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…facilitated N36 trillion loans to private sector
…enabled NPL ratios decline to below 5% in 2021
As an economic
enabler, operations of Credit Bureau in the domestic economy has facilitated access to finance by the private sector to grow to N36 trillion as at March 2022, Group Managing Director and CEO CRC Credit Bureau Limited, Dr. Tunde Poopola has said.
He said no country can thrive economically only on cash alone, noting that there is need for a mix of credit and cash, even as he maintained that Nigerians must work hard to develop its credit bureau to enable financial institutions to avail individuals and organization credit facilities.
Dr. Poopola made this remarks Tuesday, while speaking at a forum organized by the Finance and Business Online Publishers Association of Nigeria (FiBOP) in Lagos.
“Nigeria licensed three private credit bureaus in 2009 and the impacts on volume of loans and reduction in the rate of non-performing loans (NPLs) have been remarkable. Loans to the private sector rose from N7.7 trillion in 2008 to over N12 trillion in 2015 and over N36 trillion in March 2022.
The CRC boss who said the operations of Credit Bureau and Credit reporting agency in the domestic economy has been laudable explained that “Special products for SMEs and the introduction of credit cards became possible with the advent of credit bureaus. Furthermore, NPL ratios declined significantly from about 32.8 percent in 2009 to a single digit of 9.3 per cent as at June 2019 and hit the lowest in ten years to below 5 percent at the end of December 2021.”
Speaking further, on how a strong credit system promotes credit to consumers (individuals) and credit to businesses, especially the micro, small and medium enterprises (MSMEs), Dr. Poopla said with access to credit, effective demand is stimulated even as this propels an increase in demand for goods and services.
According to him “If an economy is supported by access to credit also for commercial enterprises, production is enhanced. Access to credit for businesses is productive credit and it certainly helps to promote economic growth.
Further on access to Consumers Credit, Dr. Poopola noted that “Access to Consumers Credit in Nigeria has grown astronomically.Most successful economies are driven by credit.The provision of consumer credit has a key economic function and is a largely beneficial activity, propelling spending and thereby increasing income levels of a country. It enhances productivity and leads to higher Gross Domestic Product (GDP).
“The availability and ease of access to credit is represented by the level of credit penetration. This is measured by the ratio of total credit to the private sector to the GDP. This is relatively low in Nigeria, and it underscores the challenge of access to credit in Nigeria.
“As of 2020, from the World Bank Data, domestic credit to the private sector as a percentage of GDP stood at 12.1%, up by 2.1% in 2018, which was a mere 10.2% in Nigeria. Comparing 2020 and 2018 in four other economies showed that by 2020, it was 32% in Kenya, 96% in Morocco, 70% in Brazil and 134% in Malaysia.
Dr. Poopola however, bemoan the rate of credit penetration, which is still relatively low in Nigeria, despite all the policies of the government and the presence of credit infrastructure that have helped other economies to deepen access to credit, explained that, it is an indication that there are some fundamental challenges that require ruthless and focused attention.
According to him “with credit reporting, it has become possible to trace and track old customers with bad or abandoned facilities thereby assisting to address the challenges of adverse and haphazard selection. The bureau warehouses all addresses, telephone numbers and contact details provided to all credit granters by consumers or their customers.
“A significant issue still affecting access to credit in Nigeria remains the full coverage of a unique identifier for every inhabitant. The country has multiple forms of government issued identifiers for individuals including National ID, BVN, Drivers’ License, Voters Card and International Passport. In most countries with successful Credit Bureau infrastructure, there is always a single means of identification. In Europe and America, it is the social security number.
“In a country like Egypt, it’s the National Identity Card. India commenced deployment of unique identifier in 2009, today about 1.4billion Indians have government issued unique identification numbers. Nigeria also needs to embrace a unique identifier. The current situation makes data matching very tedious, cumbersome and expensive for the bureaus. This is because a bureau relies on identification of data subjects to be able to match and merge data and develop innovative products for the market. We continuously urge the government to speedily implement a unique identifier for every Nigerian. It is pertinent to note that the BVN introduced by the CBN does not fully solve the unique identifier challenge as data providers have been unable to fully
“But to stimulate economic growth, reduce poverty and engender prosperity, there must be significant improvement in access to credit and other forms of finance for consumers and MSMEs. It is instructive to note that government interventions through grants, subsidies and other special arrangements and incentives will help, but they cannot unleash the required exponential access required to stimulate economic growth. The focus must be more on policies and programs that provoke market-driven initiatives which should be addressing the issues constituting bottlenecks and militating against free flow of credit to consumers and MSMEs”, he added.
Photo Captions: From Left… The Group Managing Director/CEO CRC Credit Bureau Limited, Dr. ‘Tunde Popoola; Mrs. Peggy Chukwuma-Nwosu (Chief Commercial Officer, CRC Credit Bureau Ltd) and Ms Sike Ighile (Branding & Communications CRC Credit Bureau Ltd).
