• Saturday, April 13, 2024
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Mutual Benefits backs Infrastructure Bank with credit bond to boost lending


Mutual Benefits Assurance plc is providing credit bond to customers of Infrastructure Bank, formerly Urban Development Bank to enable them access facility for asset acquisition and infrastructural development.

Credit Bond which many financial institutions including insurance banks fear to touch because of its high risk sensitivity; Mutual Benefits say has become one of its cash cows, which assists transporters have access to Public Mass Transit Revolving Fund (PMTRF) set up by the Federal Government.

Credit insurance is the use of a financial agreement, usually a credit derivative such as a credit default swap, total return swap, or credit linked note, to mitigate the risk of loss from default by a borrower or bond issuer.

Akin Ogunbiyi, group managing director, Mutual Benefits Assurance plc said the company opted to provide the cover after, realising that many financial institutions were running away from the risk.

To encourage the patronage of locally manufactured mass transit buses, the Federal Government had dedicated N15 billion, to be drawn from the Infrastructure Bank at zero percent interest for access by operators of Mass Transit Services in the country, for the specific purchase of these buses.

He said the fear of default in repaying the loan by some recipients forced Infrastructure Bank to request for credit bond from either banks or insurance companies.

Due to the risk involved, however, Ogunbiyi pointed out that neither the banks nor the insurance firms are willing to provide the needed guarantee, hence his company’s decision to provide the credit bond.

“When it comes to value creation, which insurance company are you aware today that does credit policy or credit bond? Nobody does it again. We are not risk averters in Mutual Benefits, we are risk takers,” Ogunbiyi said.

According to him, the government was trying to boost transportation in Nigeria when they set up the Infrastructure Bank.

“When they give out buses, they say go and get credit bond, from either banks or insurance companies. The banks did it one, two, three times, they got their fingers burnt. No insurance company will touch it. I looked at it and said how can insurance companies be running away from this?

We came up with a solution and we presented that solution to the bank, and we worked on it for six months together, we perfected it, and today, we created a first of its kind credit policy which actually allows the bank to function and fulfill the objective for which it was set up by government,” Ogunbiyi said.

“The new goal of the company is impacting development and growth of Nigeria’s economy through creating dynamism, partnership and of course, empowerment.”