CBN Issues ‘Approval-in-Principle’ To MTN, Airtel For PSB Services

Telecommunication operators’ push to offer mobile money services in Nigeria has made yet another progress as the Central Bank of Nigeria (CBN) on Friday issued MTN Nigeria and Airtel Africa Approval-in-Principle (AIP).

A PSB license allows the companies to among other things; maintain savings accounts and accept deposits from individuals and small businesses, which is covered by the deposit insurance scheme; carry out payments and remittance (including cross-border personal remittance) services through various channels within Nigeria; issue debit and prepaid cards, and operate an electronic purse or wallet.

Nigeria’s telecommunications giant, MTN said in a statement that it received the Approval in Principle (AIP) on November 4, 2021, from the CBN for a license application for the proposed MoMo Payment Service Bank Limited.

This is the first step in the process towards final approval, subject to the fulfillment of certain conditions as stipulated by the CBN.

“The decision to issue a final approval is firmly within the regulatory purview of the CBN and we respect their right and judgment in that regard,” MTN said.

With its presence in 14 countries across Africa, Airtel Africa, a provider of telecommunications and mobile money services said that its subsidiary SMARTCASH Payment Service Bank Limited (“Smartcash”) has been granted approval in principle to operate a payment service bank business in Nigeria.

According to Segun Ogunsanya, CEO, Airtel Africa, the telcom company “will now work closely with the Central Bank to meet all its conditions to receive the operating license and commence operations.”

The Central Bank gave its first set of licenses to three players in August 2020, two years after it received applications.

Targeted at Nigeria’s almost 40 million unbanked population who are mostly in the rural communities, the payment service bank by the CBN would enable telecoms and other non-financial institutions to offer financial services while deepening the country’s financial inclusion rate.

Largely driven by mobile technology, Kenya’s financial inclusion expanded from a low base of 26.7 percent a decade ago to 83 percent in 2020.

With Kenya’s 83 percent mobile money-led financial inclusion rate, eight in ten adults in the East African country have access to formal financial services. This mirrors the potential of Nigeria’s payment service bank (PSB), but for licensing challenges, the most populous nation in Africa has continued to lag African peers.

Nigeria failed to meet its National Financial Inclusion Strategy target for 2020 to include 80 percent of its adult population into the financial system. EFInA data showed that only 64.1 percent was financially included by the end of last year.

This means that 36 percent of Nigerian adults, or 38.1 million of the country’s 106 million (18 years and above) adults, remain completely financially excluded. This is a shortfall by 16 percent points from the desired target of a 20 percent exclusion rate.

Before now, only banks and licensed financial institutions were allowed to provide financial services (bank-led financial inclusion model). Although telecom operators and other Fintech companies indicated interest to operate in the market, the CBN policy would not allow them.

The regulator eventually shifted because of the increasing rate of financially excluded people in Nigeria and the lack of progress in getting banks to provide financial services to people living in areas that lack access.