By Goddy Egene
Nigeria is trailing South Africa and other countriesÂ in terms of consumer lending asÂ only 10 per cent of its loans are forÂ consumer lending.Â This is lower than 45 per cent in South Africa, 33 per cent in Brazil and 18 per cent in Indonesia.
However, the signing of the Credit Reporting Act, 2017,Â into law on May 30 by acting President, Prof. Yemi Osinbajo is significantlyÂ deepening consumer lending in Nigeria.
Speaking in an interview with THISDAY,Â the Managing Director/Chief Executive Officer of CRC Credit Bureau Limited, Mr. Tunde Popoola, said the new law heralds significant phenomenon in credit reporting in Nigeria.
â€œOne thing that government has done and we must commend them is the enactment of the Credit Reporting Act. Before now, we did not have an enabling legislation that is providing cover for our industry. The Credit Reporting Act is just a very excellent way of support from government,â€ he said.
According to Popoola, commercial banks have notÂ been doing more consumer lendingÂ because tracking non-performing borrowers isÂ difficult.
â€œBesides, consumer transactions are too small and expensive to manage. There is difficulty managing millions of borrowers and nonperforming loans, fear of multiple identities and fraud. There is also the issue of wrong lending model lack of expertise, technologies and lack of unique borrower identity,â€ he said.
Popoola noted that apart from the Act, the Bank Verification Number (BVN) will equally impact positively on the level of consumer lending in the country.
â€œWith BVN, means of identification is becoming easier and easier and that is assisting the efficiency of processing data because we now can identify people with their BVN rather thanÂ with their names. Before, when inputÂ a name into system,Â so many people come up on the system. But today, if you use their BVN, only one name comes up,â€ he said.
The CRC Credit Bureau Limited boss added that theÂ FICO ScoreÂ recently introducedÂ into theÂ country will equallyÂ boost consumer lending.
â€œFICO Scores will know the risk level of every borrower and able to dimension whether it is good, excellent, average or bad. And with that, you can now have dimension of relationship you want to have with such an individual,â€ he said.
Popoola explained that introduction of FICO Score will change the face of consumer lending in Nigeria as it will give opportunity for financial inclusion andÂ Â private individuals who donâ€™t have opportunity will now have opportunity to borrow and also give opportunity to lenders to give loans to people who have credit worthy based on the information they will get from FICO.
He said that FICO Scores is a three digit scores that is between 300 to 850,Â noting thatÂ the higher it is the better the person is rated and the lower it is the higher the risk that individual is carrying.
â€œNo institution will give money to somebody with low scores. And once you have the scores (as lenders) you canÂ now decide to differentiate who youÂ want to lend your money to, whomÂ you want to give your product to and the kind of conditionÂ thatÂ you want to attach to suchÂ relationship between lenders and borrowers andÂ buyers of products and makers of products. Those who score between 700 and 850 are excellent people and such people you sell to them at very reasonable price or rate and probably without any condition attached,â€ he said.