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Stakeholders seek adoption of credit report system to aid MSMEs’ access to funds

By Femi Adekoya
16 June 2016   |   2:38 am
To aid access to finance, especially by small businesses, the Credit Bureau Association of Nigeria (CBAN)‎ and Central Bank of Nigeria (CBN) have advocated adoption of the credit report system ...

SME

*Commercial banks’ loans to MSMEs remain very low at 0.12% of total portfolios

To aid access to finance, especially by small businesses, the Credit Bureau Association of Nigeria (CBAN)‎ and Central Bank of Nigeria (CBN) have advocated adoption of the credit report system to address risk assessment concerns arising from lending to Micro Small and Micro Enterprises (MSMEs).

Besides, the stakeholders noted that commercial banks’ loan to MSMEs remained very low at 0.12 per cent of total credit to the economy, while the rejection rate of Small and Medium Enterprises (SMEs) loan applications by nine commercial banks during in the last five years stood at 50 per cent.

The Chairman, CBAN, Mrs. Jameelah Sharrieff-Ayedun, explained that with the help of a credit report system, both the borrower and the lender could address access to credit challenges.

According to her, the credit report system offers a win-win situation for both parties even as she encouraged MSMEs and consumers to take advantage of the opportunities the credit report system offers.

The CBAN chairman during ‎an interactive session with financial institutions in Lagos, stated that the benefits of a credit report system are enormous, pointing out that the platform provides a one-stop shop information on borrowers, paves way to a sustainable expansion of credit in the economy, strengthens financial supervision and financial sector stability.

According to her, the number of transactions carried out under the platform in Nigeria is a far cry compared to South‎ Africa with a record of over 120 million while Nigeria still grapples with just 120,000.

She said the model used by most developed economies of the world is key to fast tracking economic growth and developments, maintaining that ‎it increases economic activity, wealth creation and economic growth

She said it also aids efficient risk management, increases speed of credit assessment, reduces cost of credit assessment and increases financial inclusion.

Ayedun said as a borrower, the credit report system ensures an easier and faster access to credit for MSMEs to expand their businesses, avail the opportunity to buy goods and pay later, guarantees access to attractive loan-pricing commensurate with borrowers’ risk, builds reputational collateral and encourages good credit behaviour due to accountability mechanism inherent in the system.

For the ‎creditors, it gives access to a larger population of customers, increases speed and reduces cost of credit assessment, enables attractive risk-based pricing of loan products to meet different risk profiles of customers and guarantees an efficient risk management and reduction of bad debts.

Also speaking at the event, the Head, Research & Development, Central Bank of Nigeria (CBN) in his presentation tagged, “The secure transaction and national collateral registry as a tool for deepening access to finance to MSMEs”, Dr. Musa Olasupo said a collateral registry is a financial infrastructure for MSME lending containing information platform for collateral.

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