• Friday, September 29, 2023
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Nigeria lags in retail banking as only 2% can access credit facilities

Nigeria, the most populous nation in Africa, has a herculean task before it to speedily expand its retail banking market as report shows that the country is lagging behind with only two percent of its population having access to credit facilities and less than 10 percent of these facilities available to consumers and MSMEs. Ridiculously low numbers compared to other emerging economies.

Miguel Llenas, managing director and CEO, Dun & Bradstreet Credit Bureaus, based in the Dominican Republic said that Nigerian banks need to stop focusing on offering credit facilities to public sector clients and a few corporate which constitute only about two percent of the entire population, and start lending to consumers and Micro, Small and Medium enterprises (MSMEs) which are the thrust of any economy.

However, Indonesia provides 18 percent of its banking sector credit facilities to consumers and MSMEs while Brazil has grown to 33 percent and South Africa far ahead of them all at 45 percent.

Speaking at the CRC Credit Bureau industry forum themed “Growth & Innovation in Retail Banking: Building Sustainable Business Models” held in Lagos on August 2, 2018, Llenas said; “you don’t develop a nation when you lend money only to corporate but to the people. Lending to small businesses that will engage in productive things that will grow the economy is more profitable than giving a $100million to a large oil corporation.”

Experts also advise that Nigeria adapts new global trends in credit scoring and to embrace the mandatory IFRS 9 reporting system in order to grow its retail banking market to be on par with other nations.

Peter Ould, Senior Consultant, EMEA, Fair Isaac Corporation (FICO) said technology and digitization is the way to go.

 “For efficient lending, automated processes to make decision in a matter of seconds and not days as well as the urgent need to make use of machine learning modules are very essential.”

Speaking at the Forum, Tunde Popoola, Managing Director, CRC Credit Bureau Nigeria Limited said that Africa’s retail banking revenue has been estimated to grow to US$ 53billion (about N19.08trillion) by 2022. The figure represents 41 percent of the total banking revenues in the region in the next four years with Nigeria, South Africa among growth drivers.

According to a 2018 African banking report recently released by McKinsey, the expected growth in revenues will come from South Africa, Egypt, Nigeria, Morocco, Ghana and Kenya.

McKinsey, in its report, noted that Africa’s banking markets are among the most exciting in the world as the continent’s overall banking is the second fastest-growing and second most profitable of any global region, and a hotbed of innovation.

“Africa’s banking revenue pools to grow at 8.5 percent a year between 2017and 2022, bringing the continent’s total banking revenues to US$129billion”, McKinsey said.

Popoola however expressed confidence in the future improvement of Nigeria’s consumer lending patterns.

“Following the enactment of the Credit Reporting Act, 2017 and our launch of a global scoring platform, it is expected that the value of consumer loan would grow exponentially,” he said.

Popoola disclosed that CRC Credit Bureau was positioned to help banks and other institutions successfully manage their retail lending business on a scale that enables exponential financial growth.

According to the World Bank, the future of retail lending is in embracing financial technology for financial inclusion. “Today and tomorrow belong to those who are able to play in retail banking. The drivers of any sustainable retail lending business model include digitization and data driven decisions” the World Bank said.