Beyond naming and shaming bank debtors
BANKING is critical to efficient mobilization and allocation of financial resources for individual, national and global prosperity, with lending at the nexus. There is no true alternative. The Nigerian bank is still work in progress, a task that must be done. Despite the enormous technical, economic and cultural odds it is facing, it should not be seen as taking the easy way out or repudiating transactions willingly entered into with the borrower when expectations fail. In most instances, the lender is as liable as the borrower for the non-performing loan. It is in this context that naming and shaming the borrower, with non-disclosure of what transpired, as the banks are doing, seems unprofessional. Risk is inherent in lending.
If it must name and shame, it is imperative on the bank to equally place, in the public domain, the amount disbursed with date(s) the approval level, the security arrangement and its status and the purpose and the tenor of the facility, among others, so that the audience may figure the degrees of culpability between the lender and the borrower in each case, otherwise, he or she could be liable for deliberate misrepresentation of the borrower. Thus, although the banking system direly needs to be saved from serial bad debtors, that publication is flawed in instances of greed and laxity on the part of the bank, force majeure and contested balances. And it is utterly permissive of both the lenders and the Central Bank to simply pass the entire buck to the borrower while shielding their likely complicity in the mess.
In other words, the Nigerian bank needs a lot of introspection and self-appraisal or reality check if we must deal with the disease rather than the symptom. To start with, there is the issue of executive capacity. Typically, it is the impressionable young lending officer who interfaces with the customer and raises the loan request. Often, members of executive management, credit committees and Board of Directors, who would later assent, based on what they are told, are not there! Banks must begin to see this interface like the one between the doctor and the patient or the lawyer and the client, in terms of the level of training, apprenticeship and expertise expected of the lending and relationship officer. As much as integrity deficiency, the lending and relationship management processes of any bank can be fatally compromised by over-dependence on the impressions, feelings and emotions of inexperienced officers which laid-back executives would hope could be partialed-out in the comfort of the office or boardroom, to no avail. Bank executives, undoubtedly, need to take greater interest in the integrity of both management and staff members and in hands-on operation of the lending and relationship management processes.
As foundation for this apprenticeship system, the prospective lending officer must demonstrate basic competence in the structure of the Nigerian economy and in macro-economic, micro-economic and financial statement analyses (including the analysis of bank’s regulated funding structure) which calls for intensive, integrated, pre-deployment training, for those with deficient background. Then he must be taken through case studies, with special reference to the historical bad loan portfolio of the bank, to appreciate both apparent and latent pitfalls in lending, particularly, those bordering on character, company practices and fiscal policy changes. Preferably, he should start with small enterprises and family businesses, where he should watch out for incomplete accounting records and non-separation of business cash flow from personal cash flow; poor market definition; inadequate previous preparation (education and skill gaps) relative to the proposed transaction and paternalistic hiring, promotion and organisation and governance practices that might be inimical to repayment. He must also demonstrate the ‘legal mind’ and the sense of anticipation and forecasting, before advancing to big tickets. Lending is a craft that demands orientation, internship and continuous training.
There is the already-highlighted challenge of corporate and personal avarice. Banks must guard against unnecessary peer pressure and mercantilism or undue emphasis on instant commercial success, both at the individual and the corporate levels. The bank is not just a profit-motive company but a sensitive social institution of public trust. Its licence for deposit collection from all and sundry carries with it the social responsibility for husbandry and efficient allocation of the mobilized funds to the production of needed goods and services for the growth and development of the economy. Nowhere should this mandate be more hallowed than an under-developing economy such as ours. Being liability-driven, the first objective of a bank should be to build the reputation of trust and fidelity among all stakeholders (which should soon be rewarded in maintenable deposits and elegant funding structure) upon which patronage would grow while profit definitely follows. A good number of the sticky non-performing loans in question might be traced to unethical conduct and to unbridled profit motive underlying speculative transactions, incomplete documentation, hasty disbursement and relentless accrual. Otherwise, the banks would not be as helpless as they seem. Conservatism is not synonymous with slothfulness which is counter-productive to the banking mission.
The high and recurrent incidence of non-performing loans is also no less indicting of internal controllers, external auditors and Central Bank supervisors who have perennially failed to blow the whistle before it was too late. It is no less indicting of the Federal Government and its inconsistent monetary and fiscal policies and the attendant hostile environment which render some genuine borrowers unable to repay. Regrettably, the failure to highlight the terms of the published non-performing facilities is patronizing of the lenders, the Central Bank and all other parties while constituting an injustice to some of the debtors. Is it not a contract between the two principal parties, a joint venture of sorts, in which the bank is the senior venture, which should be ahead in the game and ought to take greater responsibility for default?
It is certainly more productive that all stakeholders, particularly, the banks and the government – which ultimately pay for it, albeit, with public funds – be made to address their respective wings in the root cause of perennial loan default among Nigerian borrowers, legally and technically, than to delight in passing the buck or engage in the trading of blame. Prevention is always better than cure.
• Nwosu, a finance consultant, wrote from Lagos.