Ease of Doing Business: FG, CBAN Canvass For Well-structured Credit Reporting System
The federal government through the Presidential Enabling Business Environment Council (PEBEC) and the Credit Bureau Association of Nigeria (CBAN) have said that a well-structured credit reporting system would improve ease of doing business in Nigeria and ultimately lead to quick recovery of the Nigerian economy.
This was part of the submissions made at the 4th National Credit Reporting Conference organised by CBAN in Lagos with the theme: “Credit Bureau and Nigerian Economic Recovery: Facilitating the Ease of Doing Business”.
Mrs. Funmi Ilamah, Reform Leader, Enabling Business Environment Secretariat (EBES)/Presidential Enabling Business Environment Council (PEBEC), who represented Dr. Jumoke Oduwole the EBES Coordinator/Senior Special Assistant to the President (Office of the Vice President) at the conference, said that the presidential-level ‘Ease of Doing Business’ reform efforts demonstrate in clear terms the present administration’s readiness to support the improvement of credit infrastructure with all the political will available.
According to her, access to credit is critical to economic growth and is considered to be the motor for driving private sector development, regrettably in Nigeria more than 70 percent of private enterprises, typically MSMEs, have no access to credit or have very limited access.
Quoting the World Bank, she said that loans provided by banks to the private sector are only 14 percent of GDP in Nigeria, as opposed to 149 percent in South Africa.
She added that credit applications are rejected due to insufficient credit history and information for the lender to use to make a reasonable judgement as to whether to extend credit or not and due to unacceptable collateral.
As a way to address the problem, Mrs. Ilamah said that improved credit infrastructure was recently instituted in the form of two Acts that were recently passed into law by the National Assembly.
The two Acts are the Credit Reporting Act 2017 and the Secured Transactions in Movable Assets Act (also known as the Collateral Registry Act) 2017.
In her words: “To facilitate Nigeria’s economic recovery, the Government’s aim is to increase national productivity and achieve sustainable diversification of production, to significantly grow the economy and achieve maximum welfare for the citizens. The Economic Recovery and Growth Plan (ERGP) which unveils a road map for Nigeria’s economic recovery, growth and sustainable development were released earlier in the year”.
She added that the Plan envisaged that by 2020, Nigeria would have made significant progress towards achieving structural economic change with a more diversified and inclusive economy adding that one of the five broad outcomes of the Plan is industrialisation focusing on small and medium scale enterprises.
On her part, Mrs. Mobolanle Adesanya, Chairman of the Credit Bureau Association of Nigeria (CBAN) said that the full compliance with the recently signed Credit Reporting Act 2017 and the economic reforms being pursued by the present administration through the establishment of the Presidential Enabling Business Environment Council (PEBEC), would at the long run, provide the impetus for the Nigerian economy recovery.
“With the conclusion of reforms instigated by the Presidential Enabling Business Environment Council (PEBEC) with the sole aim of creating a conducive business and economic atmosphere for doing business, having a 60-day target to ensure MSMEs have more access to credit, ultimately at cheaper rates, we believe that these reforms will increase awareness as well as increase in the utilization of credit reports and scores by banks and other financial institutions. Furthermore, with the passing of the National Credit Reporting Act 2017, we believe that compliance would pave the way for a more secured and robust credit reporting system,” she said.
Mr. ‘Tunde Popoola, Managing Director/CEO, CRC Credit Bureau in his own presentation titled, “Credit Reporting Act, 2017: A Legislative Tool For Facilitating the Ease Of Doing Business”, said that Credit Bureaus facilitate ease of doing business by significantly improving access to credit especially for the disadvantaged sectors of the economy – consumers and SMEs.
According to him, the World Bank findings revealed that with the introduction of credit bureau, Small businesses reporting high financing constraints reduced from 49 percent to 27 percent while the probability of obtaining a bank loan for small firms increased from 28 percent t0 40 percent.
Putting the figure in perspective, he mentioned that in Ecuador, the number of micro entrepreneurs that accessed loans after 5 years increased from 60,000 to 719,000 (1,098 percent) while in Ukraine, there has been a significant decline in interest rates from 38 percent to about 15 percent within 5 years.
He added that the Act as signed by the National Assembly, will improve the ease of doing business in the country as it will promote strong credit economy with all the benefits; will encourage responsible lending and responsible borrowing; ensures that Credit consumers and MSMEs can obtain credit with ease, faster and less stringent terms & conditions; eliminate lending in the dark with emotions and prejudices and will promote financial inclusion.
“There is no limit to the amount of indebtedness that can be submitted to the Credit Bureaus – no minimum or maximum amount as the Credit Bureau will retain the information submitted to it for a period of not less than 6 years, and archived for additional 10 years, from the date it is submitted or last updated,” he concluded.