Financial inclusion is a cornerstone for sustained economic growth in any nation. However, Nigeria faces a significant challenge, with approximately 40.1 million of its 96.4 million adult population remaining financially excluded, or unbanked. This situation is particularly striking given the advancements in ePayment, eCommerce, and other financial innovations. Research identifies women, youths under 25, and rural dwellers—especially those in Northern Nigeria—as among the most financially underserved. Furthermore, key economic drivers in Sub-Saharan Africa, such as agriculture and Micro, Small, and Medium-sized Enterprises (MSMEs), predominantly operate on a cash basis, underscoring the low level of financial inclusion in the region. Annually, around 40% of MSMEs in developing countries encounter an unmet financing need of approximately $5.2 trillion, with this issue being acutely concentrated in Sub-Saharan Africa where 97% of the 44 million MSMEs are micro-businesses, including smallholder farmers.

In response to these challenges, Mastercard's report, titled 'Pay on Demand: The digital path to financial inclusion in Africa,' proposes the Pay on Demand model as a potent force for driving financial inclusion in Nigeria and across the continent. Pay on Demand business models are rapidly emerging throughout Africa. For instance, companies like M-Kopa utilize this model to enable clients to pay for services in small installments, thereby making essential utilities such as solar-powered electricity, clean water, or education accessible to average families. This method allows payments to be made when needed and in affordable sizes. By offering access to livelihood-improving products, Pay on Demand reaches underserved populations, fostering their journey towards financial inclusion. This customer-centric approach also encourages greater participation of consumers and small businesses in the digital economy, ultimately boosting financial inclusion in the Sub-Saharan region.

Nigeria’s journey towards financial inclusion began with the launch of its National Financial Inclusion Strategy in 2012, aiming to reduce the exclusion rate from 46.3% to 20%. However, by 2018, the exclusion rate remained high, necessitating a review of the strategy. Currently, the Central Bank of Nigeria (CBN) is working towards an ambitious target of 80% financial inclusion by 2020. Yet, the slow progress observed over recent years highlights the imperative for innovative strategies to accelerate adoption. Mastercard's report presents a compelling argument for leveraging the Pay on Demand solution to help Nigeria achieve its 80% financial inclusion target.

The report outlines five critical ways the Pay on Demand model can drive financial inclusion in Nigeria:

Firstly, **Filling the Digital Divide**. Sub-Saharan Africa (SSA) lags behind the global average in mobile phone ownership, with only 45% of people owning a mobile phone and a mere 23% (approximately 239 million people) using mobile internet regularly. Globally, 60 out of 100 individuals own a smartphone, but in SSA, this figure drops to 36 out of 100. Mobile devices, particularly with prepaid plans enabling low-cost recharges, have become vital tools for inclusion. Bridging this digital divide by providing access to affordable smart devices is crucial for connecting people to the digital world and promoting financial inclusion. However, many Nigerians, especially the underserved, have erratic income patterns that preclude a one-time purchase of even low-cost smartphones. Device financing through Pay on Demand allows consumers to make small, regular payments, unlocking smartphone access for multitudes. With IoT-enabled Pay on Demand, devices can even serve as collateral, enhancing lender confidence in extending credit.

Secondly, **Providing Access to Daily Needs using Cashless Payment Methods**. Pay on Demand creates opportunities for the financially underserved to access essential daily needs they might otherwise be unable to afford. By facilitating access to fundamental necessities through cashless methods, individuals are gradually steered towards financial inclusion. A prime example is the solar home industry in SSA, where the Pay on Demand model has significantly improved the affordability and accessibility of off-grid electricity for underserved communities. Between January and June 2019 alone, approximately 4.11 million solar lanterns, multi-light and solar home systems, along with 730,000 off-grid solar appliances, were sold. Under a lease-to-own model, consumers unable to pay for an asset outright can still acquire it by making small daily payments via a Pay on Demand scheme, continuing payments until they own the asset or return it if no longer needed.

Thirdly, **Providing Access to Affordable Internet Services**. The rapid adoption of mobile phones in SSA has established them as a primary vehicle for inclusion and development. Smartphone connections in the region reached 302 million in 2018 and are projected to nearly double to 700 million by 2025. Despite this growth, barriers persist, including slower internet speeds compared to other regions. In 2018, 4G adoption in SSA stood at a mere 7%, significantly below the global average of 44%. Nigeria's broadband penetration is currently 38%. Factors contributing to unreliable internet connections include the high cost of expanding infrastructure, expensive 4G-enabled devices, and governmental delays in assigning 4G spectrum. Beyond speed, affordability and availability of internet access are major concerns; the cost of 1GB of data for an average Nigerian is about 3% of the average monthly salary. While manageable for urban dwellers, this remains a substantial burden for rural populations, making the Pay on Demand model a crucial enabler for connectivity.

Fourthly, **Leveraging Mobile Money**. Mobile money has proven exceptionally effective in bringing many of the 1.7 billion unbanked adults worldwide, particularly in Africa, into the financial fold. Despite obstacles hindering broader financial expansion, mobile money has amassed over 866 million registered accounts across 90 countries. Sub-Saharan Africa boasts the highest number of mobile money customers globally, accounting for 45.6%. In Nigeria, mobile money adoption is at 6%, according to the Global Findex. Mobile money has served as a powerful catalyst for financial inclusion in countries like Kenya and Zimbabwe. To effectively harness its potential in Nigeria, comprehensive policies must be formulated, requiring significant roles from both government and the private sector.

Finally, **Creating and Leveraging Financial Data**. Many individuals in Nigeria's non-urban areas often resort to private money lenders due to the absence of credit agencies. The Pay on Demand model offers a vital mechanism to generate significant credit history, transforming unsecured lending into secured lending. The financial data generated by Mobile Network Operators (MNOs) can provide crucial insights into the creditworthiness of individuals and businesses. This data can then facilitate access to better financial services, including loans and insurance, for populations currently excluded from formal credit systems.

In summary, driving financial inclusion is intrinsically linked to achieving digital inclusion. Therefore, a collaborative effort among all financial stakeholders—including governments, MNOs, small businesses, payment service providers, device manufacturers, and financiers—is essential to fully deploy and leverage the Pay on Demand model as a powerful tool for pervasive financial inclusion.