I like to think of myself as one of the early adopters of PiggyBank. I remember two distinct thoughts in my head the very first time I read about it. The first was ‘this is pretty super awesome’ and the second was, ‘Wait. what is the legal/regulatory position of such a solution?’
The second thought was largely informed by my oddly vivid recollection of a section in the Banks and Other Financial Institutions Act (BOFIA) which says, ‘No person other than a bank or any other person authorised to take deposits shall issue any advertisement inviting the public to deposit money with it.’
I ‘penned’ this thought in my ‘thought spreadsheet’ and moved on. And by ‘moved on’, I mean, I opened an account with PiggyBank and instantly started saving with and evangelising it. But not for once, did this second question leave my mind. It kept gnawing at me and requesting for an answer.
Recently, I revisited my thought spreadsheet and picked this one up. First thing was to check the BOFIA for real this time.
Here’s the gist of relevant sections in the BOFIA: no one is allowed to carry on banking business unless with a license (issued by the CBN). And to clarify, the Act defines banking business as, “the business of receiving deposits or current account, savings account or other similar account…”
(At this point, I’ll like to pause and say that this has nothing to do with PiggyBank as a brand; but with the set of solutions it offers – “microsavings”. And bearing that in mind, it also means that a solution like CowryWise is fully envisaged under this article as well, as it equally provides same solutions as PiggyBank. I’ll try to alternate between both companies, but I may use PiggyBank more often because I’m more familiar with it).
Now, the provisions of the BOFIA made me think (perhaps, too much) about the word ‘deposit’ as it is a specifically significant feature of PiggyBank and CowryWise; perhaps the only feature that allows us connect these solutions to the banking business. I didn’t have to go too far to understand what the lawmakers meant by “deposit” though because the Interpretation section of the BOFIA defines it to mean “money lodged with any person whether or not for the purpose of any interest or dividend and whether or not such money is repayable upon demand upon a given period of notice or upon a fixed date” (emphasis, mine)
My answer was neatly wrapped in their FAQ, and it basically explained that since inception in 2016, they have shared banking licenses with 2 Micro Finance Banks, but recently, they acquired (like bosses) a Microfinance bank and its license. So that makes a lot of sense actually. PiggyBank will simply operate as a ‘product’ of the licensed bank and would not be in anyway breaking our banking laws. Check out (not-so-) deets on the acquired bank; Gold Microfinance Bank ltd
While I was pretty relieved at their compliance and legal adeptness, I wished it were way simpler for them. I think
it isn’t a bad time it’s a good time for financial regulation in Nigeria to actively and proactively consider FinTech startups and their special-ness.
So, let’s say a FinTech startup (say, some innovative local money transfer solution for indigents) requires a banking license to carry out its duties. Do you know that the smallest paid up capital required is about N20Million(for a Unit MFB).
LOL. That is deep, plis. And also not very encouraging for innovation.
PiggyBank is doing well from the look of things. I mean, it’s promoting the personal savings culture of Nigerians, it raised a seed funding of $1.1Million recently, and you can actually follow its organic growth overtime. If that’s not helping the economy, I don’t know what is. But it couldn’t possibly start up on its own because… N20Million.
God knows…that I know… that regulation is super important especially for things involving other people’s money. I mean, the financial sector is one of the heavily regulated – and for good reasons. But it’s also one of those sectors that would do so so so so much better with modern technology (and more hands?). Hence, I’ll encourage the Nigerian government to find a way to incentivize FinTech startups; encourage innovation and do away with over-regulation for them. For instance, you don’t want to demand the MOST; just enough to ensure that customers are protected. The legislature should also pitch in and make their contribution, but I believe that the CBN would bear a large part of the burden to develop favorable and forward-thinking regulations in this fast-paced times (P.S. Take a dizzy pill, it’s only going to get faster).
Anyway, so that y’all won’t say I didn’t do anything but criticize, here are some wise quotable quotes from ME that every government regulator may print and paste in their offices as a sort of encouragement:
“To regulate is good. To stifle is bad.” – Adeboro(2018)
“Innovation is the source of our running ocean. Plug it and we all, die, float and stink” – Adeboro (2018)
“Again, Innovation is the source of our running ocean. Let’s make waves while the sun shines” – Adeboro (2018)
“Confuse not technology with electricity. You’d be shocked that you may actually embrace it” – Adeboro (2018)
~yooooo I’m so wise and witty and full of puns. thanks~
Anyway. If after all my sweat and blood, the government is like ‘LOL. No thanks, child. We’re set on our archaical perspectives’, well, hello…venture capitalists and investors and funders, I have something to tell y’all! I promise, just two minutes of your read….