PSB Isn’t A Bank, It Is A Deposit Scheme…And Of Little Help To The Unbanked


When the CBN forbids PSBs from lending to the poor but only license them to take deposits from the poor, who will lend to the poor?

A bank is a financial institution that is involved in borrowing and lending of money. The bank takes customer deposits in return for paying customers an annual interest. It then uses the majority of these deposits to lend to other customers for a variety of loan.

Payment Service Banks [PSB] as planned by Central Bank of Nigeria (CBN) is nothing less than a deposit account. According to the regulatory guidelines released by the apex bank, PSBs can facilitate money deposit, further offering remittance service, mobile payments, ATM/debit card facility and third-party fund transfer but excludes advancing loans or issuing credit cards.

PSBs are modelled to be the bank for the poor, bank for the underserved and for the population that is currently excluded by the high-street commercial banks. But I doubt if the PSBs will be of much help to the unbanked. For marginalised section, savings is still very much an afterthought.

The most successful financial institutions currently serving the unbanked segment don’t even offer any deposit services. And when they do, like cooperative associations, it is for the purposes of having greater latitude in getting good lending offers.

Today, most successful microfinance institutions in Nigeria like Leap Above Poverty (LAPO) and Grooming Centre don’t receive deposits. They only offer credits for millions of their customers.

However, the PSBs may not be able to deliver comprehensive financial inclusion mandates because of the numbers of the non-permissible activities imposed on by CBN.

For instance, PSBs cannot grant any form of loans, advances and guarantees (directly or indirectly); insurance underwriting amongst others.

As planned today, PSBs would be able to deliver only three out of five pillars of the financial inclusion mandates. These include the provision of universal access to banking, micro-pension scheme and financial literacy.

PSBs would not provide the remaining two pillars of financial inclusion, which are the provision of a basic bank account with overdraft facility and credit guarantee fund.

For me, once a bank for the poor cannot offer credit to the underserved, the main essence of banking is defeated. According to Professor Muhammad Yunus, the founder of Grameen Bank in Bangladesh, the bank that provides small loans to entrepreneurs, “there’s only one kind of financial institution, which are banks for the rich.”

“This machine doesn’t work for them. The way to really address the problem of the rejected people from the financial system is to create a new financial system, financial inclusion. What does that new system look like?

“Like a Grameen bank. It’s a bank for the poor and it doesn’t lend money to the rich. The bank for the rich doesn’t lend money to the poor. That’s a simple division, “he argued.

So when the CBN forbids PSBs from lending to the poor but only allow them to take a deposit from the poor, who will lend to the poor?

If I were one of the telcos that are currently craving PSB licenses, I would rather go for the national MFB, which will give leverage to be a lender with all functions of PSBs and even more.

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