The Managing Director, XDS Credit
Bureau, Mrs. Mobolanle Adesanya, speaks on issues around the
non-performing loans, among others.
Despite the
presence of credit bureaus and the Central Bank of Nigeria’s
regulation, we still have high rate of non-performing loans. What could
be responsible for this?
Sometimes, overexposure can be
responsible for this. That someone has been able to repay a loan does
not mean the fellow should be given another loan. We need to look at the
background of such a person in terms of income and ability to repay.
There are other things that should be
considered before granting a loan; not just granting a loan based on
credit history. Yes, the customer might be doing well; but does he or
she have the capacity to repay when given an additional loan? Will his
or her income be sufficient for repayment of additional loans? There are
a lot of things that contribute to non-performing loans.
What could be the impact of high rate of non-performing loan on the economy if it persists?
It has significant effect. Most of the
banks, for instance, are not even granting facilities, as they should
because they know the economy is in recession. A few of them are trying
to recover their funds from non-performing loans and ensure that they
are reduced because the Central Bank of Nigeria has a threshold that
they can maintain in their books. If they are above those figures,
obviously, it will have an impact on their bottom-line and revenue
streams. Some of the NPLs may have to be written off if after a while
they exceed the threshold, which will affect their bottom line. If there
is high rate of non-performing loans, they are not likely to pull
report from credit bureaus. Before a loan goes bad, there are series of
things that happen. It does not just go bad overnight. You will have
seen some indications. The first step before granting the loan is to get
all available information about the customer. After the facility has
been granted, it should be monitored. Banks shouldn’t just grant the
facility and think that the customer will come back to pay. We need to
monitor those loans so ensure that terms and conditions in the offer
letter are followed.
What has been the impact of credit bureau on the financial services sector?
Credit bureaus actually play a huge role
in the financial sector. Initially, when the credit bureaus were
established, the take-off was quite slow and the banks were not really
taking it up as they should. That was when we were licensed in 2009.
From 2009 till now, there has been tremendous impact of the credit
bureaus in the financial services industry. The credit bureaus were set
up because of the 2008 economic meltdown, which affected the banks.
Now, most of the commercial banks have
subscribed to credit bureaus and we check the credit history of
customers before loans are disbursed. We are able to assess customers’
creditworthiness and exposure across board from the credit bureaus. What
we have now is that before any bank gives out a credit facility, they
check with the credit bureaus. When there is a customer who owes in
another bank, they are denied the credit facility, not only based on
what they find in the credit bureaus, but other criteria are considered
by the bank. We have people now going back to banks where they owe money
to see if they can repay or work on something else, so that they can
grant that facility they are asking for from the other bank. That is one
of the things we have been able to contribute to the financial services
industry.
Also, we help those involved in risk
management to assess the creditworthiness of a customer before they
disburse a loan. It is not only that the customer can repay the loan,
but not overexposing the customer. There has been improvement from where
we were before and where we are now. People are beginning to see our
role as an important financial infrastructure to help them have access
to credit.
How do you assess the creditworthiness of people without a credit history?
Not everybody’s information is with the
credit bureau, but it is a way to encourage people to get reported. For
instance, not all the microfinance banks actually use the credit bureau
platform; not all of them report information about their customers. When
you see that someone’s information is put there and that person is
paying back his loan as and when due and meeting his obligations, the
person can go back to other banks because of the performance he has had.
It gives that bank the comfort that they can avail the person that
facility and he or she will pay back. When such information is given to
bureaus, it makes access to finance easy. People who don’t have
information get reported for the first time and we encourage them that
when they give a loan, they shouldn’t just keep the information, they
should report it to the bureau. That is the beginning of the information
that will be made available for people to see what the customer is
doing in order to access finance elsewhere.
Why don’t microfinance banks submit their customers’ information to bureaus?
Some don’t have technical knowhow
compared to commercial banks where more technology is available. They
have to work in conjunction with their software vendors to submit data
to the credit bureaus. Some find it easy while some don’t.
Some based on the fact that they feel
they can handle those customers themselves without necessarily checking
with the credit bureaus; they don’t submit information to us. Reporting
customers’ information to credit bureau is free; it is only when you
need the report that it is paid for. It actually does not cost anything
to submit information to the credit bureau.
Are cooperative societies utilising the services of credit bureau?
We have one or two subscribers. The
appreciation of credit bureau is very low; that could be one of the
reasons. Some believe that they can manage without the use of a credit
bureau.
How do you ensure that the information you receive from banks on their customers is accurate?
When we collect the information from the
financial institutions, we don’t just upload it. It goes through a
series of processes; we check and validate before we actually load. We
compare with others. For instance, if something is given last month, and
we see some discrepancies, we get back to the banks to inform them and
they give updates. We have a process of checking before actually
uploading the information to the system. We go through some processes to
validate the clients’ information before uploading into our portal for
people to see. If by chance, there is a mistake, we have a dispute
process where a customer can actually complain about the information
given about them. There is a process we go through to have that
corrected.
The SMEs are still finding
it difficult to access loans from commercial banks. What role has credit
bureaus played in facilitating their access to loans?
We always advise people to get their
banks to submit their information to credit bureaus, especially if they
are doing well. Once you are doing well, it makes it easy to access
finance from other institutions because they can see the kind of
customer that you are. You are repaying your loans as and when due; you
don’t owe arbitrarily; you comply with the terms of offer of the bank.
It makes it easy for you to get finance from other places. Also, when
you are doing well in your obligations, you may be able to get even
lower rates from the banks based on your credit scores. You can
negotiate a lower interest rate from your bank. You can tell your bank
you have been taking credit facilities from other banks and have never
defaulted. Convince them that you are a low-risk customer and that you
should be able to take something off the interest rate as against
someone without a credit history. Those are some of the things we can do
to make sure the SMEs have access to finance from banks.
What role is the collateral registry expected to play in the financial services industry?
The collateral registry will help in a
lot of ways because we are expanding assets used as collateral. With the
collateral registry, people can use jewelleries and cars as collateral,
giving a wider range of collateral as opposed to tangible assets like
land or property often requested by banks. Now, it is gone beyond the
tangible assets. It means that financial institutions can also go to the
collateral registry to see if the collateral has been pledged to
someone else. It makes it easy because we find people using an asset as
collateral in one bank and using the same as collateral in another bank.
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