NAICOM’s agenda for financial inclusion, literacy

NAICOM boss Fola Daniel

By: Modestus Anaesoronye

Globally, financial service regulators are busy designing programmes and guidelines that would increase market penetration through financial inclusion. This no doubt has become vital following the need to use financial services products to enhance the economic and social life of the citizenry across different societies.

The World Bank and other international support agencies point to the fact that moving out of poverty would remain difficult unless there is strategic effort to enhance financial access and literacy by majority of the citizenry.

The National Insurance Commission (NAICOM), like other regulators is setting agenda for a robust financial inclusion using insurance. Part of this effort is development of micro insurance, agric insurance, Takaful insurance and other retail development programmes, all geared towards increasing market penetration and accessibility.

Part of this will be unveiled to the Media Friday when the Commission meets insurance reporters for the 2013 Media Retreat scheduled to take place in Ilorin with the theme "Imperatives of Financial Literacy & Inclusion: the NAICOM Initiatives."

Peter Meyer, Chairman of AIG Insurance Indonesia, had delivered a white paper on financial inclusion where he outlined the potentials of insurance as a strong vehicle for economic empowerment of the poor and less privilege.

Financial inclusion from the insurance perspective

Peter specifically addressed financial literacy and inclusion from the insurance perspective, talking about the difficulties of socializing the insurance concept in his work as a professional dedicated to the spread of insurance at all levels of society.

"We operate in an environment where, mistakenly, there still exists a great level of trust in the functionality and financial support capability of the extended family. This is totally unrealistic and we need to do everything possible for insurance to gain a higher level of popularity."

Most poor households and SMEs are currently outside the reach of formal products.

After providing an overview of strategies to help overcome the complexities associated with the provision of insurance services to the less affluent segment of society, Peter reminded the audience that insurance is both socially responsible and, if handled intelligently, profitable.

"It is relatively easy for the banking sector to expand its clientele. The demand for loans is huge, and the need for cash, which has been holding back the development of individuals and societies, is insatiable," he said.

"Money talks and loan recipients are happily accepting terms and conditions, catering to the needs of both, the lender and the borrower."

The demand for financial products from the "poor" segment of society, combined with banks’ and lenders’ openness to offer more comprehensive services, can serve as a meaningful short cut to real financial inclusion.

Bank and finance activities need to be expanded to non-bank financial institutions, allowing for "micro insurance" which is specifically aimed at the lower income strata.

Micro insurance needs to be linked to micro lending. It protects the lender, as it provides a form of collateral, and benefits the borrower (or his/her estate) to the extent that excess funds, after outstanding obligations have been settled, can contribute to the sustainability of an initial investment, assure the ability to keep kids in school and increase chances to retain the family home should the bread winner, because of an insured event, be incapacitated.