What is the equity percentage of the 11 banks that own CRC Credit Bureau?
Well, CRC Credit Bureau is owned by 11 banks. Dun Bradstreet and each of the banks own between 4 percent and 10 percent. The maximum is 10 percent, because the law regulating credit bureaux stipulates that no bank can invest in more than 10 percent of pay-up capital of credit bureau, and no bank can invest in more than one credit bureau. So, those are the two conditions. As a bank, you can invest in just one credit bureau. Secondly, if you are investing, whatever amount you are investing should not be more than 10 percent of the pay-up capital of that credit bureau.
We have the 11 banks spreading this amount among themselves. There are those that have 4 percent, there are those that have 7 percent, 8 percent and 9 percent, and that is their range of ownership. Dun Bradstreet has the highest singular share holding in CRC.
How successful has Nigerian credit history been
In the last 3 years, we have redefined the process of lending in Nigeria. We have redefined the process of risk management in the country. As we speak now, there are 170 institutions that are using the credit bureaux, and CRC Credit Bureau leads. These include all the commercial banks, all the merchant banks that have just been licensed, about 60 micro-finance banks, some corporative, all the discount houses, leasing companies, insurance companies, hotels, travel agency businesses, and all the development banks.
These are institutions that have seen the value of sharing information among themselves, and the number is growing every week. That is one thing. There has been an acceptance, we have succeeded in persuading the Nigerian lending industry to see that there is beauty in sharing information. Secondly, what this has done is that it has crowded out serial defaulters in the Nigerian lending landscape, so, hardly will you see people able to take money fraudulently from one bank and go to another bank for loan.
Thirdly, quite a lot of dullers who have abandoned their accounts have come back to pay what they were owing or to negotiate. Because with the availability of information sharing among lenders they discover there is no where to hide anymore. But much more important for me is that this process of infrastructure sharing has enabled genuine borrowers to begin to have access to credit, even without serious collateral because they now rely heavily on their own credit history.
It will also give me the opportunity to also negotiate their rates. So, instead of climbing uniform interest rates on every borrower, banks are now able to stratify interest rates. You get interest rates based on the perception of the risk element carried on you. The riskier you are the higher the interest rates and the more the collateral they ask you to put down for them to support your application for borrowing. Quite a lot of people now are getting money just relying on the underlined transactions, and then of course their pedigree as good borrowers. Those are part of the things that we have achieved in the market.
Before we came into the market, the Nigerian financial system was not used to trusting themselves with information about their customers, but that has become a thing of the past. We have seen the beauty of sharing information, we have seen the beauty of being able to develop new products, so we have now financial institutions, banks that have now reintroduced consumer loans, they have introduced SME desk. We have institutions whose main loan is just on retailers and consumers. We have some institutions like that in Nigeria, because now they have seen that there is appropriate infrastructure to enable them lend without losing their money.
What is the value of the three credit bureaux in the country to the nation economy
Well, the major contribution I would say is not in terms of naira and kobo. We have prevented moral hazards, and have prevented information asymmetry. Those are the two critical things that a credit bureau contribute to an economy, and we have delivered on those mandates. Ensure that there are no more hazards, ensure that those who are not suppose to have access to credit will not have access to credit. Assist lenders to be able to give loan to the right people. That’s the accomplishment that we have. Ability to ensure that the right people are not denied access to credit and the wrong people are not having access to credit.
You said from your activities so far, you see borrowers coming back to negotiate their loans and some of these loans have been written off by AMCON. How are banks relating these non-performing loan with what AMCON has taken over
It is like an income that has been forgotten; it becomes easier for them to put back these loan repayment into the books as extraordinary income. Really, if you have written off a loan it means you have made a full provision and you are not expecting thing from it anymore. Suddenly, they come back and pay. That becomes 100 percent income to you, and you take that with full hands.
Looking at the number of financial institutions backing you, does this translate to a very huge business for you
The credit bureau infrastructure to companies is very new, the concept is new, the values they bring to the economy are new to Nigerians, they are new to lenders, they are new to our stakeholders. So, it has taken a lot of time to educate Nigerians on the value that we bring to the table. In terms of numbers, it has been very low, but in terms of the value given to every institution that comes across us it has been very tremendous. Personally, we have received commendations; we have received thank you letters. So, you can’t measure our performance or contribution from the perspective of just profitability at this stage, but for the fact that we have changed the way lending is done in Nigeria, it’s going to keep on getting better.
What is your position vis-à-vis the cashless policy
Cashless policy is what everybody should embrace. It is in the interest of Nigerians and the economy. Nigeria is still being classified as a factor-driven economy, which means we are still like in the primitive age. We need to move from there. If Nigeria says it want to be in the 20 top economies in the year 2020 and you are still doing cash-and-carry kind of transactions, there is no way you can be there. For us to move from factor-driven to a knowledge-based economy, you need to do certain things, and part of it is that transactions relating to settlement of obligations must be made electronic as possible.
We are in the service age, IT is ruling the world, so this idea of carrying money from one place to another should be discouraged. Once you do that, it has tremendous benefits on the economy. The first thing is that, it enhances the efficiency of businesses to transact trade, and then it brings down the cost of doing business. Your safety is enhanced as individual, and as a nation, the security is enhanced because attacking buses on the highway, burgling homes, all of that will reduce.
Much more importantly, it will open up our economy to credit eventually, because once you have a credit card it becomes easy for banks to give you access to more credit.
Don’t you think that will encourage more indebtedness
I don’t think so. The reality is that we have not known any serious economy that has made progress without a sound credit system. You need it.
What is the importance of rating
Well, there is one thing it does. It puts you into perspective, your ability to honour your obligations and the level of risk that people can have on you as a company or as a state. Rating looks at everything – your governance structure, looks at your revenue base, looks at your liquidity, looks at those who are governing you and at your ability to fulfil obligations. When you put all these together, it assigns a figure. That figure can be an A, B, or C, even a D. The higher it is the better for you. If it is an A that means that you are able to meet your obligations on time; that’s the perception with which you can attract extra funding.
If you don’t have a rating, it means there is no information about your ability to generate businesses or revenue and pay back. So, when you want to go to the market to raise money in form of true bond for instance, nobody contributes because there is nothing to show to them that this is your capacity. Rating is an instrument that is used to develop the bond market so that government, companies can raise more funds, as the general public rely on a third party assessment of your company, state, etc. Once that third party information is favourable, people will rely on it and bring money to the table for your use.