‘Nigeria overdue for a credit economy’

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Ahmed ‘Tunde Popoola, is the Managing Director/CEO, CRC Credit Bureau Limited, one of the leading credit bureau firms in the country. In this interview with Ibrahim Apekhade Yusuf he speaks on the many prospects and opportunities which a viable credit industry presents to the economy. Excerpts:

What informed the credit industry summit you organised recently?

CRC Credit Bureau Limited in association with Dun and Bradstreet Credit Bureau Limited organised the Relationship Managers Forum to be able to assist our customers who are basically the banks to improve on their capacity to have information. It was basically to bring the Relationship Managers up to date on the various tools that we have that can assist them to better dimension their customers. We’re in the era where the country today is going through a lot of challenges and part of the challenges relating to the financial service sector is the increase in the prevalence of nonperforming loans. It has moved up to around 13 per cent as we speak. Four years ago, it was just about three per cent. What has happened is that there has been a lot of default as a result of all manner of challenges. So this time around bankers need to be armed with critical tools that can help them dimension relevant information about their customers so that they can be well-guided on how to move forward in packaging credit and facilities for them. The second part we have realised is that the cause of the high level of nonperforming loans is about concentration of risks, that is bankers lending to just big customers, high level conglomerates, a highly disproportionate amount of money whereas we believe the way to go is about dispersing their risks. It’s about spreading their risks and going retail. By that they would have the opportunity to lend to more people and they would be able to make much more contribution to the Nigerian economy. That also would assist them to reduce the incidence of nonperforming loans by diversifying their risk portfolio. So this is the whole essence of the conference. We shared with them the necessary tools, the products that they can use to lend more to the retail end of the market and also to diversify their portfolio and reduce the concentration of nonperforming loans.

Credit management is still an emerging segment in the country today which is why the National Assembly is trying to pass the bill on the National Credit Bureau. To what extent do you think that Bureau would assist the development of the credit industry?

As we speak today, the credit bureau infrastructure runs on guidelines that came from the Central Bank of Nigeria (CBN). The guideline itself was a product of the powers that Section 57 of the CBN Act gave to the CBN to give guideline on the operations and licensing of credit bureaus in Nigeria. That document is not a sufficient document for us to have a robust credit bureau system in the country. A typical country that wants to maximise the benefits of credit bureau will have to have a legislation, which is an act of parliament and that legislation would have a lot of robust provisions that would take care of the interest of all the stakeholders. And part of these includes the rights, responsibilities and privileges of the lenders, the rights, responsibilities and privileges of credit bureaus and the rights, responsibilities and privileges of customers. Everybody will be guided by the provisions of that Act and it becomes something that can be presented in the court of law. As we speak today, borrowers generally don’t have some level of protection because the guideline is skewed in favour of the lenders only. But when you have a Credit Bureau Act, an Information Sharing or Information Reporting Act, which is the whole essence of the Bill, it spells out clearly their responsibilities. It spells out clearly what the lenders can use the information that they have, i.e. the privilege information that you’re having about the borrowers; it spells out what you can use it for and vice versa. And it also spells out what the customers can do in case they have issues around their report. So this is part of what we should be looking out for. The Act would now galvanise lending in the retail sector of the market. I also want you to note that lending is not just done by banks. No. There are quite a lot of other creditors in the Nigerian economy. In fact, Nigerians get more money from nonbank sources. And all of these are going to be put under that operation so that we can have a robust lending space. People go to retail shops to want to buy things and they should be able to buy on credit. People who want to use telephones and other means of communication; they should be able to use it on credit. But all of these must be guided by what we call the Act. So that’s what we expect.

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So in summary, you’re optimistic that the Bill would actually be a game changer of sorts?

Yes, it would address a lot of challenges that we have now in the lending sector in Nigeria. It would revolutionise access to credit. It would empower SMEs’ access to credit. It would improve retail lending. So it would boost lending to the small businesses and to consumers, who are the major drivers of the economy. And so the high concentration of the loans in the corporate and the big organisations we see now would be addressed hopefully by that Act.

With only about three credit bureaus catering for about 170million Nigerians, do you think there is a yawning gap for professionals in the credit management sector?

The fewer credit bureaus you have in an economy, the better for the users because they are repository of data. So if we have so many credit bureaus, then the data would be fragmented into so many organisations. The more you concentrate the data in one source, or limited sources the better for the economy. But if you fragment them, by having so many bureaus, then you’re fragmenting the sources of information and that would be very expensive for the users of the information because it then means that they would have to be looking for information in various sources rather than having them in concentrated sources. So that’s why it is not a good practice to have so many credit bureaus. In most parts of the world, there are countries that have only one credit bureau.  Egypt has only one credit bureau for instance. There are only three in Ghana, Nigeria has three, South Africa has three and so on. The whole of Francophone in West Africa have only one credit bureau. So the fewer the better in the interest of having opportunities for lenders to have access to the information they would need and the borrowers, especially since they need this information to be at a very cheap rate because if they have to go for the information in multiple sources it’s going to be more expensive and don’t forget, they would pass on this cost to the consumers who are the borrowers. And that can really be discouraging.

There is also the vexing issue of poor data gathering in the country. As a credit bureau how do you get around this challenge?

The credit bureau data mechanism is driven by people and technology and service. Those are the three things that are very important when it comes to the issue of data collection. So we need have to go deep down and work with every institution. First of all, we need to see the kind of data they have and in what way do they keep the data and how do we help them to clean up the data? And this is what we’ve been doing in the last nine years. When we started at CRC Credit Bureau, the rate of acceptance of data accuracy of the banks was just five per cent. In other words, for every record that the banks submitted, only five was good enough to be used and be shared among them. Today it’s gone farther than that. We’re working with all segment of the lending space. The banks have been sorted. At least all the banks have bought into the concept of data submission. They know how important it is to submit quality data because it’s the kind of data that you submit that dictates the output you’re going to get. If a loan is not performing and you submit a data that shows it’s performing, it’s going to come out as a performing loan. And that means you’re misleading the public and other lenders. So they understand that. We’re dragging it down to other lenders, especially retailers and other people who sell on credit on the need for them to have good data, good documentation because it has to start from there. It must be complete information. So that information must be complete, accurate and it must be timely. So those three things are very important for us to get very good data. If you go to an hotel, and they ask for your biodata Nigerians don’t give real information. We just want to put our names, some put incomplete information. But that would not help the hotel to have very good records. So the next time you want to go there, or want to lodge without paying cash, they may not honour it because they don’t have credible information about you. So my advice to Nigerians is, whenever we’re doing any transaction, especially with financial institutions let’s give correct information. We have instances where when you pool report on certain people they give different addresses to different institutions. Some give different means of identification to different institutions. That is one of the issues that the banking industry had and that in itself can also affect the way they perceive you when it comes to reviewing your application for credit. So these are basic things that we want to bring to the attention of the Nigerian public.

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How did you come into credit bureau?

CRC Credit Bureau was established in 2008. Before then, I was also in the banking industry. I left banking in 2005 as a General Manager and then moved to Abuja to help Mallam Nasir El-Rufia to set up the Abuja Enterprise Agency. I did that to get people stimulated into running their own businesses with all the capacity to be able to do that. But I saw this (credit bureau) as a very bigger opportunity to impact the Nigerian economy. So when I saw Nigerian banks coming together to have a data sharing platform, I knew this was going to be a game changer for the way we do business in Nigeria and this was going to put money and credit into millions of Nigerians from what they use to see. So I wanted to be part of that history and therefore I took that responsibility. And I can tell you it’s been very fantastic. We started with just about eight banks, but today, we have over 1, 000 institutions submitting data to us and using our platform. We also started with just one product which was Credit Information Report, which focuses on the credit history of borrowers. But today, we have developed so many other products including tools that can predict how customers can behave. We have tools now we can use to monitor all the portfolios at a glance. We have tools today that we call Credit Monitor and Alert that can tell them where there is a change in the status of the customer without waiting for the end of the month. We have a credit score that can be used to know the riskiness of every customer trying to access loans. Credit reporting aided by the credit bureaus remains a veritable tool to assist the financial and other related services companies. With a viable credit industry, Nigeria’s economy can be better structured and managed. This is the way all other economies that have progressed and have opened up the economy.

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