The Managing Director/Chief Executive Officer, CRC Credit Bureau, Mr. Tunde Popoola, in this interview with members of the Finance Correspondents Association of Nigeria, advised the federal government to introduce a unique citizens’ identification system so as to ramp up access to credit and spur economic growth. Dike Onwuamaeze and Nume Ekeghe brings the excerpts:
How can someone know his or her credit score?
First, you should know that every Nigerian is entitled to one free credit report every year from a credit bureau by the provision of the National Credit Reporting Act 2017. You can get your credit report online for free, but you have to pay for to get your credit score. We want every Nigerian to be prepared because sometimes people come to our office to lament that they did not even know that they owed anything to anyone. So, before applying for loans from any bank you should find out if anyone is claiming that you or your company owes him. That is why we want people to have access to their credit report online without coming to our office so that they will know the claims of indebtedness people are making on them or their companies. This information is available online for free.
What is the thinking of the government in terms of introducing a unique identifier for every Nigerian citizen?
We were having challenges on unique identifier to be able to do our work. This is the way we work: For instance, a bank customer may have accounts with three different banks which he opened with three different means of identification. He will use his driver’s license at Bank A; International passport at Bank B and the National ID Card for Bank C. So, in effect, he has given three different means of identifications to three different entities.
So, when he borrows, it becomes very difficult for us to consolidate his records in one data. We then approached the Central Bank of Nigeria and met the former Governor Sanusi Lamido Sanusi to help us attain a unique identifier through the National Identification Management Commission (NIMC) so that the government will ensure that every Nigerian has a unique means of identification. This didn’t work because of the amount of money NIMC was demanding for it was beyond what the CBN was willing to pay for. Then the Governor suggested a unique identifier for the banking industry. We went on February 14, 2010, to make a presentation to the Bankers’ Committee on unique identifier for the banking system. That was what led to the Bank Verification Number (BVN) that we have today. That initiative came from the operators in the credit bureau. But I will like to make it clear that the BVN is not enough because it is not every Nigerian that has a bank account.
Why can’t credit bureau be used to do background checks on politicians before they are cleared to aspire to hold public offices as elected or appointed officials?
Some countries use the credit bureaus to know the exposures of their politicians but we have not gotten there yet in Nigeria. But I think it is something that can be very interesting because if a person who has the capacity to pay his debts is owing and isn’t paying, why should we entrust him with public treasury as a president, governor, legislator, minister, councilor, etc., because they all have access to public funds. So, I think this is something we should be looking at as a nation to help us have some sanity and also determine how responsible those who are going to hold political offices are. It should be made a law that those with non-performing loans should not be eligible to contest elections in Nigeria or be appointed as CEO or board members of public institutions.
What are the problems militating against credit penetration in the country?
The credit bureaus gather data of those that have enjoyed credits facilities. So, if the level of those who have enjoyed credit is low, the information in the bureau will also be low. And because we have also realised that a lot of lending take place outside the formal system, the bureaus are now going all out to look for the lenders in the informal system and bring them into the organised credit rating system. This explains why we are running after the cooperative societies and money lenders. They are not formalised but they lend significantly to a lot of people and people meet their obligations with through them. So, it is something that can help to increase the penetration we are talking about because if you limit it to just formal lending, that figure would keep on being very low. Today we are appealing to landlords to make credit report as part of the Know Your Customer (KYC) of their new tenants. In South Africa, you cannot get a telephone line or take a lease without them checking you on the credit bureau.
Can people borrow against their pension accretion?
As part of addressing the challenges to access to credit, I’m saying that we need to think outside the box because the intervention funds alone cannot do it for us, but this pension funds can do it for us. Your pension is truly your savings and it will be a dead asset if you cannot borrow against it. The pension represents a huge savings for a lot of people and I think it is something we can also advocate for. I support it completely.
Are your services available to cooperative societies?
As we speak today, there are quite a lot of cooperative societies who are amongst the almost 1,500 institutions that are doing business with us. If you have cooperative in your media houses, I will be willing to come with my colleagues to take your data. It is good to look at things from a positive perspective because if you do not have a credit history, the banks will be asking you for collateral. Having a credit history, even if it is with a cooperative, will help to reduce the requirements banks will demand from you before granting you credit. If you don’t have credit, you would not have a credit score. That is how the credit penetration can also grow.
What services do you render to the telecoms and the Discos?
In the two sectors, they have post-paid services. This is the area where they need our service. So, if you are on a post-paid service in a telecom company for instance, you are enjoying some level of credit. In those days MTN would ask you to pay back some amount and that was really not credit. Maybe they will ask you to pay a deposit of N20,000. And immediately you hit that N20,000 your line is off. But, nowadays that is not the case.
They no longer ask you to pay down any deposit and you can enjoy up to the credit threshold they have granted to you. But when you refuse to pay for the credit you have enjoyed they will submit your data to the credit bureau. When you are doing well they can also refresh on their analysis and say that you can enjoy a credit of up to N30,000 or N40,000. That is the way it is for the telecoms. In most parts of the world people don’t turn telcos into a bank. But that is what we have turned them into in Nigeria. You may buy airtime of N1,000 and may not finish using it for a week. But already you have given the N1,000 to the telecom firm. That is why treasurers of telecoms firms are more powerful than the managing directors of commercial banks because of the amount of money they have, which is the other way round in most developed countries where telecom services are mostly rendered on credit. And that is where we will migrate to. It is the same thing with electricity. And it is the same thing with insurance. You can enjoy electricity and pay for it after the service. But if you don’t pay then your data comes to the credit bureau. But the arrangement that we have with the electricity companies is that whether the client pays or not those data should come to the bureau. Because when you are paying for your electricity you also showing that you are reliable and responsible and can pay for your credit. We always tell the banks that the data from telecoms and discos are veritable data for them to build their credit decisions for a client on. Why? No one will repay his bank loan if he is defaulting on his electricity bill. You will first of all pay your electricity bill because you know that they can cut off your light. So, if someone is very reliable in paying electricity bill and telephone bill only mean that that person is good a candidate for bank credit.
How will you access the capacity to repay credit?
There are two things relating to capacity to pay. First is your income level and the second is your level of exposure. The one that the credit bureau will give to the lender is your level of exposure because we do not collect information on people’s income on our data base. That is why bank will ask you how much you are earning. Banks also will like to know the totality of your exposure. If for instance your income is N200,000, banks don’t know if you have borrowed against this N200,000. But when they check with the bureau they will discover that you are already exposed to two institutions to the tune of N150,000. So, it will not make sense for the bank to give you the third loan. That is how it works.
What is the relationship between the Asset Management Corporation of Nigeria (AMCON) and the credit bureaus?
AMCON is like any other financial institution and its data is with the credit bureau. So, all those borrowers who are on the AMCON’s list are not supposed to be able to take loans anywhere in the financial system because they are all bad debtors. AMCON has explained itself many times that total number of the entities that are involved are very few. The loans are huge, but from limited number of people or companies. The issue is not about the numbers of the obligors but on the amount each of them is having on the data base. All I can confirm to you is that all those loans are already on the data of the credit bureaus.
How can the informal sector benefit you’re your credit rating?
The question we ask ourselves is this: If the madam has a block of four flats and he is giving them out how can she have the opportunity to leverage on us? Are we ready to take a paper she brings that a tenant is owing her as a data? As we speak today our answer is “no.” It is a high level of risk for us as a business concern. If the tenant happens to take the landlady to court is he not going to join the credit bureau? So, we will have to go to hire a lawyer to defend us in a matter that we do not know anything about and the lawyer would tell us that we ought to have done our due diligence well before taking the data from the landlady.
That is why those we are on board with are companies and entities that can sue and be sued. The approach to rentals is that we approach the estate agents who are registered institutions and have so many customers they are attending to. That is the approach for us. What I am saying in essence is this that we keep on trying to encourage every sector like this to form associations so that we can deal with them as associations. A good example is the discussion we are having with the Advertising Practitioners Council of Nigeria (APCON), because it is joining the bureau. That is an example of another sector that we are dealing with as a group.
They can have a data base of all their members and we take those data from them. That is how to reduce the incidence of litigation and all that. We also have a very good relationship with the Association of Non-Banks Micro Finance in Nigeria (ANMFIN). It has about 8,000 members. They are not licensed by the CBN, but are lending in their own money. About 200 of them have registered with us. Our intention is to be able to take the entire 8,000 and put them on our data base. These players in the informal sector have one association or the other and that is how we deal with them.
What is the level of credit penetration in Africa?
I think credit penetration is about 55 per cent in Africa. Nigeria, with its 11 per cent credit penetration, is one of the countries dragging down the data because of our huge population. Most African countries are better than us when it comes to credit penetration.
How important is the unique identifiers to national development?
This is one area that we keep on appealing to government to really take serious as something with the capacity to change the totality of the Nigerian economy. How can we get people out of poverty and have susatainable economic growth when people do not have access to credit? And the major reason they cannot have access to credit is because the country does not have a distinct unique system of identifying its citizens. Would you give money to a stranger that you do not know how do you trace it? You won’t give money to people you don’t know unless you have a guarantor. And we are saying that the world has moved beyond all of that. So, the unique identifier should be declared as a very urgent matter by the government. In South Africa, from the day you are born you will hold that number for life and it goes to your grave with you.
The Director of Public Policy and Poverty Alleviation in Malaysia told me in 2013, that her country knows the specific number of poor people in Malaysia and that they know their homes. That is how the credit penetration in Malaysia is 100 per cent. Nobody can be really rich if he relies on his own savings and earnings to do things. We all need credit. It is the only propeller that we need to ensure that this economy takes off.