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Key stakeholder in savings and loan schemes and the Managing Director of XDS Credit Bureau, Mrs. Mobolanle Adesanya has opened up on why many banks are no more granting credit facilities.
In an interview, she said “Most of the banks, for instance, are not even granting facilities, as they should because they know the economy is in recession”.
She said a few of them are trying to recover their funds from non-performing loans and ensure that they are reduced because the Central Bank of Nigeria (CBN) has a threshold that they can maintain in their books.
According to her, “If they are above those figures, obviously, it will have an impact on their bottom-line and revenue streams”.
“Some of the NPLs may have to be written off if after a while they exceed the threshold, which will affect their bottom line. If there is high rate of non-performing loans, they are not likely to pull report from credit bureaus. Before a loan goes bad, there are series of things that happen. It does not just go bad overnight.
“The first step before granting the loan is to get all available information about the customer. After the facility has been granted, it should be monitored. Banks shouldn’t just grant the facility and think that the customer will come back to pay. We need to monitor those loans so ensure that terms and conditions in the offer letter are followed.
On the impacts and activities of her group, Adesanya said Credit bureaus actually play a huge role in the financial sector.
“Initially, when the credit bureaus were established, the take-off was quite slow and the banks were not really taking it up as they should. That was when we were licensed in 2009. From 2009 till now, there has been tremendous impact of the credit bureaus in the financial services industry. The credit bureaus were set up because of the 2008 economic meltdown, which affected the banks.
“Now, most of the commercial banks have subscribed to credit bureaus and we check the credit history of customers before loans are disbursed. We are able to assess customers’ creditworthiness and exposure across board from the credit bureaus. What we have now is that before any bank gives out a credit facility, they check with the credit bureaus. When there is a customer who owes in another bank, they are denied the credit facility, not only based on what they find in the credit bureaus, but other criteria are considered by the bank. We have people now going back to banks where they owe money to see if they can repay or work on something else, so that they can grant that facility they are asking for from the other bank. That is one of the things we have been able to contribute to the financial services industry.
Continuing, Adesanya revealed that her group also help those involved in risk management to assess the creditworthiness of a customer before they disburse a loan, noting that “It is not only that the customer can repay the loan, but not overexposing the customer. There has been improvement from where we were before and where we are now. People are beginning to see our role as an important financial infrastructure to help them have access to credit”.