… Says we have changed the way lending is done
… X-rays impact of credit reporting in Nigeria
The Group Managing Director/CEO, CRC Credit Bureau Limited, Dr. Tunde Popoola has said that his company has improved access to credit for consumers in Nigeria.
Speaking in a paper titled, “The Role of Credit Reporting in Facilitating Consumer Credit”, at a Forum organized by the Finance and Business Online Publishers (FiBOP) in Lagos on Tuesday, Popoola recalled that Nigeria licensed three private credit bureaus in 2009 saying that the impacts on volume of loans and reduction in the rate of non-performing loans (NPLs) have been remarkable.
He revealed that loans to the private sector rose from N7.7 trillion in 2008 to over N12 trillion in 2015 and over N36 trillion in March 2022. According to him, special products for SMEs and the introduction of credit cards became possible with the advent of credit bureaus.
He added that NPL ratios declined significantly from about 32.8 percent in 2009 to a single digit of 9.3 per cent as at June 2019 and hit the lowest in ten years to below 5 percent at the end of December 2021.
“The healthy loan portfolios were made possible, among other factors, by the continuous stress tests by the Central Bank of Nigeria on the Banks solvency and liquidity ratios, the presence of private credit bureaus and the establishment of the Asset Management Corporation of Nigeria (AMCON)”, he said.
While pointing out that CRC has improved access to credit for consumers, he recalled that when it commenced live operations in 2009 as a credit bureau, it had only six commercial banks which invariably successfully submitted credit records.
He said, “In its first month of live operations in June 2009, only 49 credit reports were sold to two banks. CRC now operates as a group structure with the credit bureau company having about 1,600 institutions/customers with over 60 million credit records successfully processed. Today, millions of searches are conducted on the platform of the company through various media such as web, direct connection via API and batch processing.
“In effect, over 1,600 corporate entities use the services of the company, cutting across all types of financial institutions, insurance companies, telecommunications (telcos), electricity distribution (discos), cooperative societies, pharmaceuticals, retailers, conglomerates, travel and hospitality businesses etc. CRC Credit Bureau is the largest credit reporting agency in Nigeria responsible for over 95% of the nation’s recorded credit data.”
The GMD/CEO maintained that CRC sets out to empower, enable and strengthen the capacity of lenders and creditors stating that CRC has developed a variety of products and services to help lenders decide with trust and confidence.
“The value proposition to our customers include assisting them in identifying credible customers to grant loans or sell to on credit, manage existing credit facilities or receivables and manage collections and bad debts. The company which took off with only credit information report (CIR) to help profile potential borrowers and debtors has developed over thirteen products including Credit Information Report, Credit Scores, Portfolio Monitoring Report, Prospecta, Self-enquiry, Dud Cheque Verification Platform and Delayed Propensity Score.
“In highlighting these various products that showcase the impact of credit reporting, it is imperative to mention two of these products specifically. The first is the CRC Score and the second is the Delayed Propensity Score, because they are purely focused on facilitating access to credit for consumers.
“As an introduction, the CRC Score enables lenders under the risk associated with doing business with the consumer while the Delayed Propensity Score provides lenders with information on how factors, environmental or otherwise will affect the probability of the consumer repaying a loan or credit line taken”, he added.
Speaking on CRC Credit Scores, Dr. Popoola hinted that determining the level of customer reliability with regard to the timely loan repayment is one of the key elements of credit risk assessment. This, he said, is done on the basis of a credit history analysis and scoring based on the customer’s characteristics and data provided in the loan application from the lender.
According to him, information on how the customer has repaid and continues to repay their dues is often provided and analyzed by the CRC Credit Bureau while the customer assessment itself is based on credit scoring models.
He continued, “CRC Credit Bureau’s credit scoring system provides lenders a 360-view of their customers, pulling from financial records to determine borrowers who are low-risk, medium-risk or high risk.
“This in turn has reduced the number of people with persistent credit card debt, provided individuals with greater control over credit limit, increases and ensured that lenders intervene to help customers with persistent debt including providing options to switch to cheaper loans and show forbearance.
“Credit scoring results are usually presented in numbers also known as a credit score and the number allows for assigning the customer to appropriate risk categories (e.g. reliable customers or customers who may have problems with loan repayment). Credit scoring, regardless of how it is calculated and what characteristics it takes into account, eliminates the human factor and ensures objectivity in the process which reduces risk and speeds up the credit process.
“The CRC Score ranges from 300 to 850 with scores closer to 300 highlighting that the consumer is high risk and those closer to 850 as low risk. Once a lender determines acceptable risk levels, they are able to use these scores to offer consumers various lending products based on risk-based pricing. Using credit scores assists lenders prequalify volumes of credit applications thereby enabling them to focus on the intended recipients.
“Through the API devices, institutions are connected to CRC making lending decisions possible within seconds and for several customers. This phenomenon has democratized access to credit, taking away emotions from lending decisions and making it possible to grant credits in a few seconds all year round.”
On Delayed Propensity Score, the CRC Credit Bureau boss recalled that the world during the Covid 19 pandemic, began to see a rise in non-performing loans which he said was expected with economies shut down, movements restricted and offices, markets alike non-operational.
“Institutions were, therefore, charged with restructuring loans as very few consumers and businesses were able to keep up with the loan payments. To assist institutions, anticipate and better understand their customers’ needs, CRC developed the Delayed Propensity Score. This enables credit granters review their performing customers and using our algorithm predict those who would have challenges experienced during the pandemic. The focus here was not on the already defaulting customers as they were already defaulting customers. The focus was on the performing customers.
“Post the pandemic, we have reengineered the algorithm to take into consideration performing customers whose repayment trends may become affected due to other factors – economic, social, etc. This enables credit granters to focus on and support these customers to ensure they do not go into default and they can remain their loyal customers”, he stated.
He disclosed that with credit reporting, it has become possible to trace and track old customers with bad or abandoned facilities thereby assisting to address the challenges of adverse and haphazard selection. The bureau, he added, warehouses all addresses, telephone numbers and contact details provided to all credit granters by consumers or their customers.
According to him, “It has also become possible to submit data as credit is granted. This has become exceedingly important with the advent of automated lending via apps and other online mediums.
“To deliver quality services to all stakeholders and indeed Nigeria as a country, CRC leverages and partners with the best solution providers in the world, the Dun & Bradstreet (DnB), a global risk management solution company with over two hundred years’ experience in the provision of data management and analytics while our credit scoring solution technology is powered by Fair Isaac Corporation (FICO), the pioneer and global leader in credit scoring solutions in the world.
“CRC is in partnership with Nova Credit to enable Nigerian emigrants to the United States, Canada and some other advanced countries to access their data in the CRC repository in Nigeria. With the partnership, these emigrants can use their international credit history to apply for credit products. The partnership enables credit-worthy them because of the lack of credit history in the US, Canada, etc.
“The whole idea is to assist more than 16,000 Nigerians who move to the US and Canada each year to pursue new opportunities to settle down faster and have access to credit to continue their lives and lifestyles. Emigrants can now use their credit reports from Nigeria to obtain student loans, mortgages and even automobile loans”, he further explained.
“CRC prides itself with the impact it has made on the lending space in Nigeria. We have changed the way lending is done. We are now able to go past our previous limits to play a deeper role in unlocking hidden avenues by creating additional insights that enable our customers optimize business operations, achieving customer loyalty, incremental revenue, optimized costs, and free cash flows for businesses.
“The services which are rendered with the highest level of credibility engendered by trust have enabled customer profiling, loan application assessment, portfolio management and know your customer services (KYC).
“In effect, CRC has assisted in generating growth in loans both to consumers and commercial entities and stimulated the emergence of new loan products and services. It has also improved the quality of credit offered and loan processing through the introduction of customer profiling and loan monitoring. It has positively impacted the financial environment in Nigeria by making substantial contributions to access to credit and the change in the business models of lending”, he concluded.
Photo: Dr. Tunde Popoola, GMD/CEO, CRC Credit Bureau Limited.
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