Having considered the importance of the national identification system and its impact on credit expansion on the economy, one can consider a scenario that plays itself over and over again in the Nigerian landscape.

‘Imagine 29-year old Madam XXX dropped out of school at 16 due to financial challenges at home. She enrolled in an informal fashion school and graduated at 20. At 21, she started her own sewing shop with 2 machines. She grew the business into a shop with 20 apprentices and 2 full time employees whom she pays regularly 8 years after.
At 29, she needs to expand the business as she has just 8 machines to cater for 20 apprentices. Madam XXX has been a customer of Bank ZZZ for the past 5 years and she is willing to take a loan to buy 8 new machines from firm YYY, a reputable distributor of sewing machines in Nigeria.

The bank having looked at Madam XXX’s profile and liquidity situation in terms of daily cash deposits is willing to lend but is held back by the lack of verifiable means of identifying Madam XXX. Now, imagine Madam XXX is able to obtain the loan, the following would occur:

1) Madam XXX has 8 new machines ensuring that a lot more of her apprentices are working and learning at the same time

2) Significantly reduce lost man hours and increase productivity

3) Reduce unit costs as more machines are working at the same time

4) Reduce time spent by each apprentice at her shop thereby ensuring that apprentices graduate earlier and faster

5) Firm YYY after the sale of 8 machines is able to import more machines or lock the funds in a Money Market product.’

Madam XXX’s situation is seen in the lives of millions of people in Nigeria who have continued to struggle to keep their businesses alive simply due to the lack of capital which is widely available⁽¹⁾ yet inaccessible. The widely revered Grameen Bank⁽²⁾ in Bangladesh had 7.54million borrowers as at July 2008 covering about 5% of the population. This was only possible because of the existence of a national identification system in Bangladesh.

Again, the problem in most cases is not ‘the ability to pay’ but the lack of ‘verifiable identification of the potential borrower’.

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⁽¹⁾Largely owing to the recently concluded rounds of bank consolidation in Nigeria
⁽²⁾Grameen Bank is a micro-finance institution