Managing Director and Chief Executive Officer of CRC Credit Bureau, Mr.Hammed Tunde Popoola , in this interview with Correspondent, Nkasiobi Oluikpe, he speaks on the crisis besetting the nation’s financial sector and proffers way out. Excerpts:
Tell us a little about your company?
CRC Credit Bureau is a credit bureau established to promote responsible lending and responsible borrowing.
We gathered information for all the borrowers .We have partnership with all the Nigeria banks, including Bank of Industry, Bank of Agriculture, Federal Mortgage Bank .
We bring all these information together by creating one statement for every individual, and for every company about their credit worthiness.
The objective of a credit bureau is to determine the willingness and the capacity of a borrower to pay. When you have an overview of the borrowing of the borrower of a creditor, it gives you an opportunity to know the performance of the borrower.
One of the reasons why Nigeria is a less cash base economy is because we didn’t have credit bureau. Before now, the bankers and other major creditors do not know how to deal with borrower because they lacked knowledge about individuals ability and wiliness to repay loans given to them..
But when you have a credit bureau, the credit bureau collect all information about the creditors from all sources .It is not just about the banks, but If for instance ,I am enjoying a post paid service for my telephone, then I am a debtor.
A credit bureau brings all of these together so that people and institutions can see who you are really in the real sense of it. What that does for them is that it enables them to assess you properly in terms of handling cash.
Secondly, it enables them to do what we call risk base pricing to be able to know if the loan seeker should be granted full loan or not.
Our objective is to promote information sharing among lenders as well as enhance accessibility to loans and credit for the Nigerians population.
Credit bureau all around the world is a prerequisite to have a deep credit system in any economy.
Do you facilitate loans on behave of individual of organization?
No, our own is to provide information to enable inform lending decisions.
What are the prospect and challenges of this business?
The prospect is that Nigeria, like a virgin land would in both long and short run stand to benefit when it comes to credit lending. You will agree with me that the rate of credit lending going on in Nigeria, especially informal sector like banks, micro finance banks, the mortgage institutions is very low.
As we speak today, credit lending or credit penetration is less than 50 per cent of the Gross Domestic Product (GDP), because Nigeria is still a cash and carry economy.
There are lots of opportunities for the market to open up. We have to be the driver of deepening the credit system in Nigeria and the way that is going to happen is that as the lenders begin to have confidence on the kind of information that we have they know that when they come and they see your name and whatever they see reflect the true position of who you are when it comes to credit, then the more that they will take advantage of the system.
It is on record that before now hardly would you see banks doing credit card or lend to SMEs in Nigeria, but today’s we have various number of banks having SME desk to give loans.
There are various banks doing retail loans, especially through credit card and some others loans. Some time ago, one of the banks partnered with major auto dealers so that a lot of people can begin to have access to riding new cars. That’s the kind of things that we are promoting in Nigeria.
We are able to do that now because we have credit bureau in Nigeria. The prospect is high and it will keep moving.
Our objectives is to fill the credit system in Nigeria, assists the lenders to be able to have opportunity to take inform lending decision and ensure that creditors generally do not need to sit down with you face to face to be able to avail you credit and enhance automation of credit process .
Our job is also to ensure that we bring down the high rate of interest that lenders enjoy and borrowers pay.
In every interest rate you see in Nigeria most of the interest rate they charged there is a premium charged base on the risk that they think they are taking, even though they think they are not taking big risk because this person from his behaviors in the past will always fulfill his obligation that rate will come down.
Finally we also want to reduce the incidence of relying on collateral for people to have access to credit; we want consumer loan to be based on character, responsibility, ability and wiliness to pay. This can only happen when a credit bureau is in place and be able to give you credit history of consumers in economies.
Could you please, throw more lights on your challenges?
We have many challenges just like much other business.
First is the data issue. How do we know the identity of people? The issue of not having a unique identification is a major challenge that credit bureau is facing in Nigeria and we need to seriously address that.
We need to address the issue of infrastructure especially power. A bureau rely on making access to their customers 24/7 if they must have access to the data throughout the day, weeks and months it then means you must be on all the time.
Another issue is that most of the lenders don’t capture basic information that you want to see. If you go to a bank now they ask you to fill your name, address, date of birth and means of identification .You may probably leave out any fill anything you like which may not reflect your person, the validation of such information the population of it in the first place and the validation of what the lenders have collected from their customers is a huge challenge to us.
What is your take on the recent threat taken by the Central Bank of Nigeria (CBN) to publish names of bank debtors in the country?
We have mixed feelings on the decision taken by the apex bank. It is unfortunate that we are getting to this level because once you borrow it is compulsory that you must repay, and if you do not repay, then it means that you are denying some other people the opportunity and also denying the bank revenue that they should earn from that money.
Banking is about intermediation and collection of deposit from people and giving it to you as a borrower so that you can be able to use it.
We have to avoid a systemic collapse of the system. We have seen how that happened in the past that caused collapse of some banks. What makes a bank to fail is poor governance and risk assets; once the risk assets is bad then they are unable to service the obligation then that’s the end of it all.
I think if that is what to get people to pay I don’t have objection to it. I also think that banks should avoid risk concentration because they need to diversify their portfolio to various customers.
One of the reasons why we are where we are today is that only few people or few institutions have access to the large chunk of the loan that we see in the system. If you look at the highest 300 borrowers in Nigeria, they probably account for almost 70 per cent of the total loans of the industry and they take loans factually from all the banks.
I guess the banks should come up with pragmatic initiatives that would make them to be able to lend to consumers and SMEs
As at end of 2014 the level of non -performing loans to total loans was 4.5 per cent. It moved from 3.6 per cent that it was in 2013.
I think that’s what is creating panic that we have seen in the market ,but if we are not careful some of these loans are going to be bad loans again, and we may have some problems in our hands.
The benchmark for the CBN is 5 per cent and we are still not yet up to 5 per cent. We are still a bit comfortable compared to what we used to have in early 2000s when the level of nonperforming loan amounted to total loans was about 20 to 30 per cent.
It is nothing compared to what we used to have, but it is good to put things in place now to make sure that we don’t get to where we have to be setting up another AMCON to be buying toxic assets from banks.
What do you think will be the implication on economy now that the apex bank went ahead to direct the publishing of the names of bank debtors?
I don’t see negative implication now that the banks have published the names of the debtors other than the fact that it would facilitate improvement in repayment of loans because debtors would struggle to remove their names from that list.
I also think that it may continue to create level of litigation in the system because some have gone to court to contest the amounts and the terms of those credits.
That may slow down some activities in some places but I don’t see that affecting the generality of the economy. The economy as a whole I think it will end up to be something positive, though it is an unusual things to do, but the money belongs to the banks and if they have taking all possible means and those borrowers are still not paying then, there is a problem and we have to avoid systemic failure of the system.
Not doing anything at all means that things can get worst and then it can be a systemic issue and once the systemic issue. Don’t forget that the lenders themselves already have access to the exposure of the borrowers through the credit bureau; so is not about not doing what they are doing in other countries, but for the general public to know that these guys are not to be trusted.
What are your concerns about the dwindling state of Naira against US dollar?
The currency of a country relative to other currencies is determined by the country’s level of production and ability to generate foreign exchange. Nigeria currency is in crisis because of the fact that there is continuous decline in revenue from our major source of foreign exchange, which is oil.
If you are generating increased revenue from oil, the currency would automatically become strong, but if you if the revenue dwindles the currency will also decline. We shouldn’t look at this from a short run we should look at it from a very long run perspective.
What should Nigeria do to have a strong currency?
We need to get our export more to import and earns a foreign currency. We need to diversify our economy and stop relying on oil .We’ve been talking about this since Nigeria got independence in 1960 and it is time now to work the talk.
Then, how do we reduce the level of importation in Nigeria?
The central bank recently stopped foreign exchange to 41 items in order to reduce the demand for official exchange rate.
But that is creating another problem because these companies must survive. They will then look for the foreign exchange at all cost and that’s why you are seeing the gap. There is more transaction going on in parallel market and because there is more demand in the secondary market it goes up.
If we are not careful if the gap is so wide then you create another distortion, people will be buying from the official market at N198 or N200 and selling to that illegal market at N230/N240. So, it is still the same problem.
What do you think the CBN should do to avert this problem?
There is a limit to what CBN can do to keep on putting the Naira at the rate they want to put it. The apex bank may need to allow some level of movement for the rate.
In other words, official rate is artificial now. You need to increase the quantum of activities that can bring dollar to produce foreign currency; and it is not by just fiat, especially in a short run, otherwise these comapnies will go to parallel market to look for the money and that’s is not in our interest. We still need to allow the dollar to find its level to some extent. No economy in the world allows its rate to flow freely, but the CBN should allow some gap between the official rate and the parallel rate is very close.
The Nigerian capital market is still being dominated by foreign investors. What should the country do to reverse the situation?
The management of our economy should be holistically reviewed team. As we speak today, we don’t have an economic Blueprint, hence foreign investor take good advantage to dominate system. Don’t forget that foreign investors are looking for the best return all over the world; their resources will go to where it is guaranteed best return to investment.
Nigeria government needs to come up quickly with the needed BluePrint that would determine whether foreign investor want to come back or they want to go.
Source : Independent