Banks intensify credit push to costumers as Sept. 30 deadline nears

Deposit Money Banks (DMBs) are aggressively pushing credit to consumers in compliance with the directives of the Central Bank of Nigeria (CBN).

The CBN had given the banks September 30 as deadline for attaining a minimum loan to deposit ratio (LDR) of 60 percent, which was targeted at increasing credit to the real sector of the economy.

The LDR is a ratio between a bank’s total loans and total deposits, which is generally expressed in percentage terms. A high loan to deposit ratio means that the bank is issuing out more of its deposits in loans and vice-versa.

Some banks have unveiled to the public their loan portfolio plans, targeting key sectors of the economy, while some others are sending SMS to their customers for access to quick cash of up to N5 million.

For instance, one of the messages from a tier-one bank reads: “Dear customer, need cash urgently? Dial ….. to get QuickCredit of up to N5 million instantly. Repay, at 1.75 percent monthly. No collateral. No hidden charges.”

Polaris, a tier-2 bank, announced yesterday that it has launched a collateral-free salary advance solution, where customers can access up to 50 percent of their net monthly salary capped at N500,000 for a 30-day tenor or next salary date by dialling *833*12#. The service is available 24/7 on all telecommunication networks.

“FSDH Research has observed that many banks and other credit providers in Nigeria have recently begun aggressively pushing credit to their customers,” said Ayodele Akinwunmi, head of research, FSDH Merchant Bank Limited.

Godwin Emefiele, governor of the CBN, had at the last Monetary Policy Committee (MPC) meeting in July explained that the core role required of the banks is to act as financial intermediaries to provide credit to the private sectors of the economy.

“We give them incentives that when they lend to the SMES, private sectors, they will be granted certain dispensations to make them happy while failure to comply will result into taking 50 percent of the un-lent portion of their loans into the Cash Reserve Ratio,” Emefiele said.

The deadline for compliance to the directive is September 30 and after that the CBN will begin a month-by-month monitoring.

Recently, Access Bank plc unveiled its loan portfolio plans targeting education, health and technology after disbursing a total of N37 billion to Small and Medium Enterprises (SMEs) in 2018.

Fidelity Bank plc has disbursed about N17.9 billion to SMEs in the country.

“We talked about the funding; we also need to look at creating an enabling environment by the government, improving ease of doing business,” said Ernest Ebi, chairman, Fidelity Bank.
Sterling Bank has committed 10 percent of its loan portfolio to agriculture and further plans to strengthen the sector through its forthcoming Agriculture Summit Africa.

The MPC had at its July meeting noted the need to boost output growth through sustained increase in consumer credit and mortgage loans and granting loans to Nigeria’s SMEs.

To mitigate credit risk, the MPC enjoined the management of the CBN to de-risk the financial markets via the development of a reliable credit scoring system, similar to what applies in advanced countries, as this will encourage banks to safely grow their credit portfolios.

 

HOPE MOSES-ASHIKE