The banking sector thrives on loans. But lending without adequate information means lenders will be losing money. In this interview with COLLINS NWEZE, the Managing Director/CEO, CRC Credit Bureau Limited, ‘Tunde Popoola says credit bureaux are critical to banks’ survival. He says the sector provides full lending information that makes banks’ operations successful. Popoola says banks will now have to be more innovative, competitive and learn to begin to look at banking not as a brick and mortar kind of thing, but as services that have to be rendered.
What is your view on banks’ poor performance in recent times?
In the last few years, there have been policies on the way banks charge customers, and the way they acquire customers. You see that part of the challenge has been that there has to be value creation before a customer can be charged.
There are no longer free funds from customers. Banks also need to find ways to address their costs. The issue of cost has been part of banks’ fall in profits.
What are the roles of credit bureaux in the economy?
We enable financial institutions doing consumer lending to be able to take informed decisions. Ours is to ensure that nobody lends to anyone in the dark. We are to ensure that lenders are able to lend with full information at their disposal. So, without credit bureau, consumer lending cannot be successful.
Credit bureau infrastructure is a way of giving access to a mass of people to have access to loans. The same thing goes with mortgage loans. These are the kind of loans that go to individuals. You need to make sure that you are lending to the right people and that you are lending to the right segment of the population. You need to know about their pedigree as far as financial issues are concerned.
These are the roles that credit bureaux have come to play. So, we represent that link between the lender for consumer loan, and the borrower for consumer loans. We are at the middle. We provide necessary information to enable lenders give funds to the consumer.
The kind of information we provide include identification, current exposure-to know whether that person is already leveraged. We ant to know what has been happening to that person in the past one to three years relating to obligations, among others. These are critical information we bring to the table as credit bureaux. We remain the enabler.
That is why, the stage we are now, we will begin to see other non-bank financial institutions which are already approaching the credit bureau. That’s where the future is. People need information to be able to take decisions. We provide the information, without which, people will be lending in the dark and loosing money. Even as we speak, a lot of non-bank financial institutions are approaching credit bureaux to get data on borrowers because they are also lending.
The CBN has been advising banks on the need to use two credit bureaux in loan restructuring. Has that policy impacted on the level of businesses you do?
Yes, I think the CBN has done very well in the support they have given credit bureaux in Nigeria. I think they see the support from the perspective of value we bring to the table to enhance the management of risk management in the Nigerian banking industry.
Successive Central Bank of Nigeria Governors, have seen how important we are to the lending industry and they really have come out clearly in giving specific direction on what the banks should do.
Recently, there was another circular from the CBN that mandated that effective July 1, this year. It is an offence for any bank to grant any credit without consulting at least two credit bureaux. That is, without checking for credit information of that particular applicant or prospective borrower from the credit bureaux. It also warned that any bank that fails to submit credit information from at least two borrowers, will be treated as if that bank is making concealment of the information, and will be penalized under the banking and other financial institutions act.
There has also been some brainstorming sessions on how to enhance quality, get the banks to submit complete information, and what kind of information and comprehensive that information should be. The CBN has been able to organize meetings between credit bureaux and the banks.
These are the kind of supports we get from the CBN, and the implication is that it has deepened the relationship we have with commercial banks and the lending industry. They are taking us more seriously. This has created an upsurge in the request for our products and services on daily basis from the banking institutions.
Has there been any case of default from the banks and does the policy apply to all categories of loans?
The policy covers every transaction and amount. Even that circular said they should not give loans to those with delinquent facilities. They actually gave threshold of N500 million for commercial banks and N250 million for specialised banks. The policy was very clear in making cases for commercial banks.
Since that time, top management of banks have demonstrated their interest on what is going on between the banks and credit bureaux. That also has shown how committed the Central Bank is to making sure that there is success for credit bureaux.
What has been the percentage of increase in your transactions?
It has been very significant, I must tell you. We have got to daily threshold of usage that we have not had for a long time. That showed us that banks are taking us very seriously. So, that has led to significant improvement in relationship between us. We now have banks showing interest in collecting data, updating data. Even the ease with which they submit data now has increased.
Every bank should submit data not later than five days after month-end. The numbers of institutions that are submitting data now have increased tremendously.
What percentage of increase have you recorded?
It cannot be less than 25 per cent increase in the number of institutions and volume of transactions.
What is the competition in the credit bureaux market like?
The competition is very healthy. As you know, lenders are known. It is a market that everyone knows. What we are trying to do is focus on the formal market. They are the regulated segment of the market, which are commercial banks, merchant banks, the leasing companies, microfinance banks, primary mortgage institutions. So, the competition has been very keen around that area. So, we are competing for all these institutions.
But the issue has been how innovative have you been as a credit bureau. Can these people be able to access your platform? How long does it take them to be able to download information from your platform. What is the level of your relationship management? How easy is it for them to reach you, or for you to reach them? And again, the quality of your report and depth of information they get from your platform, which have to do with the quantum of information you have and the number of institutions that are submitting information to you. These are what constitute competitive edge for us at CRC Credit Bureau. For us, we have a much more robust credit information report that is rounded and comprehensive.
What else has distinguished you from the competition?
We have produced significant products to support our customers. It has made us stay ahead of the competition. We have prided ourselves as the market leader, and we are focusing on thoughtful leadership. We want to be in the mind of everybody. We have moved from just collecting information from regulated entities to non-formal sectors. So, you se some level of patronage from corporative societies, pharmaceutical companies, among others.
We also focus on institutions that are large in size, because they will have customers with multiple transactions. There is no key institution in Nigeria today that is doing lending, and is not in our platform.
We have seen high level of acceptance from these institutions. We now see people seeing value from what we are doing. We also get request from individuals wanting to know their positions. We also have level of lodgment of complaints for correct information that can tell you the volume of people making enquiries.
We have, because of high level of patronage seen less number of litigations. There is also more awareness. Before now, any small thing, people threaten us with litigation, but because of awareness they now know that there are processes to go through. You can now make formal complaints, if not addressed, you can report to the CBN, and if the CBN does not do anything, you can now go to court.
We have now seen an increase in number of enquiries, request for change from what they got from our platform. This has made our relation with lending institutions much more robust. Those are the kind of things we have seen in the industry.
The financial sector is now getting much more enlarged. We have seen technology companies like Paga, PayPal, doing businesses that were hitherto done primarily by banks. How do you see these impacting on the conventional bankers and their profits?
You know, we are in a very interesting phase in the Nigeria financial landscape. We came up few years ago, pursuing aggressively, what we called financial inclusion, where people will have access to formal financial services.
When that was done, the intent was not that everyone will go to formal commercial banks. Financial inclusion can come in different forms. Some through mortgage, some through, microfinance banks and some through the traditional commercial banks.
When you have deepened the financial market, every segment of the market will grow. Operators, new parctioners and new segments will come in. Part of them are those licenced to do telephone banking. There is now a non-bank credit card company, giving credit cards to customers, still they are not commercial banks. So, it is easy for us to conclude that will be taken from a segment of the commercial banks. No, it will rather deepen the financial system.
What I am saying is that all those efforts you are seeing are deepening the financial system. When the financial system is deepened, the banking industry will be the ultimate gainers. All transactions at the end of the day still go to the banking system. It is about money coming into the pockets of people.
It can come though different ways, credit cards, transfer, all manner of ways. People now have more choices to make. Before, access to financial services were said to be around 30 per cent. And we wanted to target 70 per cent, and it has moved to about 50 per cent.
This, current number is not just about those who lodged money in commercial banks. It also has to do with the people in Paga, PayPal among others. At the end of the day, what is important is that you want to send money to people, and you are able to do that, through whatever platform you will do that. Whether through your bank account, or telephone or whatever it is. If you able to do that, it may eventually translate to access to credit for you.
What does access to credit imply?
Access to credit does not mean that you have to get to your bank before you have access to credit. It also means that through all manner of devices, you can have access to credit. So, it is a beautiful thing, which should continue this way. And it will continue because Nigeria is at a threshold, we have interesting statistics to show. The rebasing of our economy has propelled us to be number one in Africa.
International investors now want to be part of what is happening in Nigeria. And so, you will see more of these initiatives from various part of the world coming to Nigeria. You also see more of these initiatives coming to Nigeria. Even telcos will now be performing mini banking services.
Banks will now have to be more innovative, competitive, and learn to begin to look at banking not as a brick and mortar kind of things, but as services they have to render.
So, all of these products, they have to find a way to introduce them, and get to the consumer and get to the market and get to their customers. So, if they are unable to get to their customers through some of these forms and processes, those banks will have to lose the market. But if banks are able to innovate, and device ways of seeing their customers not necessarily coming to the banking halls, but getting the services they need, wherever they are, then, they will be the gainer at the end of the day.
As we speak today, you may do a lot of banking transactions without going to the banking hall. You may even not visit your bank for a whole year based on the kinds of products you are seeing coming up from the banking system. If you want to send money to your children, or your parents, you may not need to visit a bank to do that.
And those means of transferring financial services will keep on expanding. Before now, when I wanted to send money to my children for their school abroad, I had to go to the bank to fill Form ‘M’ and all that. But it was through my laptop we did it last year. I did not leave my office. So, that’s the kind of things we are beginning to see. When you say you want to make a place, a financial hub, these are the kind of things you see.
Are we likely to see more of these firms in the financial sector?
Organisations like Paga, are all part of what we are expecting. More of them will come. We have those who are in the telephone territory. There are those in the credit card territory and they are not formal banks. They are being licenced by the CBN to be able to give credit to people using plastics even without having bank accounts. These are the things that will become the formal feature of our economy.
The banks now have to gain, not by charging customers more, but by having volumes of transaction from everyone. They have focus on volume and innovation for them to remain competitive.
Any bank that cannot innovate, and cannot move with the tide, will be washed away by the tide. So, as we move on, we see innovation, the banks of the future, are those that are innovative. They leverage on technology and highly skilled human resource. Those will be the differentiating factor, as we move into the future. Not even in early 2000, if you rely and brick and mortar kind of banking, you will be washed away. The vey innovative ones will take all your customers away.
If you are a bank that still wants to be sitting face to face with your customers, then you have already lost the business because everyone is moving into depersonalizing loan process in banks.
What roles for credit bureaux in the entire scenario?
Part of what you have been seeing is attributed to the fact that you now have credit bureaux in the economy. Six to seven years ago, no one will come to Nigeria, to do non-bank credit card operators. Because, how will you know the people you are lending to?
Our job is to enhance information sharing, so that credible people will have access to credit. So, in all of these, we produce access to information, be it banks, or non-banking institutions. Banks now have very credible means of getting information.