Ime Akpan
The group managing director and chief executive officer of CRC Credit Bureau Ltd., Dr. Ahmed Popoola has said that low access to credit in Nigeria is practically demonstrated in various ways, apart from through credit penetration and credit bureau coverage.
Speaking as a guest at a forum organised by the Finance and Business Online Publishers (FiBOP) Association in Lagos, Popoola said access to consumer credit in Nigeria as well as credit bureau penetration had grown over the years.
However, he said the percentage “is still relatively low when compared with other countries.”
“Nigeria’s credit bureau penetration in 2019 was 14 per cent, compared with 30 per cent in Kenya, 25 per cent in Morocco, 79 per cent in Brazil and 83 per cent in Malaysia,” he said.
He explained that the low access to credit in the country is practically demonstrated in various ways, apart from through credit penetration and credit bureau coverage.
He said only few Nigerian consumers and SMEs enjoy credit facilities from Nigerian banks.
Quoting statistics, he said Nigeria could boast about 41 million micro, small and medium enterprises (MSMEs).
Also quoting a report jointly released by the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) and the National Bureau of Statistics (NBS) on January 12, 2022, the MSMEs represent over 96.7 percent of total businesses in Nigeria and contribute about 46.31 per cent to GDP and 6.21 per cent of gross exports during the year under review.
However, he said less than 5 per cent of Nigeria MSMEs have access to credit.
Furthermore, he said Nigeria has been characterised by significant disproportionate allocation of credit to different sectors.
Ironically, he said the sectors that contribute the most are denied credit while credit goes to the sector with relatively little contribution to the GDP.
“For example, while agriculture contributed over 21 per cent to GDP in 2018, the share of bank credit to agriculture was the lowest at 3.8 per cent.
“On the other hand, while oil and gas received 23 percent of bank credit, its contribution to share of GDP was less than 10 per cent. In addition, the cost of borrowing is very steep in Nigeria, and this serves as a disincentive to borrowing to a lot of businesses especially the SMEs,” Popoola said.
In appreciation of the challenge of low credit penetration, Popoola said both the government and creditors, especially financial institutions, had taken a number of significant actions to address the situation.
The initiatives include the establishment of many specialised banks including the establishment of Bank of Industry (BoI), 2002; Bank of Agriculture (BoA), 1973; Nigeria Export Import Bank (NEXIM) in 1991, Development Bank of Nigeria (DBN), 2011; and Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL), 2013.
Besides, government established several initiatives and intervention Funds to support access to finance for specific sectors.
These, Popoola said, included the N200 billion Small and Medium Scale Enterprises Guarantee Scheme (SMECGS) launched in 2010; N200 billion SME Restructuring and Refinancing Fund under the management of the Bank of Industry; N100 billion Cotton, Textile and Garment (CTG) Fund established in 2019, etc.
He also mentioned the government’s directive to the deposit money banks to set up special funding schemes to encourage access to finance especially for SMEs and the agriculture sector.
On the future of consumer credit, Popoola said “there is no doubt that the journey towards improved access to credit especially for consumers and SMEs has been helped with the establishment of credit bureaus, collateral registry and digitization.”
He said the situation now is better and different from what it used to be several years back.
According to him, there have been significant improvements in access to credit as “new players are also coming into the system, especially those that can be classified as shadow banks, mostly fintechs, money lenders and telcos.
“They process loans with speed. This phenomenon has influenced most of the commercial banks to also change their lending model, embrace technology and build the capacity of their personnel to enable them service consumers with low value loans.
“As technology is assisting in addressing the challenge of financial inclusion, it will rub off on lending and improve access to credit for consumers and small businesses,” he said.
Popoola added: “I foresee a time when we will walk into our neighbourhood supermarket and access credit on the spot; students will take student loans to pay for their education and in the near future individuals can pay their rentals monthly.”
