CBAN tasks banks on changing lending model for inclusive growth

The Credit Bureau Association of Nigeria (CBAN) has stated that for Nigeria to grow and sustain an all-inclusive economy, banks must change their lending model, saying that 80 per cent of loanable funds for economic development are in the hands of few companies.

The Chairman, CBAN and Managing Director, CRC Credit Bureau, Tunde Popoola, explained that Nigerian banks are still practicing what he described as “loan concentrating” on very few companies, therefore calling for a paradigm shift where a huge chunk of loanable funds should be channelled towards the retail and Micro Small and Medium Enterprises (MSMEs) sector to boost purchasing power of consumers for economic growth.

Popoola stated this during a press briefing in Lagos to highlight some of the key benefits of credit bureaus in the country.

“A situation where we have 80 per cent of such developmental funds in the hands of less than 200 companies, we cannot have real economic growth. Loan concentration in specific few sectors such as oil and gas is detrimental to our growth as a nation, we must focus on SMEs, retail sector where we have lots of economic activities,” he added.

According to him, since the licensing of Credit Bureaus by the Central Bank of Nigeria (CBN) in 2008, significant impact has been made by the industry, noting that banks readily share credit information which promotes transparency in the financial system; banks currently offer new credit products to their customers such as credit cards, consumer loans, vehicle loans, loans to SMEs while retail loans are enjoying special attention by virtually all the banks which has inevitably turned the tide of high level of non-performing loans that was prevalent in the 1980s – 1990s.

He also stated that courtesy of the move by CBN, Nigeria is currently 6th in the world on the Getting Credit Indicator, stressing that the value of loans granted in the country has risen from N7 trillion to N16 trillion by December 2017 while there had also been a significant decline in the rate of non-performing loans.

“The number of borrowers in the credit reporting system has grown. Furthermore, Nigeria now ranks 145th out of 190 countries on the Ease of Doing Business, compared to 169 in last year’s report due to the efforts made by the Presidential Enabling Business Environment Council (PEBEC) initiatives of which the Credit Bureaus played an integral part last year.

He pointed out that the promotion of effective credit risk operations through the deployment of quality and robust credit data management is a major critical factor that would ensure the emergence of a healthy financial services industry in Nigeria.

“The Credit Bureaus through the Credit Bureaus Association of Nigeria (CBAN), is fully committed to this. Just September last year, we organized a forum in conjunction with the Chartered Institute of Bankers of Nigeria Center for Financial Studies (CIBNCFS) for stakeholders in the industry including FinTech companies on the need to evolve a quality credit data management in Nigeria and we are sure that this would begin to yield result very soon,” he said.

Highlighting some of the benefits of credit information sharing, a critical role played by credit bureaus to bridge the gap between borrowers and lenders, Popoola said the exchange of credit information is vital for equitable credit distribution and reliable risk management, saying that a consequential benefit of credit information exchange deters borrower abuse of credit as Credit Bureaus provide credit information on request enabling lenders to have a picture of the credit status of borrowers to know the extent of their financial exposure.