Less Than 3m Nigerians Have Access To Credit Facilities- CRC Credit Bureau CEO

•Blames Poor Identity Management For Low Credit Penetration
Nigeria’s poor credit penetration over the years has been linked to the lack of a unique means of identification, as a result of which less than three million Nigerians have access to credit facilities from the formal banking sector
Tunde Popoola, Chief Executive of CRC Credit Bureau Limited noted this while addressing the monthly forum of the Finance Correspondents Association of Nigeria (FICAN) in Lagos on Wednesday, lamenting that the country’s credit penetration of just 11% at the end of 2018. The majority of Nigerians, he noted, seek self-financing of projects, relying on savings or help from family and friends, while others, including Small and Medium scale enterprises, seek alternative funding from informal sectors
Speaking on “Stimulating Economic Growth Through Improved Access to Credit,” he defined credit penetration as the level of credit to the private sector vis-à-vis national GDP, he said the level was abysmally low compared to sub-Saharan Africa’s 55%, or those of nations like Kenya, 28%; Morocco, 85%; Malaysia, 83%; Brazil, 62%; and Malaysia, 120%.
Easy access to credit, he noted, enhances the quality of life of the people, enables individuals to purchase things they need without necessarily waiting until they fully save before they can enjoy reasonable access to basic and good things of life like food, shelter, education, commuting, and other relative luxuries.
He noted that “many items from motor vehicles, to houses and even television, air conditioners, etc, are too expensive for most people to pay for all at once, with their own earnings or savings. With access to credit, effective demand is stimulated. And this propels increase in demand for goods and services. If the environment or the 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,” he stressed.
Popoola, therefore, challenged the Federal Government to intensify efforts at fast-tracking the realization of Nigeria’s national identity management project as a national identifier, lamenting that the current multiple identity systems in the country are not good enough.
Nigeria currently has four acceptable means of identification. They are: the National Identity Number (NIN), International Passport, Voter’s card, and driver’s licence, all of which Popoola noted are not open to every Nigerian. Even the Bank Verification Number unique identity introduced by the Central Bank of Nigeria serves the purpose of linking all bank depositors, it excludes those without bank accounts and so does not qualify to be used as a unique national identifier.
The CRC CEO explained that there is a correlation between the existence of a successful national identifier in a country and significant growth in credit penetration, as well as poverty alleviation. He recalled that India introduced its own unique identifier in 2009 and has done significantly well in the area of raising many of its citizens above the poverty line.
The low access to credit in Nigeria is evident, he continued, in the fact that only a few Nigerian consumers and SMEs enjoy credit facilities from banks, despite the over 37m micro, small and medium enterprises (MSMEs) in the country, representing over 96% of total businesses in Nigeria. While the MSMEs contribute about 49% to GDP and over 84% to non-agricultural employment, they attract just 5.3% of total domestic credit to the private sector.
Another sign of the significant disproportionate allocation of credit to different sectors in the country, he stressed, is the fact that those contributing the most are denied credit while credit goes to the sector with relatively little contribution to the GDP, such as oil and gas that received 23% of total bank credit in 2018, while contributing less than 10%. On the other hand, agriculture that contributed over 21% to GDP in 2018, got 3.8% of bank credit, the lowest for the period.
For him, a nation “cannot have (the commensurate) economic growth when its people don’t have access to credit, and they cannot have access to credit when the banks cannot uniquely identify the creditor.”
He also noted the need for the judicial system to ensure quick dispensation of justice to enhance confidence among litigants.
Popoola blamed the inability of SMEs to attract funding from the formal financial system on their failure to formalise their operations transparently and structure their business. Noting the huge quantum of intervention funds channeled by the CBN towards the sector so as to engender growth and generate employment among them, he warned that “no amount of intervention can replace market-driven solutions via policies and programmes that promote market initiatives.”
Popoola, however, noted that the birth of credit bureaus in 2009, when the CBN registered three operators has been a blessing, changing a lot about the behaviour of bank customers. This he said, is responsible for the drop in the ratio of Non-Performing Loans in the Nigerian banking industry over the past 10 years. He noted that because banks are required to check with credit bureaus before extending credit facilities, industry NPL has fallen drastically from 32.8% in 2009 to 9.3% at the end of 2019, adding that in 2017, the ratio actually dropped to about 5%.
Since its inception in 2009, for example, Popoola said CRC Credit Bureau has successfully processed over 33m credit records, hosting data from over 1,500 client institutions cutting across all segments of the financial services sector, telecommunications, electricity. This array of clients, he noted, is served using 13 products tailored to meet their specific needs, even as it also undertakes to assign credit scores to obligors thereby enabling banks objectively and independently determine who should get loans and at what rate, depending on the score of the obligor.
Also, he said the company is working towards bringing informal financial intermediaries such as cooperative societies and money lenders onto its platform, thereby giving a better picture of the banking penetration level in the country.