The Executive Director, Investment Banking & Asset Management, United Bank for Africa Plc (UBA), Mr. Chika Mordi, has stated that the introduction of credit bureau into the Nigerian financial sector will help curtail the activities of those he referred to as ‘serial’ loan defaulters.
Mordi, who stated this last week in Lagos, at an event to formally announce the establishment of Credit Reference Company (CRC), noted that presently, due to the absence of credit information on banks customers, it is easy for fraudulent- minded individuals to obtain loans from different banks at the same time without the ability or intention to pay back. He, however, asserted that this will become extremely difficult for them when credible information is available on them, which the CRC is aimed at acieving.
CRC is being floated by nine Nigerian banks in partnership with Dun & Bradstreet (D&B), the world’s leading provider of credit information products and services, while Accenture, a global management consulting, technology services and outsourcing company, and the International Finance Corporation (IFC), the private sector arm of the World Bank, are supporting with technical and advisory services. The investing banks in CRC are United Bank for Africa Plc (UBA), First Bank of Nigeria Plc, IBTC Chartered Bank Plc, Guaranty Trust Bank Plc and Diamond Bank Plc. Others are Intercontinental Bank Plc, Standard Chartered Bank, First City Monument Bank (FCMB) and Access Bank Plc.
A credit bureau or credit reference agency is a company that provides credit information on individual borrowers. This helps lenders assess credit worthiness, the ability to pay back a loan, and can affect the interest rate applied to loans. The use of credit information ensures that interest rates are not the same for everyone, but instead are based on risk-based pricing, a form of price discrimination based on the different expected costs of different borrowers, as set out in their credit rating. Credit bureaux collect and collate personal financial data on individuals, from financial institutions with which they have a relationship. The data are aggregated and the resulting information is made available on request to contributing companies for the purposes of credit assessment and credit scoring.
Mordi, who also doubles as the Chairman, Business Track Committee of CRC, noted that it took three years of hard work on the part of all those involved to get the company off the ground. This according to him, was underscored by the desire to create a world class credit bureau for Nigeria which, he added, informed the decision to go after D&B, the world’s best provider of credit information. His words: “It has taken almost three years to get here. We had to convince a world class credit bureau operator to be involved. D&B are not only involved as technical managers but also as equity investors, who have an international reputation to maintain. And then, we faced the challenge of building a critical mass across the banks, bring in as many banks as possible to have a good fraction of the industry that is reflective of the number of clients.”
He said that the setting up of CRC is a commitment by the shareholders to help in the economic growth of the country, noting that credit bureau “has a very strong impetus of helping to grow the overall income level, to reduce poverty, to make Nigerian companies more competitive.” According to Mordi, “By its nature, credit bureau makes the environment more conducive for consumer lending, and when you have more consumer lending, it makes people have access to buying things that they don’t have to wait for years to save in order to buy them.”