The implementation new loan recovery guideline called Global Standing Instruction (GSI) issued on Monday last week by the Central Bank of Nigeria (CBN) may suffer setback across microfinance banks (MFBs) sub-sector of the economy. This is because not all MFBs are on the Nigeria Inter-Bank Settlement System (NIBSS) platform.
The guideline specified the roles of NIBSS, which is to execute the master GSI agreement between Participating Financial Institutions (PFIs). Also, NIBSS is to administer the back-end of the GSI services (utilising NIP protocols) where upon trigger undertakes balance enquiry, debit instructions on identified accounts, and completes the GSI operations by instantly transferring the collated funds to the borrower’s pre-designated repayment account in the creditor bank.
It is stated in the guideline that the creditor bank shall indemnify NIBSS and other Participating Financial Institutions from all liabilities that may arise from inappropriate use of the GSI infrastructure.
However, the National Association of Microfinance Banks (NAMB) is collaborating with NIBSS and other services providers to bring all MFBs on board, says Rogers Nwoke, national president of NAMB.
The latest CBN’s Financial Stability Report (FSR) published in 2019 showed that MFBs net loans and advances increased by 26.11 percent to N220.95 billion at the end of December 2018, from N175.20 billion at the end of June 2018.
The apex bank examination of the sub-sector revealed high incidence of non-performing credits (above PAR of 5%).
Nwoke is optimistic that if the guideline is implemented, it will help the sub-sector recover past loans from defaulters.
“It will when fully implemented. The only challenge now is that not all MFBs are on the NIBSS platform. Our Association is collaborating with NIBSS and other services providers to bring all MFBs on board. Our Microfinance Development Company is handling this,” according to Nwoke.
However, the initiative has been hailed as a much-awaited policy capable of sanitising Nigeria’s credit space and promoting economic growth and stability flowing from borrower-lender credibility.
This is as financial technology (fintech) groups and other lenders not yet captured in the GSI have commended the policy, seeing much hope in the sanity of the lending market.
Push for a system that would spread the net to harvest debtors across the financial industry was made in February 2020, when the Bankers’ Committee approved what they called the ‘Go-Live’ on the GSI aimed at facilitating an improved credit repayment culture; reducing non-performing loans in the Nigerian banking system, and do watch-listing of consistent loan defaulters.
The CBN in collaboration with stakeholders has just developed the necessary protocols to facilitate what many regard as a seamless implementation of the GSI process, including eligible loans granted from August 28, 2019.
One of the players in the industry, Ife Ibitokun, founder/CEO of BizNurture Financial Services Limited, told BusinessDay in Port Harcourt, in a telephone interview, that financial institutions and operators had looked up to this measure long ago, and the unveiling of the protocol was a welcome development.
Ibitokun, who disclosed that some operators in the online lending sub-sector were groaning under bad loans, said most borrowers move from bank to bank or from one lender to the other causing liquidation on their trail.
She stated it would be impossible for anyone to borrow and move to another bank to operate fat balances while the first lender was in distressed caused by non-performing loans from same borrowers.
She however hoped that the measure would gradually move from the regulated institutions such as regular banks and MFBs to the licensed financial solutions operators such as fintechs.
She said: “It is going from known to unknown, so we believe it is in the right and positive direction. It may get to all sectors of the lending space as time goes on. It is going to impact seriously on the entire spectrum of the payment services sector.”
The ex-banker admitted that borrowers from even the fintechs and from other lending firms might imbibe the impression that loans owed in one firm would be recovered from any other bank account, saying this impression alone would be capable of instilling sanity in the fintech sector not yet covered by the GSI.
The CEO of BizNurture also agreed it was possible that through collaboration, the banks could help fintech and non-covered lenders to recover loans through the Bank Verification Number (BVN) system.
Ibitokun started BizNurture from Port Harcourt because it was the region she said she knew. “I worked in Port Harcourt for six years and then left for studies for about one year to set up BizNurture as an online lending company that provides funding for SMEs in Lagos and Port Harcourt. When I got back, I saw there was an opportunity in the space because I had people calling me, asking about finance and funding. This was despite that I was away from the country for about 15 months. I turn on my phone and it would be the same issue of ‘we need funding, the banks are not funding us, etc.”
Now, she said the firm had given out about N1 billion in loans, admitting that recovery rate was higher in Port Harcourt than in Lagos. Now, with GSI, she hoped that even the Lagos lending space would sit up.
