Mapping Nigerian Microfinance Banks
In 2006, the Central Bank of Nigeria began to transform a network of several hundred community banks into ‘microfinance banks’ (MFB). Since that time, the registration rolls have ballooned, now to over 900 institutions, albeit not without considerable turmoil. 224 banks had their licenses revoked in 2010, only to have 121 of these reverted back to a state of provisional approval months later. Reporting from clients indicates that many are uncertain or suspicious of these banks, and the sheer numbers create a regulatory burden.
At the same time, more than 60 percent of the population of Nigeria are financially excluded or have informal access only - 71 percent of loans are from family or friends, for instance. So, when there are several hundred financial institutions across the country focusing on low-income clients and able to offer a range of services, it’s worth trying to lean more about the details and dynamics of that sector. Are there ways to look at the data on microfinance banks in a way that helps us to understand access to finance in Nigeria?
Visualizing microfinance bank data
To try to tackle this problem, MIX worked with Development Seed to build the nigeria.mixmarket.org site, through MIX's partnership with The MasterCard Foundation. We needed to match data on microfinance banks with background data on Nigeria to help us understand the role of these institutions building financial access. Development Seed have expertise in mapping and experience with microfinance data and were thus perfect partners.
Data on microfinance banks is publicly available and easily accessible, thanks to the efforts of the Central Bank of Nigeria (CBN), although it was not always so. A full list of registered microfinance banks is posted here. Each bank has name and address information, and some data on registration dates and licensing status; updates on the revocation and provisional license status for individual MFBs are here and here. Financial data is not publicly available at this stage for individual microfinance banks, although aggregate data is posted in CBN Statistical Bulletins and there is a system in place for monthly processing, through the use of the FinA platform.
Of course, getting the data ready is not that easy. We needed to do quite a bit of cleanup for the lists - standardizing names and addresses, removing duplicates, filling in state names. To let us bring the map from 36 states (plus the Abuja Capital Territory) to the 774 local government areas (LGA), we populated LGA data for those banks for which we could recover this information (roughly 80 percent of the total list).
This gets us halfway there. The second issue is finding data on socio- economic factors that are relevant to financial access. If we look at the landscape of microfinance banks in the context of this data, can we learn more about challenges and opportunities for the sector? The site lets you view the distribution of MFBs in the context of population, mobile and internet access (given the potential for mobile banking services), and literacy and unemployment levels to understand socio-economic variation across states. For those that are curious, more on the nuts and bolts can be found on the DevSeed blog. Over time, we can evolve the factors chosen here, or can replicate in other countries for which we have good data on regional variation.
Analyzing microfinance bank data
Having a good framework for visualizing data on MFBs now makes it easier to analyze the role of MFBs in providing access to financial services for the poor.
First, we can take some big numbers as background. The CBN statistical bulletins report the following totals for MFBs loans and deposits since 1992 (prior to 2006 the data are for community banks; after 2006, all community banks were transformed to microfinance banks). After a dip in 2006, growth has been more rapid within the past few years, for both savings and loans, and peaking in 2008, commensurate with registration of many new microfinance banks.
Ideally, we would like to bridge this monetary data with data on unbanked populations in Nigeria. Fortunately, a recent EFinA survey of the sector indicates that 3.2 million people have an account with an MFB (mostly savings; fewer have loans), or 3.8 percent of the adult population. Since close to 70 percent of the adult population remain unbanked, there is clearly some ground to cover.
The mapping data allows us to dig deeper into where MFBs provide services and where demand might be higher (or supply might be lower). We can plot state-level statistics against MFB coverage to test some relationships. We have posted some of the state-level data to a Google fusion table to make this type of analysis easier.
Are more banks located in the most populous regions? Not always. Lagos has by far the most MFBs, and a large population (over 9.1 million people in 2006). However, Kano State has an even larger population - 9.4 million - but only 6 MFBs, vs. the 180+ licensed in Lagos. Moving further down the population chart, we can see that many regions - especially predominantly Muslim states north of the Sharia line - have less saturation than we would expect. The least populous region - the Abuja Federal Capital Territory - also has the 3rd most MFBs, with 48.
Number of banks vs. total population, by state
Perhaps total population is too broad a brush - what if low- income populations are unevenly distributed across the country, and bank locations reflect poverty levels, rather than total population? Most regions of the country have a high percentage living below the poverty line - the median is just over 80 percent - but the number of MFBs is low in many states with large populations living in poverty. Of the 5 states with the largest populations living in poverty, only Lagos has more than 25 MFBs (as well as the only one below the Sharia line).
Number of banks vs. population below poverty line, by state
Data on unemployment and literacy levels shows the same - high levels of unemployment (or low levels of literacy) are not associated with a broader network of MFBs. Reports from consumers indicate that a lack of trust and lack of knowledge about MFBs are hindering uptake and data on local demographics may help bridge this gap.
Number of banks vs. unemployment rates, by state
Mobile banking has received attention in much of sub-Saharan Africa, including Nigeria. A recent article indicates that “hardly a week passes these days without something new entering the market.” MFBs appear to be cognizant of this potential, as the regions with the highest mobile penetration also have the most MFBs.
Number of banks vs. mobile access, by state
We can also use the data to look at the closures (and re- licensing) of MFBs from earlier this year. If we track the rates of provisional approval by state, there is no obvious incidence of higher-than-normal incidence in any region.
Provisional approval levels by state
Perhaps politics played a role - however, crossing voter turnout levels with MFB coverage does not reveal any stronger relationship.
Provision approval levels vs. voter turnout, by state
What can you do with this?
While the above is only a quick analysis, the map and data can help us to unpack a knotty sector with hundreds of new institutions and rapid growth. We can see structural factors - the Sharia line, mobile access - that are related with access to banking services. The maps can be used for business planning - where are there gaps in bank branches? The EFinA survey notes that distance is one of the main factors that would encourage the unbanked to open a bank account. Where is there high mobile penetration or high unemployment or unmet demand? Since the maps bring bank coverage down to the LGA level, this analysis can be very granular. Regulators can also use this type of information (and the scrubbed name and address lists!) to better allocate resources for supervision and to track the evolution of the sector.
You can always dig deeper into the sector using existing MIX Market resources; in particular, we know that non-bank microfinance providers play an enormous role in the sector and more on their activities can be found in the Nigeria country page. In addition, you can also embed the map or work with the data for your own analysis. Let us know what you find!
We are still experimenting with the format, so please comment on this article with your feedback; in the next several weeks, MIX aims to extend this to all of Africa!