subgroups of age, sex, educational levels, occupational groups, e.t.c. This will enable them to make effective and innovative solutions. General information on cross country financial inclusion can help drive international finance to other country markets. It can provide the institutions that drive to carry their brand names from one country to the other to foresee the benefits of their products in other markets and helping them to derive what opportunities that awaits. For example, knowing the level of penetration of mobile phone banking in a host country can give a home country institution an insight of how accessible and compatible their mobile banking competencies will be in the host country. Other researches can utilize the topic of financial inclusion in a more market drive inquisition. This can be in terms of consumer behavior and customer satisfaction of financial services. Researchers can apply a more informatory method of data accumulation while looking into aspects such as the demand and the supply sides of the topic. In tackling the problem, it is important to note that the issue comes from both the individual, household and providers point of view. Acknowledging comments and data from all three sources will drive for higher levels of development. The information on financial inclusion can also be useful to the general public helping them to comprehend the importance of such financial services and products. They may also use information on the causes and effects of lack of access to better position themselves for better access to these opportunities.

5.3

CONCLUSION

Due to the limited capability of the researcher to administer other methods of analysis, they were various limitations to this research. It would have been more informatory to use more informative to display the findings in a representative selection of factors like geo-political region, sex, occupation e.t.c. The research employed a simple random sample but future research can take this into consideration. Future research can also take into revaluate the size of the sample as the implemented sample size of the research may not be significant and so results do not give a clear account of the situation. Also the method of data collection can also be questioned due to the inaccessibility of the 74

targeted sample; the research employed data collection from the use of mail questionnaires and the internet medium. This doesnt undermine the objective of this academic research, but serves as a guide to further researches and a broader look at the financial inclusion in more developing and underdeveloped countries.

75

Bibliography
A Framework for Assessing the Benefits of Financial Regulation. (2006) Report Prepared by the Financial Service Authority. [Internet] June, pp. 4-14.
th

Available

from:

<http://www.fsa.gov.uk/pubs/other/Oxera_report_20060622.pdf > [Accessed 26 August, 2010]

Adelakun, A. (2009) Enhancing Nigerian Competiveness in the Global Economy Through Strategic Alliances. Brno University of Technology, Economics & Management. [Internet], vol. 14, p 1. Available from: < http://www.ktu.lt/lt/mokslas/zurnalai/ekovad/14/1822-6515-2009-649.pdf >

[Accessed 19th July, 2010].

Amaeshi, K.M., Ezeoha, E.A., Adi, B.C., & Nwafor, M. (2007) Financial Exclusion and Strategic Corporate Social Responsibility: A Missing Link in Sustainable Finance Discourse? International Centre for Corporate Social Responsibility, [Internet] No. 49, pp 7-21. Available from: <http://www.nottingham.ac.uk/business/ICCSR> [Accessed 17th July, 2010]

Anderloni, L., Bayot, B., Bledowski, P., Drozdowska, I.M., and Kempson, E. (2008) European Commission, Directorate-General for Employment, Social Affairs and Equal Opportunities Inclusion, Social Policy Aspects of Migration, Streamlining of Social Policies. [Internet] March, pp. 4-6. Available from: <ec.europa.eu/social/BlobServlet?docId=760&langId=en > [Accessed 12th August, 2010]

Anyanwu, C.M. (2004) Microfinance Institutions in Nigeria: Policy, Practice and Potentials. Central Bank of Nigeria, Paper Presented at the G24 Workshop on Constraint s to Growth in Sub Saharan Africa, [Internet] November, pp. 1-13. Available from: <http://www.g24.org/anyanwu.pdf > [Accessed 6th July, 2010] Al-Hawari, M., Hartley, N., and Ward, T. (2005) Measuring Banks Automated Service Quality: A Confirmatory Factor Analysis Approach. Marketing Bulletin. [Internet]. Vol. 16, no.1, p. 1. Available from: < http://marketing-bulletin.massey.ac.nz/V16/MB_V16_A1_AlHawari.pdf > [16th July, 2010].

77

Aportela, F. (1999) Effects of Financial Access on Savings by Low-Income People. Banco de Mxico Research Department. [Internet], December, p.6.
th

Available

from:

<http://www.lacea.org/meeting2000/FernandoAportela.pdf> [Accessed 17 July, 2010]

Bandyopadhyay, G. (2010) Banking the Unbanked: Going Mobile in Africa. Standard Chartered: A Guide to Working Capital Management. [Internet], pp. 60-69. Available from:

<http://www.infosys.com/offerings/industries/banking-capital-markets/Documents/bankingunbanked.pdf> [Accessed 12th July, 2010] Banking the Unbanked: Banking Services, the Post Office Card Account, and Financial Inclusion. (2006) London, House of Commons Treasury Committee. HC 1717 (2005-2006), [Internet], November, 3rd July, 2010] Banks and Financial Inclusion: Survey on the Italian Territory, ABIs Study on Financial Inclusion Activities Undertaken by Italian Banks. (2007). The European Alliance for CSR. [Internet], p.1. Available from: < http://www.csreurope.org/data/files/offer_side_survey.pdf > [Accessed 21st August, 2010] p.1. Available from:

<http://www.publications.parliament.uk/pa/cm200506/cmselect/cmtreasy/1717/1717.pdf> [Accessed

Beck, T., Demirguc-Kunt, A., & Peria, M.S. (2007) Banking Services For Everyone? Barriers to Bank Access and Use around the World. October, pp.1-50. Available from:

<http://www.efmaefm.org/0EFMAMEETINGS/EFMA%20ANNUAL%20MEETINGS/2007Vienna/Papers/0287.pdf> [Accessed 15th July, 2010] Bolton, R.N and Drew, J, H (1991) A Multi-Stage Model of Customers Assessments of Service Quality and Value. Journal of Consumer Research. [Internet]. Vol. 17, no. 4, pp. 4-6. Available from: <http://www.ruthnbolton.com/Publications/ServiceQualityandValue.pdf> [Accessed 12rd

August, 2010]

Bouman, M, and Van der Wiele, T. (1992), Measuring Service in Car Service Industry: Building and Testing an Instrument. International Journal of Service Industry Management. MCB University Press. [Internet]. Vol. 3 no. 4, pp. 10-16. Available from:

<http://www.emeraldinsight.com.ezproxy.leedsmet.ac.uk/index.htm> [Accessed 24th August, 2010]

77

Care Taker (2008) More than 50% of Nigerian Adults Lack Access to Finance: Banking Survey. [Internet] 24th November. Available from: <http://www.africanloft.com/more-than50-of-nigerian-adults-lack-access-to-finance-banking-survey/> [Access 12th July, 2010]

Central Bank of Nigeria (2007) Statistical Bulletin. [Internet] Vol.18, pp. 36-65. Available from: <http://www.cenbank.org/OUT/PUBLICATIONS/STATBULLETIN/STD/2009/CBN%20STATISTI CAL%20BULLETIN%20VOL.%2018,%20DEC.%202007%20%20EXPLANATORY%20NOTES.PDF> [Accessed 12th July, 2010]

Cohen, D., Gan, C., and Choong, E. (2006) Customer Satisfaction: A Study of Bank Customer Retention In New Zealand. Commerce Division Discussion Paper. [Internet], No. 109, p 19. Available from: <http://www.lincoln.ac.nz/Documents/2308_DP109dc_s6473.pdf > [Accessed 3rd July, 2010]

Cohen, N (2010) Sharp Rise in Mortgage Lending. Financial Times, [Internet] 11th August. Available from: <http://www.ft.com.ezproxy.leedsmet.ac.uk/cms/s/0/336763e0-a527-11dfb734-00144feabdc0.html> [Accessed 1st September, 2010]
Conroy, J.D (2008) Financial Inclusion: A new Microfinance Initiative for APEC. The Foundation for Development Cooperation, [Internet] January, p. 4. Available from: <https://www.abaconline.org/v4/download.php?ContentID=4244> [Accessed 12th July, 2010]

Consumer Protection: Leveling the Playing Field in Financial Inclusion. (2010) Alliance for Financial Inclusion, p. 1-5.

Dan, M.I. and Silvia, D.E. (n.d.) Service Quality Attributes in Retail Banking Services. Constantin Brancoveanu 14th July, 2010] University [Internet], pp. 733-736. Available from: <

http://steconomice.uoradea.ro/anale/volume/2009/v4-management-and-marketing/146.pdf> [Accessed

Duncombe, R and Boateng, R (2009) Mobile Phones and Financial Services in Developing Countries: A Review of Concepts, Methods, Issues, Evidence and Future Research Directions. Manchester Development Informatics Working Paper. [Internet] pp.1-35. Available from:

<http://www.sed.manchester.ac.uk/idpm/research/publications/wp/di/documents/di_wp37.pdf> [Accessed 1st September, 2010]

77

Eseigbes (2010) The Effect of Bank Consolidation on the Performance of Banks in Nigeria. [Internet] 9th February. Available from: <http://www.articlesbase.com/banking-articles/theeffect-of-bank-consolidation-on-the-performance-of-banks-in-nigeria-1841090.html> [Accessed 12th June, 2010]
Financial Access: Measuring Access to Financial Service around the World. (2009) Consultative Group to Assist the Poor/the World Bank. [Internet], pp.1-92. Available from: <http://www.cgap.org/gm/document-1.9.38735/FA2009.pdf> [Accessed 12th July, 2010]

Financial Capability Baseline Survey: Methodological Report. (2006) Financial Service Authority, Consumer Research, [Internet], crpr 47a, March, pp. 1-70. Available from: <http://www.fsa.gov.uk/pubs/consumer-research/crpr47a.pdf> [Accessed 10th July, 2010].

Financial Inclusion and Consumer Protection in Peru: The Branchless Banking Business. (2010). A Joint SBS/CGAP Report. [Internet], February, pp. 4-9. Available from:

<http://www.cgap.org/gm/document1.9.41601/Financial%20Inclusion%20and%20Consumer%20Protection%20in%20Peru%20The%20B ranchless%20Banking%20Business.pdf> [Accessed 17th July, 2010] Financial Inclusion: Ensuring Access to a Basic Bank Account. Consultation Document. (2009) Brussels, European Commission; Internal Market and Services. [Internet] June, MARKT/H3/MI D(2009), [Accessed 17th July, 2010] pp. 1-14. Available from:

<http://ec.europa.eu/internal_market/consultations/docs/2009/fin_inclusion/consultation_en.pdf>

Financial Inclusion Measurement for Regulators: Survey Design and Implementation. (2010) A Report Delivered by Bankable Frontier Associates, Commissioned by the Alliance for Financial Inclusion. [Internet] February, pp. 1-28. Available from: <http://www.afi-

global.net/downloads/Policy%20paper_Data&Measurement.pdf> [Accessed 12th August, 2010]

Financial Inclusion Strategy for Wales: Taking Everyone into Account. (2009) Welsh Assembly Government, CMK-22-10-106. [Internet] February, pp. 1-68. Available from:

<http://wales.gov.uk/docs/dsjlg/consultation/090128fistrategye.pdf> [Accessed 3rd July, 2010]

Financial Inclusion Task Force: The Help the Aged Response. (2005) Help the Aged. [Internet], June, pp.1-6. Available from: <http://policy.helptheaged.org.uk/NR/rdonlyres/0BF6FF36-7E1E-46F2B099-3EE34BFD0088/0/financial_inclusion_taskforce_response.pdf> [Accessed 7th August, 2010] 77

Frei, F.X., and Harker, P.T. (1996) Measuring the Efficiency of Service Delivery Processes: With Application to Retail Banking. The Wharton Financial Institutions Center. University of Pennsylvania. [Internet] 96-31-B, p.4. [Accessed 12th July, 2010].

Froehle, C.M and Roth, A.V. (2004) New Measurement Scales For Evaluating Perceptions of Technology-Mediated Customer Service Experience. Journal of Operations Management. [Internet], vol. 22, p 1. Available from: < http://www.cba.uc.edu/faculty/froehlcm/pubs/2004-frjom.pdf > [Accessed 21st June, 2010].

Glaveli, N., Petriduo, E., Liassides, C., and Spathis, C. (2006) Bank Service Quality: Evidence from Five Balkan Countries. Managing Service Quality. Emerald Group Publishing Limited. [Internet], vol. 16 No. 4, pp. 380-385. Available from: <http://www.emeraldinsight.com.ezproxy.leedsmet.ac.uk/> [Accessed 7th July, 2010].

Hamilton, K (2009), Low-income Families: Experiences and Responses to Consumer Exclusion. International Journal of Sociology and Social Policy. Emerald Group Publishing Limited. [Internet]. Vol. 29, no. 9/10. Available from: < http://www.emeraldinsight.com.ezproxy.leedsmet.ac.uk/index.htm > [Accessed 26th August, 2010].

Harris, E.G and Fleming, D.E. (2005) Assessing the Human Element in Service Personality Formation: Personality Congruency and the Five Factor Model. Journal of Services Marketing. Emerald Group Publishing Limited. [Internet], vol. 19(4), pp. 187-188. Available from: <http://www.emeraldinsight.com.ezproxy.leedsmet.ac.uk/> [Accessed 7th July, 2010]

Hayton, K., Percy, V., Chapman, M., and Latimer, K. (2007) Financial Inclusion: A Topic Report From the Scottish Household Survey. Scottish Government Social Research. [Internet], pp.14-16. Available from: <http://www.scotland.gov.uk/Resource/Doc/198912/0053172.pdf> [Accessed 3rd July, 2010]

Henry, A. (2008). Understanding Strategic Management: Oxford University Press

Honohan, P, and King, M. (2009) Cause and Effect of Financial Access: Cross-Country Evidence from the Finscope Surveys. Prepared for the World Bank Conference Measurement, Promotion, and Impact of Access to Financial Services. from: <> [Accessed 15th August, 2010]. Department of Economics and Institute for International Integration Studies, Trinity College Dublin. [Internet] 9th March, pp. 9-20. Available

77

In or Out? Financial Inclusion: A Literature and Research Review. (2000) Financial Service Authority, Consumer Research, [Internet], crpr 03, July, pp. 1-101. Available from: <http://www.fsa.gov.uk/pubs/consumer-research/crpr03.pdf> [Accessed 10th July, 2010]

Increasing Financial Inclusion: What the National Strategy for Financial Capability is doing to Help. (2007). Financial Service Authority, National Strategy for Financial Capability. [Internet] December, p. 3. Available from: <http://www.cfebuk.org.uk/pdfs/financial_inclusion.pdf> [Accessed 12th August, 2010]

Jankowicz, A.D (2000) Business Research Projects. Thomson Learning Business Press, 3rd Edition.

Jama, M.H (2010) Strategies Adopted By Local Banks to Attract New Customers and Retain Existing Customers: A Case Study of Handlesbanken in Lulea. Thesis, Lulea University of Technology.

Jenkins, P (2010) UK Debit Card Use to Exceed Cash for First Time. [Internet] 19 th January. Available from: <http://www.ft.com.ezproxy.leedsmet.ac.uk/cms/s/0/59a69080-0536-11dfa85e-00144feabdc0,s01=1.html> [Accessed 1st September, 2010]

Johnson, S, and Nino-Zarazua, M. (2009) Financial Access and Exclusion in Kenya and Uganda. The Centre of Development Studies, University of Bath. [Internet] February, pp. 1-27. Available from: <http://www.solvay.edu/EN/Research/CERMi/documents/FULL_JohnsonSusan_FinancialAccessand exclusioninUgandaandKenya.pdf> [Accessed 8th August, 2010]

Karmakar, K.G. (2010) Financial Inclusion: Branchless Banking and Beyond. National Bank for Agriculture and Rural Development, India. ETI Dynamics Ltd, UK. [Internet], p.1. Available from: <http://ticorridors.com/IndiaUK/Lists/Featured%20Reports/Attachments/11/2010_06_30_Ch_Reports _Financial%20Inclusion-branch%20less%20banking.pdf> [Accessed 21st August, 2010].

Kempson, E (2006) Policy Level Response to Financial Exclusion in Developed Economies: Lessons from Developing Countries. A Paper for Access to Finance: Building Inclusive Financial Systems. Personal Finance Research Centre, University of Bristol. [Internet] 31st May, pp. 4-8. Available from: <info.worldbank.org/etools/library/latestversion.asp?232700> [Accessed 25th July, 2010]

77

Kendall, J., Mylenko, N., and Ponce, A. (2010) Measuring Financial Access around the World. The World Bank Financial and Private Sector Development Financial Access Team. Policy Research Working Paper. [Internet] 5253, pp. 37-53. Available from: <http://www.cgap.org/gm/document1.9.43130/Measuring_Financial_Access_Around_World.pdf > [Accessed 12th July, 2010].

Krauss, S.E (2005) Research Paradigms and Meaning Making: A Primer.

Universiti Putra,

Selangor, D.E., Malaysia. A Qualitative Report. [Internet]. Vol. 10, no. 4, pp. 758-767. Available from: <http://www.nova.edu/ssss/QR/QR10-4/krauss.pdf> [Accessed 13th August, 2010]
Landeiro de Vaz, J.J (2000) Competitive Advantage of the Portuguese Banking Industry. Investigaciones Europeas de Direccin y Economa de la Empresa [Internet] Universidade Tcnica de Lisboa. Vol. 6, no.3, p.25. Available from: <http://www.aedem-

virtual.com/articulos/iedee/v06/063025.pdf> [Accessed 12 July, 2010] Managing Director/CEOs Statement (n.d.) Nigeria Deposit Insurance Corporation. [Internet], pp. 31-137. Available from: <http://ndic.org.ng/files/2008_annual_report.pdf> [Accessed 13th June, 2010]

Making Your Money Count for You: A Financial Inclusion Strategy for the City. (2009) Norwich City Council. [Internet], pp.2-37. Available from:

<http://www.norwich.gov.uk/internet_docs/docs/Council%20Key%20Publications/Financial_inclusio n_strategy.pdf> [Accessed 7th August, 2010]

McAteer, M (2008) Tackling Financial Exclusion: Ethical Solutions. Centre. Glasgow Caledonian University. [Internet]

The Financial Inclusion Available from:

pp.12-14.

<http://www.povertyinformation.org/fileuploads/tackling-financial-exclusion---ethical-solutions5615.pdf> [Accessed 21st August, 2010]

McAteer, M., and Evans, G. (2010) A Financial Inclusion Manifesto: Making Financial Markets Work for All in a Post Financial Crisis World. The Financial Inclusion Centre. [Internet] March, pp. 5. Available from: <http://inclusioncentre.org.uk/doc/financial_inclusion_manifesto_summary.pdf> [Accessed 25th July, 2010]

77

Measuring Banking Sector Outreach. (n.d.) Financial Sector Development Indicators. [Internet], pp. 1-7. Available from: <http://siteresources.worldbank.org/INTTOPACCFINSER/Resources/Bnkoutrch.pdf> [Accessed 12th July, 2010]

Measuring Financial Capability: An Exploratory Study. (2005) Financial Service Authority, Consumer Research, [Internet], crpr 37, June, pp. 1-75.
th

Available

from:<

http://www.fsa.gov.uk/pubs/consumer-research/crpr37.pdf> [Accessed 10 July, 2010]

Microfinance Policy, Regulatory and Supervisory Framework for Nigeria. (2005) Central Bank of Nigeria.
th

[Internet]

December,

pp.1-27.

Available

from:

< >

http://www.cenbank.org/out/Publications/guidelines/dfd/2006/microfinance%20policy.pdf [Accessed 12 July, 2010]

Micro Finance Policy, Regulatory and Supervisory Framework for Nigeria. (2006) Zenith Economic Quarterly. Vol. 1, no. 5, pp. 13-22.

Mitchell, T (2003) The Role of Microfinance in Economic Development. Student Economic Review. [Internet]. Vol. 17, p.3. Available from: < www.tcd.ie/Economics/SER/sql/download.php?key=65 > [Accessed 12th June, 2010]
Moon, J. and Moon, S (2004) The Case of Mixed Methodology Research: A Review of Literature and Methods. A Working Paper. [Internet], pp. 1-16. Available from: <http://www.svpuk.com/Mixed%20methodology.pdf> [Accessed 21st August, 2010]

Nigeriatelecoms (2009) Banking the Unbanked Africa: The Disconnections. [Internet] Zdnet UK. Available from: <http://www.zdnet.co.uk/blogs/nigeria-mobile-marketing10008775/banking-the-unbanked-african-the-disconnections-10012955/> [Accessed 5th June, 2010]
Nwachukwu, T.E and Odigie, P. (2009) What Drives Private Saving in Nigeria. A Paper Presented at the Centre for the Study of African Economies (CSAE) Conference, University of Oxford.

77

Obaigbona, E.C (2009) Regulatory Framework for Mobile Payments Service in Nigeria. Central Bank of Nigeria, Banking Operations Department. [Internet] BOD/RTP/GEN/RVP/01/002, 11th June, p.1 Available from:

<http://www.cenbank.org/OUT/CIRCULARS/BOD/2009/CIRCULAR%20ON%20REGULATORY %20FRAMEWORK%20FOR%20MOBILE%20PAYMENTS%20SERVICES%20IN%20NIGERIA. PDF> [Accessed 5th September, 2010]

Okeke, H (n,d,) Mobile Banking to the Rescue. [Internet] Next. Available from: <http://234next.com/csp/cms/sites/Next/Home/5512564-146/story.csp> September, 2010]
Oluba, M. (n.d.) Evolving Trends in Financial Inclusion in Nigeria, [Internet], pp. 1-6. Available from: <http://www.martinoluba.com/publications/newspapers/Evolving%20trends%20in%20Financial%20I nclusion%20in%20Nigeria(%20Article%20for%20Abuja%20Inquirer).pdf> [Accessed 3rd July, 2010]

[Accessed

1st

Oluba, M (2010) Thoughts on Financial Exclusion in Nigeria. [Internet] Business Day, 12th April. Available from:

<http://www.businessdayonline.com/index.php?option=com_content&view=article&id=9987 :thoughts-on-financial-exclusion-in-nigeria&catid=96:columnists&Itemid=350> 12 June, 2010]

Oluyombo, O.O (2010) Assessment of Rural Sustainable Development by Microfinance Banks in Nigeria. A Presentation Delivered at IESD PhD Conference: Energy and Sustainable Development Institute of Energy and Sustainable Development, Queens Building, De Montfort University, Leicester, UK. [Internet] 21st May, p.1. Available from: <

[Accessed

http://www.iesd.dmu.ac.uk/events/phd_conference_2010/papers/Oluyombo.pdf > [Accessed 12th July, 2010]

Other Financial Institutions Department (2008) Distribution of MFBs by Geo-Political Zones. [Internet]. The Nigerian Microfinance Newsletter. 31st May, p.1. Available from: < http://www.cenbank.org/OUT/PUBLICATIONS/DFD/2009/MFB_JUNE2008.PDF > [Accessed 21st July, 2010]

77

Poolthong , Y. & Mandhachitara, R. (2009) Customer Expectation of CSR, Perceived Service Quality and Brand Effect in Thai Retail Banking. International Journal of Bank Marketing. Emerald Group Publishing Limited, [Internet], vol.27 No. 6, p 409. Available from: <http://www.emeraldinsight.com.ezproxy.leedsmet.ac.uk/.> [Accessed 7th July, 2010]

Porters

Diamond

Model

(n.d.)

[Online

Image]

Available

from:

<http://bcognizance.iiita.ac.in/jan-mar06/prespective_3.htm> [Accessed 12th June, 2010]

Promoting Financial Inclusion in Rural Areas. (2007) A Report for the Rural Commission for Rural Communities, November, pp. 1-74

Reuters (2010) Fitch says Nigerian banking sector making improvements. [Internet] Next. Available from:<http://234next.com/csp/cms/sites/Next/Home/552897646/fitch_says_nigerian_banking_sector_making.csp> [Accessed 7th June, 2010] Sanusi, L.S. (2010) Developments in the Banking System in Nigeria. Central Bank of Nigeria. An Address to Member of the Press. [Internet] 14th August, pp. 1-4. Available from: <http://www.bis.org/review/r090922b.pdf> [Accessed 10th June, 2010]

Saunders, M, Lewis, P. & Thornhill, A. (2003) Research Methods for Business Students. 3rd ed. Pearson Education Limited

Shehzad, C.T and De Haan, J. (2008) Financial Liberalization and Banking Crises. Faculty of Economics and Business, University of Groningen. [Internet] September, p.1. Available from: <http://www.finance-innovation.org/risk09/work/6450490.pdf> [Accessed 4th August, 2010]

Simwaka, K (2006) The Determinants of Currency in Circulation in Malawi. A Report for the Research and Statistics Department, Reserve Bank of Malawi. [Internet] June, p.3. Available from: <http://www.unidep.org/Release3/Conferences/AES_2006/IDEP-AES-06-34.pdf> [Accessed 14th August, 2010]

Sinclair, S., McHardy, F., Dobbie, L., Lindsay, K., & Gillespie, M. (2009) Understanding Financial Inclusion: Using Action Research and a Knowledge Exchange Review to Establish What Is Agreed and What Is Being Contested. Friends Provident Foundation, [Internet] pp. 18-19. Available from: <http://www.oecd.org/dataoecd/31/45/44109352.pdf> [Accessed 16th July, 2010]

77

Soludo, C.C. (2008) Making Finance Work for the Poor. A Lecture Delivered at the Federal University of Technology, Owerri, Imo State. [Internet] 15th February, pp. 18. Available from: <http://www.cenbank.org/out/Speeches/2008/Govadd25-2-08.pdf> [Accessed 8th August, 2010]

Soludo, C. C. (2009) Banking in Nigeria at a time of Global Financial Crisis, A Presentation delivered at the Special Interactive Session on the Banking System, Lagos, Nigeria. [Internet] 30th March, p. 5. Available from: <http://www.cenbank.org/Out/publications/pressRelease/GOV/2009/globalcrisis.pdf> [Accessed 8th August, 2010] Sureshchandar, G.S., Rajendran, C and Anantharaman, R.N (2003) Customer Perception of Service Quality in the Banking Sector of a Developing Economy: A Critical Analysis. International Journal of Bank Marketing. Vol.21, no. 5, pp.

Tagoe, T., Alless, J., Aidam, V., and Dayson, K. (2006) West Sussex Financial Inclusion Strategy. Harley Reed Consulting Ltd and Community Finance Solutions, University of Salford. [Internet] 11th July, pp. 9-20. Available from: <http://www.westsussex.gov.uk/ccm/cmsservice/stream/asset/?asset_id=3850178> [Accessed 17th August, 2010].

Wallace, A, and Quilgars, D. (2005) Homeless and Financial Exclusion: A Literature Review. Centre for Housing Policy, University of York. [Internet] October, pp. 13-14. Available from: <http://www.york.ac.uk/inst/chp/publications/PDF/hlessfinexcfinalrep.pdf> [Accessed 15th August, 2010]

World Databank [Internet] Available from: <http://databank.worldbank.org/ddp/home.do> [Accessed 21st July, 2010] Williams, M (2000) Interpretivism and Generalization. Department of Sociology. Vol. 34, no. 2, pp. 209- 215. BSA Publications Limited.

Williams, R (2008) The Epistemology of Knowledge and the Knowledge Process Cycle: Beyond the Objectivist and Interpretivist. Journal of Knowledge Management. Vol. 12, no. 4, pp.72-75. Emerald Group Publishing Limited.

77

Yavas, U., Bilgin, Z., and Shemwell, D.J. (1997) Service Quality in the Banking Sector in an Emerging Economy: A Consumer Survey. International Journal of Bank Marketing. [Internet]. MCB University Press. Vol.15, no. 6. Available

from:<http://www.emeraldinsight.com.ezproxy.leedsmet.ac.uk/index.htm> [Accessed 12 July, 2010]

77

Appendix A: Sample of Research Questionnaire

Questionnaire; Assessing Financial Inclusion

I am currently conducting a survey to complete my dissertation in MA International Business at Leeds Metropolitan University, UK. The purpose of this questionnaire is to measure the level of financial accessibility among the Nigerian public. I would be most grateful with your corporation. I assure you that none of them require any personal information that could be detrimental to you. Any information that is given here is assured to be treated as confidential. Please, deliberately complete all questions in this questionnaire in order to have precise and accurate research. Thank you so much for your participation. IBEACHU HENRY EBUKA (Please try as much as possible to answer each question accurately. If you encounter any problem on filling the form, it is best you refresh the page to start over. Thank you) * Required Location: * Gender:

Age:

Male Female

18-24 25-30 31-36 37 and above

Employment Status

Employed Unemployed Retired Part-Time employed

Monthly Wage Level

Less than 18,000 18,000 - 50,000 50,000 - 100,000 100,000 and above

1. Do you own a bank account? *

Yes No

2. What type of account best describes yours?

A savings account A current account

77

3. Is the account useful to your financial needs and achievements?

Yes No

4. Which one of the below best describes the type of financial institution that you patronize?

Micro finance bank Commercial Bank Community Bank

5. Rate the distance of your nearest financial bank from your place of residence

1 Far away distance

5 Very near

6. Is the distance to the bank of your choice cost intensive?

Yes No

7. Does your financial institution provide automated teller services (ATMs)?If no, skip to Q. 12

Yes No

8. If yes, do you use these services? If yes, skip to Q. 10 & 11 or If no, skip go to Q.9 and then to 12 continued.....

Yes No

9. If no, please select the reason that suits your situation more appropriately. You may select more than one answer

Physical Disabilities Lack of knowhow Lack of access Over complexity High amount of charges Unnecessary

10. If you answered yes to question 8, is the automated teller service at your disposal?

Yes No

11. How often do you use these automated services?

More than once a week Once a week One a month

77

Once a year Don't know

12. Do you patronize the other products provided for you by your financial institution? If Yes, skip to Q. 14

Yes No

13. If no, please state which one of these reasons suits your situation. You may select more than one answer

Lack of knowhow High amount of charges Unnecessary Over Complexity

14. Which of these services can you state that you can identify with?

Poorly aware Loans Internet Banking Mobile Banking Credit Cards Debit Cards Mortgage

Fairly aware

Aware

Very aware

15. Do you feel you need to be educated by the banks for you to be compatible with these services?

Yes No

16. In your opinion, do you feel that your employment status plays a role in your use/access of these services?

Yes No Don't know

17. In your opinion, do you feel that your level of income plays a role in your use/access of these services?

Yes No Don't know

18. Does your bank provide avenues for credit/lending services?If no, skip to Q. 24

77

Yes No

19. If yes, do you use these services?If no, skip to Q. 24

Yes No

20. If yes, how will you rank the rate of interest that is being charged to you?

Very Low Low Moderate High Very hIgh

21. In your impression, do you feel that the rate of interest and bank charges plays a role in your choice and use of the credit services?

Yes No Don't know

22. Does your finance institution require some documentation/identification before you are permitted to access/use the bank facilities?

Yes No Don't know

23. If yes, how will you rate the amount of documentation and identification required for using and accessing bank services?

Highly Irrelevant Slightly irrelevant Relevant Very Relevant

24. In your own view, does the required identification deter you from accessing or using bank services?

Yes No Don't know

25. Given the recent questions about banking, would you say that your choice financial institution is sound and reliable?

Strongly disagree

77

Disagree Unsure Agree Strongly agree

26. Having come in contact with the personnel of your choice financial institution, how will you rank their receptiveness?

Unemotional Fairly receptive Very receptive

27. When you have a problem, your financial institution shows full interest in resolving it.

1 Strongly Disagree 1 Very poor 2 3

5 Strongly Agree

28. How will you rate the quality and process of services delivered to you?

5 Very good

29. From the above questions (24, 25,26 & 27), will you say that this has an effect in your choice of bank?

Strongly Disagree Disagree Unsure Agree Strongly agree

Thank You..
Submit

Powered by Google DocsReport Abuse - Terms of Service - Additional Terms

77

Appendix B: Research Proposal

Dissertation Research Proposal

Leeds Metropolitan University MA International Business

Solving the Problem of Inflation in Nigeria: Justification of Inflation Targeting For Monetary Policy.

Supervisor: Mr. Peter Chippindale

77

Table of Content 1. Working Title.................................3 2. Introduction:..3 3. Aim and objective:.4 3.1. Hypothesis:.4 4. Conceptual Framework:...4 5. Methodology..............................6 5.1. Research Design: ......6 5.2. Research Sample:..6 5.3. Data Collection: ........................6 5.4. Data Analysis: ....7 7. Time Scale: .......7 8. Limitation:..8 9. Bibliography:.......9

77

1. Solving the Problem of Inflation in Nigeria: Justification of Inflation Targeting For Monetary Policy. 2. Introduction: Currently, one of the major problems facing the world is the talk of recession. Nigeria is one country that is facing an excessive period in inflation. Inflation has been moving upwards in recent times in Nigeria. At the moment, the country has a double digit inflation level and the economic team does not appear to have the tools to building a viable economy where local resources would enhance economic growth. This is a display of difficult times ahead if nothing serious is done to tame inflation in Nigeria. Nigerias inflation currently ranks 198 in the CIA 2009 world fact-book. One way of achieving and maintaining a low and stable rate of inflation is for a Central Bank to have price stability as the heart of its monetary policy. When the main focus of a CBs monetary policy is narrowed towards the pursuit of a low level of inflation, such a policy is regarded as inflation targeting. Many CBs have taken up the inflation targeting as their long-term objective. According to Oluba (2008), high and variable inflation rates are very economically and socially costly because it distorts prices, lowers savings and investments. High inflation rates reduce the peoples purchasing power and retards economic growth. According to Belongia & Batten, (1992), because a central bank only has one policy lever this implies that it can (and should) pursue one long term objective. In 1990, the New Zealand central bank started to adopt a monetary policy of inflation targeting. The idea of targeting inflation as a major objective of the CB came with great benefits. It has enormous potential as an effective instrument of managing inflation. The country needs to carefully evaluate the most up-to-date evidence in developing economic policy. A more interventionist, directional economic policy stance should be adopted by Nigeria. Seeing that many nations that adopted this method of monetary policy regime never went back on it, this has caused Nigeria to carry up the same mantle. In Nigeria, the macroeconomic objective of the central bank was that of price stability through the intermediate targeting of M2 monetary aggregate. Given the continuous upward move of the inflation rates and the issues that come with it, it is liable that the CB rethinks its method of monetary policy adoption. Inflation targeting entails five main elements: The public announcement of medium-term numerical target(s) for inflation, institutional commitment to price stability as the primary goal of monetary policy (to which other goals are subordinated; an information inclusive strategy in which strict variables and not just monetary aggregates or the exchange rate, are used to decide the setting of policy instruments; increased transparency of the monetary policy strategy through communication with the public and the markets about the plans, objectives, and decision of the monetary authorities; and increased accountability of the central bank for attaining its inflation objectives. Under this framework, the central bank must make the inflation target its overriding objective and as such work to contain IT within the target range anytime inflation threatens to exceed the permissible range. 77

3. Objectives and Aims: The research will be in place to meet the objective of looking at ways that the CBN can solve the issue of inflation in Nigeria. As well as display a more understanding on the current debate of Inflation targeting and how it can be beneficial to the countrys economic condition. To provide information that will be useful to policymakers who must weigh the costs and benefits of the current inflationary pressures in contrast to a severe recession. To access the validity of adopting Inflation targeting as the monetary policy objective by trying to display the Nigerian banking system in correlation with the prerequisites of adopting inflation targeting. To compare different CBs adopting the policy of inflation targeting to identify it as a success tool. To conduct a careful study of the impact of inflation on Nigerian economy. To use quantitative skills in revealing the correlation between the inflation targeting tools and their impact on actual inflation rates and comparing the different rates.

3.1. Hypothesis: The research will be in place to test on the following hypothesis: : The level of inflation is directly correlated with the level of output in Nigeria. : The level of inflation has no direct correlation with the level of output in Nigeria.

4. Conceptual Framework: Debates over targets and structure of monetary policies are as old as the economic systems that engender them. According to Oluba (2008), many conclusions have been made that countries that adopt inflation targeting were resulted with low level of inflation and volatility. Ball and Sheridan (2003, cited in Oluba, 2008), noted that in majority of some other countries it was found that inflation targeting wasnt responsible for their economic turnaround as there was no evidence that it improves economic performance as measured by the behaviour of inflation, output and interest rate. The Marxian theory of inflation states some factors that affect prices: The rise or fall of value of a commodity will affect its price, though price and value are not necessarily identical. Government subsidies can keep the price of a commodity below the level which, but for the subsidy, it would sell. One factor which affects the general price level centers round the currency. The Keynesians school postulates that the relationship between changer in the quantity of money and prices is non-proportional and indirect through the rate of interest. Essentially, the Keynesians theory examined the relationship between the quantity of money and prices both under unemployment and 77

full employment situations. In other words, so long as there is unemployment output and employment will change in the same proportion as the quantity of money. Stock and Watson (1999) used the conventional Phillips Curve (unemployment rate) to investigate forecasts of the United States inflation at the twelve-month horizon. Specifically, they found that inflation forecasts produced by the Phillips Curve generally had been more accruable than forecasts based on other macro economic variables, including interest rates, money and commodity prices but relying on it to the exclusion of other forecasts was perhaps, a mistake.

Lim and Papi, (1997) studied the determinants of inflation in Turkey by analyzing prices determination within the framework of a multi- sector macroeconomic model (1970- 1995). By incorporating both long and short run dynamics comprising the goods, money, Labor and external sectors, they concluded that policy makers commitment to active exchange rate depreciation on several occasions of the past fifteen years) had also contributed to the inflationary process.

Callen and Charge, (1999) modeling study revealed that Reserve bank of India had shifted from browed money target toward a multiple indicator approach in the conduct of monetary policy. Their findings indicated that exchange rate and import prices where relevant for inflation and that developments in the monetary aggregates remain an important indicator of future inflation.

Williams and Adedeji (2004) found that the major determinants of inflation were changes in monetary aggregates, real output, foreign inflation and the exchange rate. Regionally, in Africa, Chibber et, al. (1989) employed a highly disaggregated econometric model for Zimbabwe and found that monetary growth, foreign prices, exchange rates, interest rates, unit labor cost and real output are the key determinants of inflation in that country.

Olubusoye and Oyaromade (2008) analyses the main sources of fluctuation in inflation in Nigeria using the framework of error correction mechanism, it was found that lagged consumer price index (CPI), expected inflation, petroleum prices and real exchange rate significantly propagate the dynamics of inflationary process in Nigeria.

The New Phillips curve which was supposed to identify the correlation between wage rate increase and unemployment was further modified to keep up with inflation. The equation which was previously stated numerically as: has been changed to introduce the role of

inflationary expectations. Consequently, expectations augmented wage Phillips Curve is produced: = - f(u) + .

77

) being the growth of money wages per employee is:

) when it is tried; increases and falls ) inflationary

with unemployment rate (u). In explaining the role of inflation, it then includes (

expectation. This inclusion implies that actual inflation can feed back into inflationary expectation and thus cause further inflation.

It is good to note that all the previous works of these authors have all been aimed towards solving the issue of inflation and ensuring price stability.

5. Methodology: 5.1. Research Design: With the use of case studies from certain countries that have adopted the inflationary target strategy of monetary policy, the research will try to display the various impacts of adopting such a method also comparing their different experiences descriptively. It will also with the use of mathematical regressions investigate the validity of certain aggregates and monetary policy instruments on inflation rate in Nigeria. This will include the use of secondary data acquired from statistics.

5.2. Research Sample: The countries in question (though needing further adjustments) will be Nigeria, South-Africa, New Zealand and UK. It will be focusing on the various Central Banks or Reserve authorities of the countries. The data for analysis will be limited only to Nigerian statistics and one of the other above countries on Interest rate, Inflation rates, Exchange rates, GDP growth rates e.t.c. This is also due to the lack and shortage of available data for further research as comparison will be done. 5.3. Data Collection: The data used will be secondary in nature and will be acquired from the Central Bank of Nigeria data and statistics from the time range of 2005 2009.

5.4. Data Analysis: In analyzing the data available, simple methods of econometrics will be adopted and a descriptive interpretation will be adopted. Methods like; tables, histograms, Standard deviation, time series and Regression. Standard Deviation: {( x 2 / n) (x/n) 2}.

Regression: { nxy - (x)(y) } / { (nx2 - (x)2)(ny2 - (y)2 ) }.

77

6. Time Scale: Below is the estimated time frame in which this research should be carried out, there is quite an adequate amount of time for the discovery and analysis of the data.

Week beginning

Progress

4/05/2010

Hand in the dissertation proposal and ethics form Complete all Outstanding course work Prepare adequately for the examinations

10/05/2010

Literature review Visit my supervisor for advice on the next steps in the research process. Study the different CBs undertaking Inflation targeting.

17/05/2010

Ongoing collection of secondary data Perfect my skills in the use of multiple regressions of variables.

21/05/2010

Allocate my variables in to independent and explanatory variables. Receive any other sources of data. Start Data analysis

28/05/2010

Dissertation draft writing Hand the dissertation draft to my supervisor Receive first feedback for dissertation draft Make any necessary changes to the data analysis

04/06/2010

11/06/2010

Receive more feedback for dissertation draft Final modification to the dissertation draft

18/06/2010

Start with writing the dissertation proper Finalize the dissertation Make any necessary corrections

77

15/09/2010

Final submission of the dissertation

7. Limitations: The main limitation of this research is the unavailability of data to further stretch the research. Since the research is about inflation targeting, Nigeria has just decided to carry on a monetary policy of inflation targeting in 2009 and so accurate data for forecasting might not be readily available.

77

Bibliography: Hu, Y (2003) Empirical Investigations of

th

Inflation

Targeting.

Available

from:

<www.iie.com/publications/wp/03-6.pdf:> [Accessed 14 March 2010].

Agu, C (2007) What Does the Central Bank of Nigeria Target? An Analysis of Monetary Policy Reaction Function in Nigeria. Available
th

from:

<www.csae.ox.ac.uk/conferences/2008-

EDiA/papers/112-Agu.pdf> [Accessed 14 March 2010].

Woodford, M (2001) Imperfect Common Knowledge and The Effects of Monetary Policy. Available from: < www.nber.org/papers/w8673: > [Accessed 14th March 2010].

Chukwu, C (2009) Measuring the Effects of Monetary Policy Innovations in Nigeria: A Structural Vector Autoregressive Approach. African Journal of Accounting, Economics, Finance and Banking Research Vol. 5. No. 5.

Back to Basics: The Move to Inflation Targeting:

Bomhoff, E.J (1992) Money Targeting and Interest- Rate Targeting in an Uncertain World.

Epstein, G and Yeldan, E Inflation Targeting, Employment Creation and Economic Development.

Bardsen, G, et al, (2003) Econometric Inflation Targeting.

Kara, A and Nelson, E (2002) The Exchange Rate and Inflation in the UK.

Shamim, F (2007) The ICT Environment, Financial Sector and Economic Growth: A Cross-Country Analysis. Vol 34 No 4, Emerald Group Publishing Ltd. Filho, S.H, et al, (2007) Economic Transparency and Effectiveness of Monetary Policy. Vol 34 No 6, Emerald Group Publishing Ltd.

77

Appendix c: Subgroups Percentages Nigerian Subgroups %

Subgroups Percentage (%) Account Owners ATM Users Users of Credit Lending Facilities Other Services Effects of Employment Status

Sex Male Female Age Group 18-24 25-30 31-36 37 and above Monthly Income Below 18,000 18,000-50,000 50,000-100,000 100,000 and above

59.60% 40.40%

40.40% 25.00%

9.62% 6%

21.15% 15%

11.50% 29%

19.20% 38.50% 19.20% 21.15%

36.50% 23.00% 9.60% 13%

0.00% 1.90% 3.85% 9.60%

9.60% 10% 3.85% 13%

14% 19.23% 14.00% 14.00%

7.69% 26.90% 17.30% 15.40%

6% 17% 14% 13.50%

0% 1.90% 3.90% 5.77%

3.90% 5.77% 10% 11.50%

5.77% 15% 9.60% 9.60%

77

Subgroups Percentage (%) Sex Male Female Age Group 18-24 25-30 31-36 37 and above Monthly Income Below 18,000 18,000-50,000 50,000-100,000 100,000 and above

Effects of Income Level

Effects of Interest rate

Effects required identification

30.80% 25%

46.15% 25%

19.23% 14%

14.00% 19.23% 7.69% 15.40%

14.00% 25.00% 12% 19.23%

8% 12% 4% 10%

3.90% 17.30% 9.60% 9.60%

5.77% 17.30% 13.50% 11.50%

1.90% 8% 5.77% 9.60%

77

UK Subgroups %
Subgroups Percentage (%) Sex Male Female Age Group 18-24 25-30 31-36 37 and above Monthly Income Below 800 pounds 800-1,000 pounds 1,000-3,000 pounds 3,000-5,000 pounds 5,000 and above Account Owners ATM Users Users of Credit Lending Facilities Other Services Effects of Employment Status

51.25% 37.50%

46.25% 32.50%

18.75% 15%

23.75% 10%

35.00% 23%

32.50% 32.50% 11.25% 8.75%

26.25% 23.75% 12.50% 5%

11.25% 6.25% 7.50% 6.25%

8.75% 5% 7.50% 5%

20% 16.25% 7.50% 3.75%

18.75% 12.50% 8.75% 3,75% 2.50%

15% 10% 10% 2.50% 1.25%

3.755 2.50% 6.25% 3.75% 1.25%

6.25% 6.25% 5% 2.5 1.255

6.25% 10% 7.50% 3.75% 1.25%

77

Subgroups Percentage (%)

Effects of Income Level

Effects of Interest rate

Effects required identification

Sex Male Female Age Group 18-24 25-30 31-36 37 and above Monthly Income Below 800 pounds 800-1,000 pounds 1,000-3,000 pounds 3,000-5,000 pounds 5,000 and above

31.25% 23%

40.00% 24%

32.50% 21%

17.50% 155 7.50% 3.75%

21.25% 18.75% 10% 7.50%

20% 15% 5% 5%

8.755 3.75% 7.50% 3.75% 1.25%

13.75% 105 3.755 3.75% 1.25%

8.75% 5% 6.25% 1.25% 2.50%

77