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Still smarting from the credit crisis of last year, many banks
are now tightening their credit disbursement processes. This follows the
directive by the Central Bank for banks to engage the services of at least two
licensed credit bureaux in determining the credit behaviour of their customers.

Credit bureau operators confirm that there has been higher
patronage by the banks since the CBN circular issued in April. They, however,
complain about the quality of data which they say still falls short of what is
required to make informed business decisions. According to the CBN circular,
all banks and financial institutions need to comply with the provisions of the
guidelines on the licensing, operations and regulations of credit bureaux by
having a data exchange agreement with a minimum of two credit bureaux licensed
by the central bank.

This also covers all previous loans granted to enable the
determination of the borrower’s current exposure to the financial system. The
banks are also expected to report periodically on the performance of the loans
in their portfolio to any of the two credit bureaux with whom they have a data
exchange agreement and to obtain quarterly credit report from at least two
credit bureaux for all previous loans granted to determine borrowers’ composite
exposure to the financial system.

Increased compliance

Ubong Awah, chief accountability officer of XDS Credit Bureau
said the level of compliance has increased. Mr. Awah said with the CBN
regulation, there has been more interaction between the banks and the bureaus,
adding however, that there is room for improvement.

“The figures are not up to expectations,” he said. “You know we
are in a depressed economy. Most of the credit has been to government while
credit to private sector has not really grown.” According to Awah, banks are
currently engaged in remedial work of trying to reassess previous loans and are
being careful in taking up additional bad credit in their books. He projected a
higher figure in the third quarter when the economy would have recovered and
the various credit easing policies of the CBN.

Ahmed Popoola, managing director of Credit Reference Company
said the compliance level by banks was encouraging. According to him, out of
the 22 banks that have signed on with his company, 15 are using and submitting
data as required. “Only seven are yet to comply and each of them has been given
four months period to comply depending on when they signed on,” said Mr.
Popoola.

Data quality

Operators are however worried about the quality of data that are
currently available from the banks. Customer data, whether individual or
corporate must cover up 70 per cent of the identity of the individual before it
can qualify as sufficient, explained Popoola. He said what is important is how
far the banks are ready to comply.

“There are administrative, legal and IT issues involved,” he said, adding
that some of the information cannot be obtained without the consent of the
customers. Mr. Awah said the quality of data will depend on changing the credit
culture of Nigerians to see the importance of credit bureau to the economy.
Popoola believes that the credit bureaux are pivotal to the growth of the
economy. “It is in the interest of the banks and it is in the interest of their
customers. There is no economy in the world where banks give credit to the real
sector and individuals without a functional credit bureau system. So it is in
the interest of the economy for credit bureaus to work in Nigeria.”