Can inactive bank account holders earn negative record and be flagged as bad debtors by credit bureaus even when they do not borrow from banks?

Financial institutions report all customers’ account in debit, at the end of every month to the credit bureaus to which they have data exchange agreement. And the law mandates each bank to have this relationship with at least two credit bureaus. Therefore, it does not matter whether the account is dormant or inactive or whether the amount was an authorized loan or not, as long as it goes into debit, it becomes due for the customer to settle it.

Frankly, a lot of bank customers are caught unawares because of this as they are denied credit on account of un-serviced accounts that have gone into debit and which, in most cases, they are not aware of. In some instances, the customers don’t remember that they had such accounts. Some have lost good and profitable business opportunities on account of been denied credit by banks because of this.

We have always encouraged bank customers to obtain their credit reports and do a credit check of themselves from time to time. In the first instance, every Nigerian is entitled to one free credit report in a year from each of the credit bureaus. I encourage bank account holders, especially those with current accounts, to always request for their credit reports.

Huge non-performing loans are threatening the banking industry and the economy. How much of banking sector failed credit do credit bureaus capture?

We do not envisage the collapse of any bank in Nigeria in the near term. The regulators, made up principally of the Central Bank, supported by the Nigeria Deposit Insurance Corporation (NDIC) are doing a lot of commendable jobs in supervision, regulation, stress testing and risk management. Nigerian banks are competing favourably in the area of capital adequacy and other parameters. Don’t forget that the Nigerian economy has just exited recession and going back to a positive growth phase.

Our observation was that the most affected sector during recession was oil and gas. Because they have huge exposures in foreign currency denominated loans, recession increases the level of non-performing loans of the affected banks. Since the Central Bank has achieved stability in the forex market, the worst scenario is over.

CRC Credit Bureau captures all credits in Nigerian banks because all of them are subscribers to our company. And the law mandates them to submit information of all obligors, no matter the amount and classification. So, we believe that our credit bureau has information on all loans in banks in Nigeria.

AMCON and NDIC are the custodians of bad loans taken over from commercial banks and dead banks in Nigeria. Both institutions report the bad loans in their custody to the credit bureaus.

How further away is Nigeria’s transition to credit economy?

Nigeria is so far away from transiting to a credit economy, yet so near. We are far because credit penetration is still low in Nigeria - among the lowest in the world. When an economy is cash-based, it limits consumption, investment and production as people can mostly purchase and have only what they are able to save for.

In a credit economy, consumers and investors are in the best of the world as consumers can easily enjoy items that improve their economic and social being, while paying for it over time. A credit economy inspires consumer effective demand, which then propels production and employment opportunities for factors of production.

Nigerian banking system still has high credit concentration with few customers accounting for a significant value of loans. Less than 2000 customers account for over 80 per cent of the loans granted by our commercial banks. Credit to consumers and small businesses remain insignificant in terms of value.

It is a shame that access to credit in Nigeria is still low, despite all the credit infrastructure available. And this is why I said that it is far, yet so near. It is far because credit penetration is still a long way. The fact that financial inclusion is till below 70 per cent implies that a lot of adult Nigerians are still not yet in the banking system. And you will access bank credit only if you are a bank customer.

Last year, Nigeria also established a national collateral registry that empowers use of movable assets like equipment, machinery and receivables as collateral. This means that SMEs don’t need tangible assets and landed properties to access loans. They can use their working tools to pledge and obtain loans.

Are the 5C’s of credit relevant in making right choice of political leadership in the country?

Well, the five C’s of credit refer to the basic factors a lender or creditor considers in appraising a borrower for the purpose of granting credit or enjoying access to a product under a deferred payment arrangement. Bankers, over the ages, have found a way of grouping these appraisal yardsticks under five conditions now popularly known as the 5C’s of Credit. These are the debtor’s Character, Capacity, Capital, Collateral and Conditions.

Character attests to the willingness of the debtor to repay loans and settle his obligations and it is always measured by examining how the debtor has performed in similar conditions in the past. Bankers believe that this is the most important test, among the five elements. This factor is also the most relevant in appraising a candidate for political office. Of all the five items, character seems to be the most important here and of course to the banker.

In Nigeria today, the banking system uses the services of credit bureaus to examine the repayment pattern of performance of their intending borrowers.

The 2017 National Credit Reporting Act lists the permissible purposes for which a data subject information can be accessed in a credit bureau. While it permits its usage for employment opportunities into a board of a corporation and for normal employment, the law does not indicate that it can be used to screen aspirants into political offices or appointments.

Today, nobody holds any strategic position in any bank in Nigeria as an executive management staff, executive director, chief executive or non-executive director without having a clean credit report from the credit bureaus operating in Nigeria. Many people have missed these strategic appointments because of poor credit report.

Consequently, to the extent that this is now used to appraise persons for board appointments, I am of the view that it should be extended to appointments in government. Screening using credit reports of persons for appointments as commissioners, directors, CEOs and board members into the public sector should be embraced. The significance of this is that, chronic debtor or fraudulent persons already captured by the credit bureaus cannot aspire to these strategic positions.

How do credit industry operators help the electorate to make appropriate leadership choices in 2019?

Unfortunately, financial services generally are a private affair between the providers (banks) and the consumers (their customers). It is difficult to subject transactions of individuals in the financial system to political consideration and evaluation.

However, if a bank customer refuses to pay a loan which has then been transferred to AMCON, I believe such can be used as good information by the electorate. AMCON is a public institution, funded by tax payers’ money. Furthermore, the Central Bank has directed all banks to publish the names and amounts owed by chronic debtors and loan defaulters in newspapers, every quarter. And the banks have been doing that for more than two years now. The general public or the electorate can use this information as a tool to appraise candidates vying for political offices.

https://www.dailytrust.com.ng/we-don-t-envisage-the-collapse-of-any-bank-in-near-term-popoola-262239.html