So I'd like to ask you all a question that I've pondered for these past few years. Why is it that for-profit organizations and nonprofits, or those that work in the development space, are quite different with the type of impact that they have?
I mean, in theory, they should be similar, right? They both have access to super-talented individuals. Should it matter that you are working on affordable housing or trying to build a multi-million dollar condo building? I don't think it should. But if I took a poll in this room and asked you all to take a guess on which of these buildings will be completed first, I'm fairly certain that we would all agree it's not the affordable housing. Right?
And you may go, “Well, Tolu, isn’t it about the money? One of these has access to more money than the other." And I think there's truth to that, but I believe it goes much deeper than that.
I live in Nigeria now, before I moved back to Nigeria, I actually spent the bulk of my career working in development markets in the for-profit sector, right? In the for-profit sector, we are held accountable every year by investors to ensure that the benefits of the activities that we invested in throughout the year far outweigh the investments in those activities. This annual cadence of accountability required that everything that we did was striving toward increased profitability. This annual cadence of accountability created such a high sense of urgency in everything that we did. And so we leveraged data analytics, evidence-based tools to ensure that we're able to hit those goals fast.
In the development space, where I spend the bulk of my time these days, the culture appears quite different. We don't seem to operate with the same sense of urgency. The work we are doing now is arguably more meaningful, right? We are trying to solve problems such as increasing financial access to those who currently don't have it. We're trying to solve problems that include education access, energy access. And, in fact, increasingly we are trying to help people who are vulnerable build resilience to climate change. These challenges are quite significant and require that we do things differently.
In Africa, we have a proverb which states that if you want to go fast, go alone. If you want to go far, go together. But what happens when trying to solve a problem like increasing financial access requires that you go both fast and far? I believe that we need to do development differently. We need to include the profit motive and for-profit approaches into the way that we do development.
So let me walk you through an example of how we experimented with this in Nigeria. We're trying to expand financial access in Nigeria. For those who don't know, financial access is an individual's ability to get access to insurance or loans or build savings. A lot of research has shown, in fact, that a lot of these development activities that we have require financial access as a key enabler. A key enabler. However, when you look in Africa, we are lagging behind the rest of the world in terms of financial access. In fact, in sub-Saharan Africa, only about 55 percent of all adults have access to financial services. A country like Nigeria, where I live, you have more adults in Nigeria that do not have access to financial services than the entire population of Canada. Think about that. More individuals in Nigeria do not have access to financial services than the entire population of Canada.
Now, I mean, this is not for a lack of trying. We've been working on this issue for a while. And I think one of the reasons the issue persists is because we were trying to solve the problem in the same way we have tried to do it in developed markets, trying to build bank branches and ATMs everywhere. But this is so expensive and capital-intensive and time-intensive, which we cannot afford. But there's a cheaper, scalable option. Agent banking. With agent banking, a financial institution can hire an individual or a retailer to provide financial services to the community on their behalf. So you have ... a grocery retailer, right? She gets cash from selling foodstuff to her customers, and she can play the role of a human ATM, if you will, connecting to the branch online and able to dispense cash to her customers and other financial services. And unlike bank branches and ATMs, you can deploy an agent within about a day. So you can literally start the day with the community without financial access and at the end of the day with an agent provides financial access to that community.
We know agent banking works. And in fact, in Nigeria, we estimate that over these past three years we've deployed about 850,000 of these agents. But the problem persists. After all of this work, the problem persist. In Nigeria, we still estimate that less than 50 percent, in fact, of adults still have access, despite all of this work, and this has persisted for over a decade.
So a few colleagues and I decided to investigate this to try to understand why is it that after all this work, we're still struggling with this. And so we teamed up with nonprofit organizations and for-profit organizations to understand, after hundreds of thousands of agents, why does this problem persist. And we discovered two important problems.
One is, we in fact, are not deploying these agents into the right places. The rural parts and northern parts of Nigeria most desperately needed these agents, but the deployment tended to be in the urban south. And when we deployed them, we tended to also deploy overlapping agents. What does that mean? Think of this as you are trying to, you know, you deploy 50 ATMs in a New York City block. What's the point of that? In fact, if you had used data analytics, perhaps we would have done this properly.
The second problem we observed was that agents, in fact, were not staying around for the long haul. So you placed this agent, but the average agent only remained operational for about three months. Between the start-up cost and the recurring cost required to sustain the business, they needed a high volume of transactions, of business, to be able to remain profitable and remain in business. But they didn't really know how to do that. So we're working hard, but we're not placing them correctly and they're not profitable, so we're not moving the needle at all.
So with this understanding of the problem, we wanted to design profitable or viable agent banking business. And to do this, we did a compare and contrast between agents that remained around for the long haul versus those that only left after a short period to understand the differences between them. We also literally went across the country to understand the differences of our agents, who worked across the country, and understand how money moved in the respective communities. And with this understanding, we built our profitable agent banking model.
So what are those things, what are the key elements to ensure that an agent is viable and remains around for the long haul? One is, you need to make sure that you have about 500 adults. You need about 500 adults in the community to support one of these agents. So when you are deploying overlapping agents, that can be counterproductive. Another thing is, even though these agents, in fact, are leveraging the internet connections to financial institutions online, they still needed access to cash for the community. Cash was still very important. And then, agent banking is not a full-time business. It's a side hustle. So you can be a bartender, you can be a grocery retailer, you could be a hairdresser, anything, really, and offer agent banking as an add-on to make that viable.
So we felt good that we understood how to design it. So now we wanted to estimate how many of these agents can we put across the country to ensure that every Nigerian has access to financial services, universal access. To do this, it's not a simple task, involves a lot of data. So we built an analytic engine, called Geofin, to do this. With Geofin, you can look across Nigeria, any part of the country, and zoom in to understand the current level of financial access, as well as how many of these agents that we talk about you need to deploy to get to universal coverage. So if you look down south in Nigeria, in a place called Bayelsa, in Bayelsa we have high level of financial access. About 85 percent of adults in Bayelsa have access to financial services. And so you would only need to deploy about 2,000 more agents to get to universal coverage. Up north, in Yobe though, in the northeast of Nigeria, you find that about 25 percent, only about 25 percent of adults actually have access to financial services. And so there you need upwards of 8,000 agents to get to universal coverage. Quite a beautiful tool that allows us to sort of understand and try to solve the problem in a very nuanced way.
So all of this was research and analytics. What did we find? What was the real impact of all of this? So you remember I had said in Nigeria so far we've deployed about 850,000 agents? Well, with this approach, we discovered that we only really need about 275,000 more agents to get to universal coverage. Now, the bulk of these agents were not profitable. In fact, about 90 percent of them are not profitable. But that's OK. The work they are doing is still quite important. And so we need to support them with subsidies and grants to ensure that they can stay around and support their communities. However, about 27,000 of these agents will be profitable. We think of them as the high-impact agents. And what do they do? These agents will move the needle significantly. So in Nigeria today, we estimate that only about 45 percent of adults have access to financial services. These 27,000, roughly, agents will move the needle from about 45 percent today to 80 percent. And given how fast you can deploy them, we estimate that this will occur within 24 months or less. This is the power of including the profit motive in development work. That we can move the needle so fast for a problem that has remained intractable for so long.
Now, financial access is not the only challenge we have. What if we took this same mindset to energy access, where instead of just deploying solar in rural areas alone, we could think about helping entrepreneurs to build viable urban solar businesses? Or we can also deploy this approach to education access, where, instead of just deploying schools widely, we'll work with local community entrepreneurs to build community schools that are profitable and viable for a long period of time.
I believe that when we combine these nonprofit and for-profit approaches, when we include the profit motive in the development work that we do, we can go fast and far together to address these development challenges and change the world for the better.
Thank you.
(Applause)
