Access to credit from banks and other credit institutions has remained one of the main challenges hampering the growth and development of businesses in Nigeria, despite the recent leap of the country on the World Bank’s Ease of Doing Business Index.
Players in the nation’s economy have been lamenting the situation, which has severely impacted on the nation’s real sector, which ought to drive its gross domestic product (GDP).
The organised private sector (OPS) has persistently cried out over lack of requisite access to credit facilities from financial institutions, saying the development has caused untold hardship to its members in recent years.
A report presented at the sixth Bankers’ Committee annual retreat in Calabar recently revealed that close to 100 companies account for over 75 percent of loans granted by banks in the country.
It is feared that with over 17 million medium and small scale enterprises in Nigeria and hundreds of large corporations, the remaining 25 percent is inconsequential and cannot serve the credit needs of the stakeholders in these categories.
Also a report by CRC’s Credit Watch said credit data by June 30, 2014 showed about three million individuals and a little above 350,000 corporate organisations as borrowers in the country. It said 86 percent of all loans during the period were granted to these corporate organisations.
Most banks hinged reasons for credit squeeze to some manufacturers on their inability to get convincing details on the customers before advancing facilities to them.
The emergence of credit bureaux in Nigeria following the grant of operational licences to the CRC Credit Bureau Limited, XDX Credit Bureau and CR Services Credit Bureau by the Central Bank of Nigeria was meant to improve borrowing.
Credit bureaux are institutions that collect information on a borrower’s credit history and compiles information on the borrower, which creates the basis for a comprehensive credit report that is in turn sold to the creditors.
According to the World Bank Group report, credit bureaux are crucial to the expansion of credit, and the use of credit bureaux reports increases the quantity of credit decisions, lowers operational costs and provides significant risk mitigation by minimising default rates and fraud.
It further said credit bureaux are a key building block of sound financial infrastructure, and allow for greater access to finance for both individuals and small businesses.
Mobolanle Adesanya, Managing Director of XDX Credit Bureau, said a credit bureau assists growth by stimulating the consumer credit economy, which gives room for borrowers to be assessed for risk objectively, based on credit payment history so credit can be allocated more efficiently.
“Borrowing by high risk borrowers is controlled and the market gets opened for new low risk borrowers,” Adesanya said.
The Asset Management Corporation of Nigeria (AMCON) said it uses services of all the credit bureaux in the country to ensure that banks get needful credit assessment guides for decision-making at the instance of the loan applicants.
The Managing Director of CRC Credit Bureau Ltd, Ahmed Babatunde Popoola, said the emergence of credit bureaux has raised the value of loans granted in the country from N7 trillion to N12 trillion in the last few years.
Pooola also said the bureaux have also helped improve non-performing loans from 24 percent of total loan value in 2012 to 4.5 percent in 2014.
Besides, the Central Bank of Nigeria (CBN) says the number of borrowers under the credit bureau system grew to 26,639,641 in 2015 from 14,423,780 in June 2012. The number of registered borrowers is also up at 29,265,471 from 18,640,000 borrowers in June 2012.
A deputy director of the apex bank, Steven Nwaduiko, said the development was a manifestation of the growth of the credit reporting industry, adding that the CBN was ready to provide the requisite support to enable the credit reporting industry to thrive in Nigeria.
The CBN, Nwaduiko added, has made it mandatory for all financial institutions to have agreement with, at least, two credit bureaux.
“All banks are required to obtain credit report from, at least, two credit bureaux before granting any facility to their customers, while quarterly portfolio checks must also be carried out to enable them determine their borrowers’ current exposure to the financial system,” he explained.
“We also review compliance levels in line with our zero tolerance policy for infraction, and sanction erring institutions,” Nwaduiko said.
He added that the credit bureau guidelines issued in October 2008 were revised in 2013 in order to provide a more robust legal framework that would serve as a platform for the sustainable growth of the sector.
There were initial concerns by operators of the credit bureaux on incongruous data of borrowers and the fact that most of the lenders don’t capture basic information that you want to see.
“If you go to a bank, they ask you to fill your name, address, date of birth and means of identification. You may probably leave out any anything you like which may not reflect your person,” Popoola noted.
“The validation of such information, the population of it in the first place and the validation of what the lenders have collected from their customers is a huge challenge to us,” he told our correspondent.
He said Nigeria is still a cash economy as issuance and use of credit is presently low.
“Until we move into a credit economy, Nigeria will continue to lag behind South Africa and the Western world. The economy must develop to a stage where consumer credit is widespread to enhance the standard of living of Nigerians,” he said.
Adesanya said the introduction of the Biometric Verification Number (BVN) system by the CBN has improved data quality and quantity.
The Credit Bureaux Association of Nigeria said it has gained a data template for credit information provision, and collaborated with the CBN and the bankers’ committee to adopt the use of a uniform identifier for Know Your Customer processes. It said credit record numbers and data quality improved marginally by not less than 30 percent.
The revised guidelines for the licensing, operations and regulation of credit bureau and credit bureau-related transactions in Nigeria carried out on November 14, 2013 required all credit bureaux and end-users to establish readily accessible processes and procedures, supported by a complaint resolution unit to handle all complaints or disputes in respect of its data or operations.
It also requires credit bureaux to render monthly returns on all disputes and complaints to the CBN, a format approved by the apex bank.
Stakeholders in the nation’s economy believe that if the challenges besetting credit bureaux can be addressed, the development would impact positively on the nation’s GDP.
