Availability, access to credit penetration relatively low in Nigeria -CRC Credit boss, Popoola
Photo Caption:
L-R: President of FIBOP, Mr Charles Onwuatogwu, Managing director of CRC Credit Bureau Limited, Mr Ahmed Tunde Popoola and Mrs Peggy Chukwuma- Nwosu of CRC Credit Bureau Limited at the event in Lagos
The Managing director of CRC Credit Bureau Limited, Mr Ahmed Tunde Popoola, has stated that the availability and ease of access to credit represented by the level of credit penetration is relatively low in Nigeria and underscores the challenge of access to credit.
Popoola observed that 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.
Speaking recently on the role of credit reporting in facilitating consumer credits at the May 2022 Forum of Finance and Business Online Publishers Association (FIBOP) in Lagos, Mr Popoola stated that access to credit for businesses in productive credit helps to promote economic growth.
He noted that though government interventions through grants, subsidies and other special arrangements and incentives will help, they cannot unleash the required exponential access required to stimulate economic growth.
He pointed out that 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.
Poopla observed that the journey towards improved access to credit especially for consumers and SMEs has been helped with the establishment of credit bureaus, collateral registry and digitization, stressing that It can only get better.
He said the situation today is different from what it used to be several years ago as significant improvement in access to credit is being experienced.
CRC boss noted that new players are also coming into the system, especially those that can be classified as shadow banks, mostly fintechs, money lenders and telcos.
“This phenomenon has influenced most of the commercial banks to also change their lending model, embrace technology and build the capacity of their personnel to enable them service consumers with low value loans. As technology is assisting in addressing the challenge of financial inclusion, it will rub off on lending and improve access to credit for consumers and small businesses”, he said
He explained that a lot of Nigerians have gone through harrowing experiences in the hands of some of these loan sharks, micro lenders and fintechs.
According to him: Their rates are usurious, and their debt collection management are barbaric, evil, embarrassing, and stressful for their customers. We are also beginning to witness fraudulent deployment and use of Apps, leading to loss of funds, unethical lending practices and usurious charges.
He states that the Nigeria government has embarked on a clampdown of some of them not long ago, adding that this has not stopped them.
He enjoined the regulators such as the CBN, CPC, and SEC to do more by being firm and decisive.
He suggested that there must be a way to bring these operators under regulation and high-level scrutiny.
He said the guidelines for Open Banking recently released by the Central Bank of Nigeria when fully operational will also help access to credit for consumers and MSMEs.
He observed that the ease of access to credit for consumers is more visible now than ever.
According to Popoola, “As of 2020, from the World Bank Data, domestic credit to the private sector as a percentage of GDP stood at 12.1percent, up by 2.1percent in 2018, which was a mere 10.2 percent in Nigeria. Comparing 2020 and 2018 in four other economies showed that by 2020, it was 32 percent in Kenya, 96 percent in Morocco, 70percent in Brazil and 134 percent in Malaysia.
He stated that the Central Bank of Nigeria’s monthly economic report for October 2021 indicated that the growth in consumer loans was driven by a 52 percent, year-on-year increase in personal loans, and rose to N1.57 trillion in October 2021.
He said Nigeria has been characterized by significant disproportionate allocation of credit to different sectors.
The CRC Credit boss noted that sectors that contribute the most are denied credit while credit goes to the sector with relatively little contribution to the GDP.
In his words:”For example, while agriculture contributed over 21 per cent to GDP in 2018, the share of bank credit to agriculture was the lowest at 3.8 percent. On the other hand, while oil and gas received 23 percent of bank credit, its contribution to share of GDP was less than 10 per cent. In addition, the cost of borrowing is very steep in Nigeria, and this serves as a disincentive to borrowing to a lot of businesses especially the SMEs”.
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