GSM: A Challenge to the banking sector By Jerry Uwah


Nigeria’s GSM service providers have thrown a challenge to the banking industry. Since the service providers rolled out mobile phone lines in 2001, no sector of the economy has grown as fast as the telecoms industry.
Before 2001, the Nigeria Telecommunications Limited (NITEL) dominated the scene practically as state monopoly. After decades of dominating the scene as operator and regulator rolled into one, NITEL had only managed to install less than 600, 000 phone lines. That probably explains why David Mark as communication minister in Ibrahim Babangida’s cruel dictatorship could tell Nigerians that telephone was not for every Tom, Dick and Harry. Mark was telling the gospel truth with the brutality of a member of the kitchen cabinet of a vicious military dictator. It was easier for a poor Nigerian to open a bank account than to own a telephone line. The emergence of GSM has changed all that. In the 16 years since GSM emerged, there has been phenomenal growth in the industry.
Statistics from the Nigerian Communications Commission (NCC), the industry regulator shows that there are 216 million connected telephone lines in Nigeria at the moment. The lines are owned by 157 million individual subscribers. From all indications, most of the 110 million Nigerians living below poverty line now have GSM.
GSM service providers are light years ahead of banks in market penetration and product awareness strategy. There are GSM networks in practically all the villages in Nigeria. Unfortunately, banks are yet to register their presence in all the headquarters of the 774 Local Governments in Nigeria. My village is the headquarters of Ibiono-Ibom Local Government area in Akwa-Ibom State, yet the nearest bank branch is 30 kilometers away in Uyo.
The banking industry has millions of lessons to learn from the telecoms industry.
First Bank Plc, the oldest surviving bank in Nigeria is 123 years old. Yet, banking services in Nigeria is older than First Bank. However, as at December 31, 2016, all the deposit money banks (DMBs) in Nigeria could only muster 84.5 million bank accounts.
Ironically, the emergence of bank verification number (BVN) slashed off a huge chunk of that figure. By April 2017, statistics from the industry showed that 46 million out of the 84.5 million accounts could not be linked to BVN. Transactions in accounts without BVN were therefore suspended. That reduced the number of bank accounts to 38.5 million. In terms of the number of individuals who have bank accounts, the data showed that in April 2017, only 29 million account holders were captured under the BVN scheme. It could therefore be concluded that only 29 million Nigerians have bank account at the moment.
If the banking industry is crying that BVN has reduced its market penetration, the telecoms industry can as well argue that telecoms has its own equivalent of BVN. Every subscriber identification modem (SIM) card had to be registered with the full bio-data of the subscriber. Like in the case of BVN, a deadline was set and after the deadline any SIM card without bio-data of the subscriber was to be barred from receiving calls.
Unlike the case with BVN, the GSM service providers rather than the consumers were the ones penalized for not keeping the deadline. MTN is still battling with a penalty of N300 billion for allowing five million unregistered phone lines on its switch board. Ironically, banks are raking in billions of naira from clandestine transactions in accounts without BVN. No one penalizes them. Those paying the price are the owners of the accounts. But in the telecoms industry, the operators pay the price for allowing calls on unregistered lines.
Consequently, MTN was not only compelled to shut down more than five million unregistered lines, but it is paying what could be described as the “mother of all penalties”. Banks on the other hand are still trading with the deposits in the 46 million accounts not linked to BVN even when a court ordered a temporary forfeiture of the money. The banks have free access to more than N2 trillion as a result of the BVN crisis. The telecoms industry is not so blessed.
The irony of the sluggish penetration of the market by Nigerian banks is that unlike in the 1980s when it was easier to open a bank account than own a telephone line, the GSM service providers have turn the table against the banking industry. With a scant 29 million account holders in the face of 157 million mobile telephone subscribers, it is obvious that telephone is now for every Tom, Dick and Harry, while more than 100 million Nigerians cannot access banking services.
With only 29 million bank account holders it is obvious that banking services are no longer for the poor.
The sad development in the banking industry is fraught with calamitous consequences because of the direct relationship between poverty and lack of access to banking services. Those among the 110 million Nigerians below poverty line who have no access to banking services cannot raise even a micro-loan of N5, 000 to start the business of roasting plantain on the roadside. However, if half of GSM’s 157 million subscribers have access to banking services, poverty would be reduced drastically.

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