Popoola: Unique Identifier Will Improve Financial Inclusion, Reduce Poverty

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The Managing Director/CEO, CRC Credit Bureau Limited, Mr. Tunde Popoola, spoke to journalists on how availability of credit data is changing the face of consumer lending, the 10th anniversary of the company and how efficient identification system will reduce poverty, among other issues. Goddy Egene presents the excerpts:
Looking at when CRC Credit Bureau started operation 10 years ago, if you are to assess the ease of accessing credit how would you rate it. Also, these days you realise that with just your phone you can have access to credit, looking at that phenomenon, did the CRC play any role?

If you look at the ease of doing business ranking, one of the reasons why we were giving an award is because Nigeria moved to sixth position in the world in the use of access to credit in 2016- 2017 circle. So we clearly played a role. What role did we play? First we have a credit infrastructure that can give credit information.

Second, we introduce a credit score that is recognised internationally. And so the World Bank, who are those doing the ranking realised that Nigeria has transformed the way credit is processed and so Nigeria moved to 6th position in the world. That is what we have done. And I am saying that beyond the paper issue of moving in ranking, it is also the typical thing that people can see. Now, that everywhere you go you can really have access to credit if you are credible. You can really have access to credit without necessary having that big collateral of grandfather or grandmother. It is changing rapidly.

As regards the second question you asked, yes we are a major player in that regard. Why were banks not lending? They were not lending because they were lending in the dark. For instance, a lady as an individual approached a bank and you say I need a loan and the man looks at you and says this is beautiful lady and gives her a loan.

And then he gives you because of your beauty and you decided not to repay. That is what we call haphazard selection. Selection based on emotions, not on any profile. That was what is happening in those days. So, they made wrong judgement, people that they should give loan, they were not getting loans. People that should not get loans, they were getting loans and then there also incidents of serial defaulters. So that beautiful lady took a loan from bank A, she is unable to pay, she goes to bank B, takes another loan and uses that one to pay bank A. It continues like that. So all of that is not possible anymore because there is this infrastructure where you can see everything that is happening. Not just on the banking side even on non-banking transaction like telephone, electricity, buying ticket on credit and like what you are doing in your corporative societies. So it is a total life changing thing, and that is how we have affected what is happening now. So we played a major role in all the new products, in all the new models of granting credit that you are seeing now that makes it very fast for people to get credit.

Are you satisfied with the level of consumer lending we have now, If not, what can be done to further deepen it?
No I am not satisfied; we are not there yet. You still cannot go to the mall with your unique number and buy a product. You still cannot do mortgage loan, if you still have about 10 to 15 years to spend in service, you should be able to get a loan. You still don’t have that. We still have not gotten interest rate down to the lowest level that is affordable for people to comfortably take a loan. So, we are not there yet. We have actually just started because now the infrastructure has been tested people have seen that it is robust, it can be relied upon.

So how do we get more people to be able to have access to credit? How do we get people have access to credit not just for consumer product that we are doing now, 10,000 to 15,000, but also for productive assets that they can use to now produce and then stimulate their own prosperity? Those are the focus for us, that is what we will say we have achieved. So we want to make it easy for people to have better life from two perspectives, one perspective is get them opportunities to earn a living by getting access to credit to reproduce. And then get them opportunity to be able to consume what they need to consume. So you want an air-condition(AC), and you are living in a place that is not very comfortable, but you cannot afford an AC unless you save and it takes you two years to do savings for an AC. So when you have a credit you can but an AC and then change the quality of your life.

What are the bottlenecks you have experienced over the past decade you have been in operations?
I think there is just one major bottleneck that we have in this job of empowering Nigerians, and that is the bottleneck of the limited means of identification. Nigeria needs unique identifier. Every Nigerian needs to have a number by which we can identify the person. If we all agree that the future is about data, and we all agree that with data there is a lot that can be done to change the fortunes of the people from poverty to prosperity, then that data we will not be able to take maximum advantage of it unless we have a unique identifier for every Nigerian.

And I want you to get it right, unique identifier is not about holding an ID card. That is not what a unique identifier is. Unique identifier is to have a unique number, so once you mention that number, everybody goes to the data base and see who you are, where you live, what you do. If we have that, this economy can move faster. The issue around financial inclusion, poverty can completely have eradicated. I can tell you also that this particular project is what has changed the fortunes of India and China to where they are today. In 1980, China’s poverty rate was 75 per cent and India was 65 per cent. At that time Nigeria’s poverty rate was only 28 per cent in 1980. Today reverse is the case, in China and India, they have less than two per cent of their population now in poverty.

And each of those two countries has over a billion people. Now we have moved from 28 per cent to about 55 per cent to 60 per cent, more and more people in poverty, because we are unable to provide the basic needs of live for them. We are unable to empower them to be productive and be able to have access to what we call economic access to earn a living. So that issue of identification is what most countries have used to put any asset at the disposal of their people. And unless we have it, it is going to be very difficult for us to move forward.

Banks, retailers, whoever provide services is not going to be giving credit to people they don’t know. They will only give to people they know, and that is why you have to know people. In those days before the advent of credit bureau you have to know somebody who is introduced by your in-law or by your church or by your mosque before they can give you loans. But now we are getting there but we think that we can do more, we can move faster if we have a means of identification. That is one thing I think we have to work on, that is one major thing we are taking to government.

Persons that submit their data to CRC are they mandated by law to do so or they do it on their own volition?
There are two categories, the first categories are commercial institutions, all those institutions, licenced or supervised by the Central Bank, those ones are mandated to use the credit bureau. So if you are a commercial bank, merchant bank, finance house, micro finance bank or you are mortgage bank, they are compelled to use the services of the credit bureau. But there are quite a lot of other institutions who see value and want to expand then they will come to the credit bureau.

So telecommunication companies (telcos), electricity distribution companies (discos), retailers and the big multi-national companies, the Unilever, Nigerian Brewery, the travel agency businesses who sell on credit, the pharmaceutical companies who sell on credit, the corporative societies who grant loans to their members, Fintechs that do N10,000, N5,000 loans; these are institutions that are not compelled by law as I speak today, to summit data or to use the bureau but who have seen the value in it. And that is why we said the future, the days has not broken because where should we be going as a country? Where we should we going is for you to walk into Shoprite Mall and want to buy something and you can buy on credit. You should be able to walk into a hotel and use your credit card.

You should be able to walk to a mortgage institution and have a mortgage. Nigeria has a shortage of 17 million houses and if you want to build today you have to use your own savings to that. Nobody does that in any part of the world, they rely on mortgage finance. So those are the focus areas for us in the future and that is why we said that we can really use the bureau to transform or bring prosperity to the people. But that will happen only when people have unique identification number.

Still on the means of identification, I think that is what government set out to do through the National Identity Management Commission (NIMC) but they have had a lot of challenges. What do you think the government can do?

They need to put the infrastructure in place to make sure that as soon as possible everybody has that unique identifier. Now they have only 1,000 places in Nigeria to register for 200 million people in a country. That is something that we can improve upon. So, I want government to improve upon that and accelerate the access to where people can register because we have started that journey already, so how can we move faster, that is what we should be thinking about.

What roles have you played in tracking either the movement of your credit or defaulters in that category of institutions because we have seen some banks still talking about defaulters in the system and we have records of those who are still going there to get money?
In recent time when you look at it, you will discover that the only bank that is crying of default now is Asset Management Corporation of Nigeria (AMCON) and those are the historical loans. They also tell you that once they identify 20 people then they know who owe those debts. So the incidence of non-performing loans has really reduced substantially.

This system is not just about profiling customers, it is not just about making the institution to see the credit history and know the credit of the individuals. But it is also a social institution that changes the way people re-alert, because you know as an individual or as company that you have a bad loan that is the last one you will have, you will never have another one again until you go and settle the last one. So everybody now knows. And so we see ourselves not just as an economic agent, we are also a social institution that change the behaviour of people to honour agreement and to honour obligations. And that is why you have seen that clearly there has been some level of reduction, and CBN also keep on telling you that non-performing loan is reducing.

The second issue y is that it has democratised access to credit. More and more people are having access to credit. In those days you have 90 per cent to 95 per cent of bank loans concentrated on only few individual high net worth or big companies. But now every bank that I know has SME in it, SME department or desk. Every bank that I know now is trying to digitalise how to access credit, either through your phone, some even have USSD code that you can use to access these credits. So, all those things are happening now because they now have information that they can use to profile the customers. Some are even lending to customers, to people who are not there directly as long as they have information about them, they can lend to them. That is where we are in the country.

Looking at how important SMEs are in the economy and the need to grow that segment of the economy, how often do you engage these players in this sector?
CRC has its corporate social responsibility (CRS)project called ‘You and credit. And it is like a campaign that we take to all business managers, organisations whether it is Manufacturers Association of Nigeria (MAN), we engage them. We organise sessions. In fact every quarter we go to Fate Foundation, all those entrepreneurs and aspiring entrepreneurs, we talk to them about credit, how they can access credit and the evil side of credit, what not to use credit for. So we do all of that, that is the way we have engaged SMEs. And there are other stakeholders in the sector that also engage us whenever they are having sessions.

The CBN recently increased the loan to deposit ratio to 65 per cent. What for you is the constraint with people and SMEs, is it about the interest rate or is it that people don’t know how to access these credit?

Coming from what the CBN has done, the CBN ratio is all the infrastructure you need to lend, we have provided them. We have provided credit bureaus, we have licensed credit bureaus, we have a collateral registry where SMEs can even use the available assets as security. So why are you not lending to them? That is why CBN took that step. But it is a step that has just been taken it is less than six months as we speak. In the fullness of time, let us see where we are. Since they did it there has been astronomical growth in lending from what has been reported so far, and we also see a lot of more request on credit information on a lot of people that they have not done in the past happening now. So that is one direction that is seems to be working.

The question one should be asking is, is it sustainable? Should we be waiting for government to flog us before we comply with things? Wouldn’t the banks have seen the value in them hovering the market and looking for who is qualified own their own without CBN saying you must lend so, so amount of your deposits to them. So those are the kinds of conversations we expect to see at the 10th year anniversary lecture and public discuss. I don’t have answers to all of them but I know that the speakers from their perspective will give answers. But there are two things that I must say, one is that a lot of SMEs in Nigeria about 41 million of them do not have basic things that engenders lending.

So you need to prepare yourself if you want somebody to part with their money to give to you, you yourself need to prepare yourself. How do you prepare yourself? You need books of accounts; you need basic infrastructure like an office where we can even see what you are doing. Most of them don’t have that. A lot of them you cannot separate the business from the owners, the business money is not different from the owners’ money. So how do you lend? You give him the money, he puts it in his current account, the next day he has gone to Dubai. So how do you deal with that? So those are the issues, don’t forget this money is depositors’ money, it is not free money, it is not government money. Even if it is government money it should not be treated in a way that is wasteful. And I think that is the major issue that we need to do and I think the Bank of Industry (BoI) has been doing a lot in that aspect.

They even appointed business consultants to go and be looking for the SMEs and help to prepare them to meet all the criteria that the financial institutions want. So, I think with time we will get there, it is a bit slow but we can move faster. My message actually is to SMEs themselves, a lot need to happen. Because some people are not actually running business for posterity. They are just running it to be able to meet ends meet. If it is that you are running, it is difficult for you to get money, a business is supposed to be a going concern that will outlive you. That is why a bank will give you money for 10 years, 15 years. If they know that business will not outlive you they will not give you money for long term.

But some experts still believe that the loan to deposit ratio at 65 per cent is too high and may lead to non-performing loans, what is your take?

Well, yes and no. Yes, in the sense that if government says that for every N100 you have as a bank, N65 must be given as loans and you are only lending N30 now, which means you are forced to go and be looking for who to give the money to. So you can then make haphazard selection as I talked about. You can then eventually give money to wrong people. So, that fear is what made people to be thinking in that direction. When the banks finish giving money to good people, they end up giving money to people who are not good in order to meet regulation and that may be the undoing for them. That can now escalate to high level of non-performing loans. But I look at it differently, I look at it that in the long run it will be given out. So you can have here an appreciable increase in non-performing loans, later it will then stabilise. Don’t forget we said there are institutions in place now, so in giving me loan and I refuse to pay, I can’t get loan again. I will find a way to go and pay so that I can continue.

Because it is not just me that will not get access to loan as a business, even me as an individual will not get access to loan as the promoter of that company. And not just loans, electricity, telephone, all those other things that you are supposed to be enjoying, nobody will give you loan. Because like we are saying, we said we should be able to walk in anywhere and use your credit card and get loan. But if I check and I discover that your company is already owing somewhere, you can’t get loan. So in the long run it will level out. In advance countries, nobody talks about high non-performing loans the way we are talking about it because it is sacred. Your life depends on your credit history and your credit score. You maintain it, after your God, it is the next thing you make sure you manage. And you know what that means, it forces you to manage financial affairs to be discipline. To do only things that you must do, to avoid things you should not do, to make sure that when you have an obligation you try as much as possible to meet it.