Moved by the need to significantly move Nigeria up in the world Doing Business rankings, the Credit Bureau Association of Nigeria (CBAN) has called on telecommunications companies, utility providers and other Non-Financial Institutions that provide services on credit to fully tap into the benefits of using the credit bureaus as enshrined in the recently signed Credit Reporting Act.
Mr. Tunde Popoola, the Chairman of CBAN made this call in Lagos and a press conference where he explained how “the Credit Reporting Act provides for credit information sharing between the Credit Bureaus and lenders such as banks and other financial institutions, and institutions that provide services on credit such as telecommunication companies, electricity distribution companies, Water Corporations and retailers”.
He said that while the Financial Sector has complied with the provision of the Act, by sharing information with the Credit Bureaus and using the credit reports from the Credit bureaus to determine the credit worthiness of their customers, most operators in the Non-Financial Sector are yet to fully utilise the services of the credit bureau.
Mr. Popoola however revealed that CBAN would in the coming months begin a series of sensitization programmes to enlighten operators in the non-financial sector on the Credit Reporting Act, the benefits of complying with the Act and how this would impact on the ease of doing business in Nigeria.
According to him, access to credit is critical to economic growth and could be considered to be the motor for driving private sector development adding that more often than not, credit applications get rejected due to insufficient credit history and information for the lender to use to make a reasonable judgement as to whether to extend credit or not.
He mentioned that in Nigeria more than 90 percent of private enterprises, Micro, Small and Medium Enterprises(MSMEs) have no access to credit or have very limited access. Citing the World Bank report, he said that loans provided by banks to the private sector are only 14 percent of Gross Domestic Product in Nigeria, as opposed to 149 percent in South Africa. To improve this, he called for adequate credit information sharing by all concerned.
Speaking on the benefits of Credit Information Exchange, the CBAN Chairman said “the exchange of credit information is vital for equitable credit distribution and reliable risk management. A consequential benefit of credit information exchange is that it deters borrower abuse of credit”.
He added: “One of the most important benefits of a credit bureau is that it is an underpinning for economic growth, employment generation, and wealth creation. With access to credit information, creditors have the confidence to disburse credit to more entrepreneurs and consumers. With access to credit, entrepreneurs can build or expand capacity and – along with consumers – spend more, thereby acquiring more goods. To meet demand for more goods, providers must expand productive capacity – oftentimes hiring new employees and/or increasing employment wages. Additional employee savings with banks provide more funds for lending to eligible entrepreneurs and consumers. This cycle leads to economic resiliency and wealth creation”.
It would be recalled that the Credit Reporting Act was signed into law by the Acting President, Professor YemiOsinbajo SAN, on 30th May 2017. The Act was meant to promote responsibility in the credit market by encouraging responsible borrowing, avoidance of over-indebtedness and fulfilment of financial obligations by all parties.
The Act would not only guarantee a more robust Credit Reporting System in the country, but it would promote financial inclusion and also improve credit information sharing between financial and non-financial sectors and ensure more solid platform for better access to finance for SMEs with more influx of Credit Information on Data Subjects.