Ladi Smith, director, SIAO, in this interview with Daniel Obi, says Credit Awareness Nigeria Initiative is geared towards sensitising lenders on the need for credit information to avoid non-performing loans. Excerpts Assessing recent awareness on credit Some proposals are cancelled by lenders, not necessarily because they are weak or irrelevant, but possibly because they lack adequate information on those behind the proposals. Precisely, the journey began about two years ago when we had our first national stakeholders’ conference in Abuja. Our intention was to gather all the stakeholders to create awareness and design a road map that would enable us engage the market on a road show campaign.

Why did you embark on credit awareness? SIAO midwived the idea since 2007. We embarked on it primarily because we noticed a huge gap in the economic expansion of Nigeria. We realised this when SIAO was involved in the banking consolidation that took place in 2004 and 2005. We asked ourselves that after consolidation what next? This is because we knew that consolidation was not an end in itself but a means to an end. When the former CBN governor decided on consolidation to make the banks bigger and more reliable, and also to drill down in the pyramid so that people who before now did not have access to credit would have it. For people to have access to credit it was not enough for the banks to be bigger and strong but there should be data on the people who are potential borrowers. It is only a credit bureau that can provide reliable data to the market.

Journey to setting up of credit bureau We took over the initiative and embarked on the quest to see the possibility of setting up credit bureau. We went to South Africa and discussed with some technical partners where we discovered that the Nigerian environment is challenged for a successful credit bureau. One of the key observations that we made was the absence of financial literacy. The financial literacy level was very low apart from the issue of infrastructure we have in Nigeria. The SIAO, which is into professional service business, therefore, decided to assist the government in building the financial literacy level and increasing assess to financing. The organisation then midwived an NGO called Credit Awareness Nigeria to drive the project. The first partners we sought were the Central Bank and the World Bank who are key partners in this awareness building. In adopting the programme, CBN set up Credit Awareness Committee.

Assessment of current credit awareness in Nigeria An organisation, Efina, last year conducted a survey in Nigeria on access to financing. The statistics showed that as high as 79 percent of Nigerians did not have access to finance. There has not been any other research to show current statistics.

Why low rate on establishment of credit bureau The market may not be able to attract many credit bureaus. This is because their function is to primarily provide data to potential lenders. They are not bureaus that should be scattered everywhere. Their services are not only required by the banks but contract-awarding companies, merchandising firms, leasing companies and all other companies that deal with second parties. Credit report card should contain all information about the reliability or otherwise of a customer.

Why firms ignore the services of credit bureaus That is why we are having this knowledge awareness campaign. Our target is to bring to the knowledge of Nigerians, various institutions that have been built by the CBN to assist people such as money deposit banks, microfinance banks and credit bureaus. Many people would be empowered through the information to be provided in the credit awareness, Bank reforms and lack of awareness on credit information

In the banks there is what is called KYC – Know Your Customer- and what enables a bank to know its customer is being able to get a robust current report on that customer. There could be some customers the banks must have inadvertently lent to without knowing that the customers are already exposed elsewhere. In this situation, if a borrower is overwhelmed with debt, ability to pay back becomes a challenge. The issue of non-performing loans could be a function of lending without adequate data on the borrowers. But Credit Bureaus would be providing information on potential borrower which would enable the banks to take informed decision on lending. Today, it is both the absence of credit bureaus and the information about the functions of credit bureaus. First of all, if the institutions are established, people should know what credit bureaus do.

Managing the information gathered by credit bureaus Information gathering is one of the key foundations of credit bureaus. The difference between one credit bureau and the other is the amount of information that each of them has. The information on anyone can come from anywhere such as school, visa applications, banking records etc. We have three credit bureaus in operation and later on, two more would join them. There is the confidentiality base of credit bureaus about leaking information to scammers. The institutions need to sign all sorts of confidentially agreement because they deal on confidential data that if care is not taken, could be misused. Due to this, not every body can come into the business of credit bureau.

Plans on the awareness The awareness campaign is beginning next month and we are going round Nigeria starting with Lagos State as the most commercial centre. In the campaign, we are holding state conference where CBN, state government officials, microfinance banks CEOs and other stakeholders involved in funding activity would meet. Though the banks had gone through recession, but sooner, the banks would start to lend because a bank that does not lend cannot be in business. Credit bureaus are to assist in the risk profiling of banks. The more risky ones in borrowing are the supposedly ‘big men’ whom the banks tend to trust easily.

Other countries that use credit bureaus In Africa, Nigeria is one of the last countries to start the credit bureaus. South Africa is very big. Uganda, Ghana, Kenya, Angola and Zimbabwe use credit bureaus and this have assisted them in lending.

Challenges Funding is one of our greatest challenges. The World Bank is sponsoring film on credit education. We expect the state government and the private sector who are beneficiaries of this initiative to come in. Despite the challenges, people would appreciate this.