In this interview with IFE ADEDAPO, the Managing Director /Chief Executive Officer, CRC Credit Bureau Limited, Mr. ‘Tunde Popoola, says financial sector has experienced increased lending
What is your view about the high level of non-performing loans in Nigerian banks?
It is an over bloated situation. When we started in 2008, the level of non-performing loans in Nigeria was high. As of the last analysis in December 2014, non-performing loans to the total loans was 4.5 per cent. I don’t consider that as excessively high.
Before the consolidation, it was about 30 to 40 per cent but after consolidation and the creation of AMCON, it went down because a lot of the bad loans were moved to AMCON. It started rising steadily to about eight to 10 per cent. It has come down to four per cent.
There could be various factors that cause bad loans in an economy. There are exogenous factors and endogenous factors; those factors within the control of the borrowers and those that are beyond them.
Can you be more explicit with these factors?
The factors that are within the control of the borrowers have been taken care of by the presence of the credit bureaus. The capacity and the willingness to pay are very important. We have been able to restore confidence in people.
Banks and creditors generally are able to establish the willingness to pay by checking the credit history of borrowers. And they are also able to check the capacity to pay by looking at the exposure that the borrowers already have before they take on new loans or engagements, to the extent that the creditors have information to determine the capacity and the willingness to pay.
It enables them to do more work on risk assessment of borrowers and debtors. That will mean that the possibility of granting people who ordinarily will not have access to credit has reduced.
We now have information and we are no longer lending in the dark. That is one of the reasons why the level of non-performing loans has reduced. That is not to say that there are no genuine cases of the capacity being affected by factors beyond the creditors’ control.
But many companies are still not doing well; how do they repay their loans?
There can be incidence of poor business performance and changes in cash flow projections. In Nigeria; the political situation, exchange rate, and a drop in the price of oil all conspire to affect the capacity to pay by borrowers.
The bureau is more useful for consumer and retail loans because the factors I have mentioned will not significantly affect those who are in the bracket. The loans are usually in small amounts. It is not as bad as it looks because there has not been an increase in the level of non-performing loans to total loans.
What we will see is that there has been significant increase in the total loans overtime. As we speak, we have about N22tn loans out there compared with N14tn between 2008 and 2009. The rate of the non-performance of those loans has also declined in terms of percentage not in absolute terms.
Bankers are able to do better job in risk assessment and in pricing of the loans because by knowing who are repaying and not repaying, you can measure your pricing around the risk you are carrying as a lender.
If someone has high risk based on the credit report, that person will have to go with high interest rate because if another borrower is known to be a low risk borrower because he services the loan as and when due, then that can make the price to relatively reduce.
CRC is five years now; how will you assess the organisation’s level of performance?
It has been an incredible journey since we went life in June 2009. We have had tremendous impact in the lending industry in Nigeria. We should start from the fact that when we started, we started with few banks submitting data to us. We started with about ten banks in 2009 and today we have about 400 institutions submitting data to us covering the entire banking industry, all the commercial banks, the merchant banks, all the discount houses, the special vehicle banks like the Bank of Industry, Bank of Agriculture, mortgage banks, and a number of microfinance banks, the leasing companies, and the primary mortgage institutions.
In the non-insurance sector, we have the insurance companies, the cooperative societies and pharmaceutical companies, tourism and hospitality companies, travel business and some retailers.
What kind of information do you obtain from organisations outside the financial sector?
They all submit information about their borrowers and sometimes, the information is about the receivables that are outstanding and people have refused to pay for the products they have purchased. That is the way it has been.
We have moved from 10 banks to cover the entire financial sector and to the non-banking institutions. The number of record has also grown astronomically to 10 million records as we speak, covering the consumers and the corporate in the Nigeria lending space.
When we started, the quality of data was very bad and even the level of acceptance by the banks was just about 10 to 15 per cent. Today, data quality acceptance has moved to about 98 per cent, which means virtually all data that are submitted to us get accepted because of the kind of support we are giving in terms of data quality to our customers. The interesting thing for us is that we are moving on to the utility companies.
For us, there have been a lot of changes that we have brought to Nigeria and the economy. If you look at the Nigerian banking industry today, you will see virtually all the banks going into loans for SMEs, retail products and issuing credit cards. All these are made possible due to our presence in Nigeria.
In terms of access to credit, it has improved significantly the number of credit that is available to retailers, consumers and SMEs in the economy.
Has the credibility of businesses improved over time?
We have received some appreciation letters from lenders, thanking us for our existence because a lot of borrowers have come back to them to pay willingly. Many borrowers have gone to do transactions in other places and discovered that until they pay up what they are owing that has become bad, there is no way they can get other facilities. That has helped the lending industry tremendously.
A lot of borrowers are now aware of the need to meet with their obligations as and when due. They need to have a clean record of repayment. We are also a social institution because we are not just out there to make money for our investors but we are a social institution in the Nigerian lending space that get people to meet their financial obligations and refrain from acts that can spoil their credit history.
There are three credit bureaus in the country; is there any need for more?
A credit bureau is a database and it is supposed to take data from various sources and for anybody who wants to use the services of a credit bureau to check for a subject or borrower, the person will have the probability that the credit bureau will have as many of the information needed as possible. If we have one credit bureau in an economy, it means everybody submits to that bureau and so creditors will check only one database.
However, when you have two, it means a lender can submit information to two credit bureaus. Therefore, when trying to check the credit worthiness of an individual company, the two bureaus have to be checked otherwise it will not be complete. Now that we have three in Nigeria, the lenders are being made to check on three platforms because if they check in one, the other two may also have information that could be useful.
For banks which are compelled to use the services of credit bureaus, the Central Bank of Nigeria has insisted that they must check on the platform of two bureaus for any credit application process.
The lesser the number of credit bureaus the better for the lenders in an economy and it is also better for the borrowers as well because if they have very good history, it is easier to point out the bureau that has their history. We have started with enough credit bureaus in Nigeria.
How do you assess the credit worthiness of those who have never collected loans?
For those who have not borrowed, they don’t have credit history and it is difficult to assess their ability to repay loan. That is still a gap and people are always encouraged to go for a loans, and then pay back to establish a credit history.
However, loans may not just be from the banking system because those who have enjoyed facilities in other places and have deferred payment, even though not in a bank, can have the information submitted to build a credit history.
If you are a member of cooperative society, it is good to encourage the society to submit their data to the credit bureau and for those who have been enjoying electricity with post-paid meter, not a prepaid meter system; it is good to encourage the Disco companies to submit such information to the credit bureau.
If you use post-paid services for your telephones, it is good that the telecommunication company submits such information to the credit bureau because these are legitimate borrowing which can count for you positively in creating your credit history.
Even when you travel through a travel agency and you have an agreement that you will pay over two or three instalments, you can ask the agency to submit such information to the bureau to build credit information for you.
In fact, we are going to the informal sector to collect data. We have a number of non-banked microfinance institutions who are very small lenders in their own environment because they don’t collect deposits but give loans informally. We are already collecting information from such institutions to get as many people as possible to have credit history