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Data credibility threatens FG loan access plan


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Nigeria

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The absence of a robust credit history of borrowers as well as the lack of a  centralised national identity card system have been identified as significant impediments to banks retail segment lending, BusinessDay investigations have revealed.
Analysts have consequently suggested that fundamental issues, such as the proper identification of citizens and the establishment of a legal framework to ease repayment or prosecution, in the case of default, would have to be resolved, to enable meaningful bank retail segment lending in the country.

Also, it was said that a databank containing the history of both corporate and individual customers, would need to be in place, to make the effort realisable. 
The suggestion also comes against the backdrop of a planned Federal Government task force to evaluate processes to ease access to loan facilities to sectors that have the potential to grow the economy. Nwanza Okidegbe, chief economic adviser to the president, made public last week the Federal Government plan to set up a task force with focus on key sectors, such as infrastructure and agriculture, which have the potential to boost growth and generate employment, but are currently having challenges accessing finance.

Taiwo Ayedun, chief executive officer, CR Services (Credit Bureau) Plc, who acknowledged the existence of untapped opportunities, particularly in the consumer credit aspect, said the operators, under the umbrella of the Credit Bureau Association of Nigeria (CBAN), have made a presentation to the Bankers’ Committee, on how banks can significantly grow their asset size and profits, through close partnerships with the credit bureaus.

But Business Day investigations further revealed that fundamental issues, such as proper identification of citizens, a legal framework aimed at easing repayment or prosecution, in the case of defaults, as well as financial records of both corporate and individual customers, would have to be resolved, to make the task force effective.

“Good thinking by the Federal Government, but unless the banks are assured of an easy way of retrieving their funds to customers on default, through an accelerated framework, based on proper identification and reliable data of would- be borrowers, the banks would not lend, and they would continue to see the risks as high, with the consequent high lending rates,” said Emeka Onyejiaka, a financial analyst in Lagos.

Samir Gadio, analyst with Standard Bank, London said, “The main argument of  Nigerian banks has been that lending to the retail segment of the market is too risky because of the absence of proper customer identification and/or track record.

Ken Iwelumo, former Senior Vice President – Investments, Bank of America/Merrill Lynch said, “Currently, there is no iron clad way of identifying the average Nigerian citizen. As a state bank or financial institution, you must be able to identify a particular individual before you can offer him or her services, benefits, loans or collect taxes. You also need to identify a particular individual, in order to enforce the law, or enforce a plaintiffs/creditor’s rights, in a situation where an individual defaults on a legal obligation.
“Lack of a National Identification system backed by law, is the main reason why banks in Nigeria are reluctant to offer individuals uncollateralised loans. It is not uncommon for rogue bank credit officers 

to connive with fictitious customers and defraud their own banks.  Without a properly structured and legally enforced National ID, Nigeria will find it very difficult to truly develop.”

Johnson Chukwu, managing director and chief executive officer, Cowry Asset Management Limited said, “A situation where fraudulent individuals can assume different identities as they so wish, increases the risk inherent in lending to individuals or persons who do not have well established personality in the society. Another constraining factor to the development of consumer credit culture in Nigeria, is the absence of a robust credit bureau, where credit records of all borrowers in the country are maintained.”

Taiwo Ayedun, chief executive officer, CR Services (Credit Bureau) Plc, however said that credit information was available, acknowledging however, the existence of untapped opportunities, particularly in the consumer credit aspect.

“Under the umbrella of the Credit Bureau Association of Nigeria (CBAN), we have made a presentation to the Bankers’ Committee, in which we shared the untapped growth opportunities for banks, through credit bureaus, and demonstrated to the committee, how banks can significantly grow their asset sizes and profits, through close partnership with the credit bureaus. We are glad that some of our recommendations are already receiving the attention of the banks and regulators,” said Ayedun.

Article Credit:Vanguard News 

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Updated 6 Years ago
 

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