As access to consumer credit becomes a reality for some Nigerians, with more people expected to enjoy it in coming months, experts have reviewed how this would be a sustainable venture for all participants, OLUWAKEMI ABIMBOLA reports

Earlier in the year, President Bola Tinubu announced the launch of the first phase of the Consumer Credit Scheme, a programme designed to offer credit facilities to working citizens in the country.

A press release from the State House announcing the scheme stated that consumer credit serves as the lifeblood of modern economies, enabling citizens to enhance their quality of life by accessing goods and services upfront and paying responsibly over time. It facilitates crucial purchases, such as homes, vehicles, education, and healthcare, essential for ongoing stability to pursue their aspirations.

Through repayment, individuals build credit histories thus unlocking more opportunities for improved access. The increased demand for goods and services also stimulates local industry and job creation.

Experts and reports have also linked consumer spending to a nation’s Gross Domestic Product. It is believed that an increase in consumer credit often signals higher spending and economic growth. In contrast, a decline in consumer credit may indicate reduced consumer spending and a potential economic slowdown.

According to the Managing Director of CRC Credit Bureau, Dr. Tunde Popoola, credit penetration in Nigeria has risen to 14 per cent with 33 million Nigerians already having a credit score. While this figure is an improvement from over the years, it is still lower than that of the sub-Saharan African region, which stood at about 35 per cent.

In setting up the scheme to be executed through the Nigerian Consumer Credit Corporation, the FG highlighted strengthening Nigeria’s credit reporting systems, ensuring every economically active citizen has a dependable credit score as some of the goals with the score becoming personal equity they build, facilitating access to consumer credit like in western climes.

Last month, the Special Assistant to President Bola Tinubu on Social Media, Dada Olusegun, revealed that about 150 banks had expressed interest in participating in the lending ecosystem and that over 40,000 civil servants who applied in the initial phase would receive the first tranche of payment in weeks.

As the government moves ahead with its plans, stakeholders from the public and private sectors at the CRC Credit Bureau Finance and Credit Conference 2024 discussed the sustainability of credit financing in the country.

At the conference themed ‘Sustainable Financing Options: Innovations in Credit Risk Management’, the stakeholders revealed the challenges that they had had to deal with to achieve the level of credit penetration in the country and the work needed to be done to meet and surpass the achievements of countries ahead of Nigeria.

Providing a perspective from the small and medium enterprises side, the Director-General of the Small and Medium Enterprises Development Agency of Nigeria, Charles Odii, who was represented by the Lagos State Manager, SMEDAN, Olubunmi Kole-Dawodu, stated that credit financing was a challenge for SMEs, which if left unresolved would hinder the nation’s economic growth.

“In a day, if 20 SMEs walk into my office, 19 of them need funding for their businesses. I think that the financial sector is regimented. It is working on a template but if you ask me, we need a disruption and we all have to work together in it. Stakeholder engagement is key. Funding businesses is part of what drives economic growth and if we do not do it, we keep having issues with economic growth.”

A sore point for financial institutions when it comes to consumer credit is what happens after the loans have been advanced; recovery.

The Directorate Head, Lagos & West, Keystone Bank Limited, Helen Maiyegun, said, “Actual collection is the main issue for me. If I cannot get my money back whether it is digital lending or case-by-case lending, I have no incentive to go in there because I know it goes directly to my bottom line.

“There should be a lot of caution because what I see and experience is that you don’t just get some of these monies back and what I see is financial irresponsibility (on the part of the borrowers).  If you want me (banks) to do this business well, there must be agencies that can help me collect money outside of going to court because that is typically where it ends.”

Still from the perspective of the financial sector, LAPO Microfinance Bank seems to have cracked the code of collection despite facing similar challenges.

Representing the Managing Director/CEO of the bank, Cynthia Ikponmwosa, the Head of Credit Rating, David Osadolor, revealed that the bank often reviewed its processes and thought of innovative ways to recover the loans.

“It has not been easy. There have been challenges on how to get these monies and that is one of the reasons we have identified that the credit penetration is very low. Ordinarily, financial institutions would not want to throw away money because of credit risk.

“We need a lot of data to assess the willingness of a customer to pay. Yes, CRC provide us with data on how to advance loans but some of these customers do not have data on these platforms and that is because some of these institutions do not subscribe. We have been using these platforms to assess credit for customers.

“Irrespective of this, customers still default, which brings us to a point on what measures we are going to deploy to recover the loans. We embark on one-on-one engagement with customers, leaders for those of them in groups and that has helped us as an organisation to get these monies back,” he disclosed.

Throwing more light on the risks faced by lenders, the Head of CRC Data Analytics Division, Demola Adesalu, noted that lack of enough information to make lending decisions was a challenge.

Whether this was for deciding on a first-time borrower or a returning borrower, the concerns were the same. Extending beyond the lending decision is the ability of the consumer to repay the loan.

The expert stated that with the solutions that CRC Credit Bureau had been able to produce over 15 years, financial institutions were better able to make lending decisions and recover their loans based on the consumption pattern of the customers.

He highlighted the fact that there was a correlation between a customer’s spending pattern and their financial status and a correlation between their spending pattern and how financially responsible they were.

Still, on loan recovery, Adesalu remarked, “There are two categories of defaulters. Some default because things went bad for them, then some want to deliberately defraud the system. We have technology and controls in place to address those.

“Between January and now, the economic conditions have affected so many people and changed the dynamics of their lives. There are proactive approaches to managing collection if you use the data we have in the bureau plus the data generated by your teams. You can predict and likely know when someone is going to get to a leverage position and start defaulting. That may help a little bit.”

Bringing the gender perspective to the conversation, experts posited that women perform better compared to men when it comes to repayment of loans.

Maiyegun provided some practical examples; “Females have a higher rate of loan repayment. Indeed, when men owe us, we look for their wives, especially when they have a property and that is where they stay. Just write and deliver the letter to the woman and the man will come the next day to discuss how to pay the loan.

“That is why banks are talking to women, international organisations are talking to women to fund and empower women. When you empower women, you are empowering the nation, taking away poverty and such and at the end of the day, you get your money back but then you have to do business with everyone. We are talking about financial inclusion regardless of gender and financial status.

“I want to deal with those who can pay my money. When I was reading about the national credit scheme, it said working Nigerians, we want to bring 50 per cent of working Nigerians into the scheme and I want to know how we define the working Nigerians. The vulcaniser is a working Nigerian, the employee is a working Nigerian, so how do you now define a working Nigerian.”

She maintained that the players in the Nigerian financial sector were looking for those that they could extend credit and would be able to pay back.

A key point to facilitate an improved credit penetration that the stakeholders agreed with was the adoption of the National Identification Number, which the founder and Chairman of Proshare LLC, Olufemi Awoyemi, who moderated the panel, said would resolve data concerns and boost the confidence of lenders.

“The NIN is not as structured as the one in Canada, the NI in the UK or the SI in the USA because that is all you need and everything else is built around it. Nobody needs your other details; you are not supposed to share your other details but we all listened to the last panel on cybersecurity. If we are aiming to build on this. Everyone in the industry must know that its survival is pinned on the ability of the government to get the NIN right,” Awoyemi elucidated.

In his keynote address, the Group Managing Director of FirstBank Nigeria, Segun Alebiosu, represented by Patrick Akhidenor, affirmed that the country indeed to review its systems when it comes to consumer credit and adopt fresh measures.

“We require a new thinking to address the challenge of low access to credit. We have been confronted with the reality of poverty, low purchasing power and economic access to opportunities. Our financial institutions have been confronted with an insinuation of not being healthy enough to achieve the national objective of financial inclusion and economic aspirations despite successive governments. Yet, financial institutions are doing a lot in their individual and collective domains.

“The fact is that the Nigerian financial institution cannot operate in isolation. With the challenges of social infrastructure, insecurity, low purchasing power and a high rate of youth unemployment, we face a challenge in mobilising resources to support the growth of our economy.

“The prosperity of Nigerians is hinged on access to credit for production and consumption. We do not need in any way to reinvent the wheel. We only need to deepen what is working for us and adapt what has been tested elsewhere,” he concluded.

Despite these challenges, the Nigeria Consumer Credit Corporation is on a mission to accelerate consumer credit access to 50 per cent of working Nigerians by 2030 and it aims to do this by fixing the structural barriers to accessing consumer credit in Nigeria and catalysing the market with capital, guarantees, and policy.