Experts have said that the recent move by banks to access information through credit bureaux before giving loans to their customers would reduce high risk associated with lending.
They also said that credit bureaux services would as well help banks and other financial institutions with knowledge of the credibility of their customers to repay before lending money to them.
The managing director of CR Credit Registry, Taiwo Ayedun, said that in the recent times the number of financial institutions requesting for data from credit bureaux companies has been on the increase.
A report also showed that there was an encouraging percentage growth in credit in the first half of 2011, compared to the first half of 2010, as banks make more use of credit bureaux.
Ayedun said that while commercial banks dominate in utilising credit risk data, other industries were embracing the use of credit information to make informed risk management decisions.
He said that about 92 per cent of the usage of credit bureaux were commercial banks, while other industries such as finance houses, savings and loans firms, discount houses, microfinance banks and even the government, accounted for the remaining eight per cent.
“Anybody or firm doing lending would benefit from the scheme. If banks give more money as loans, it would boost businesses, employment rate would rise, and they would have more income in their bank accounts.
That is how GDP grows an economy. This scheme however, helps banks lend much more profitably, and reduces their risk exposure.” Portfolio monitoring has the ability to proactively implement risk mitigation strategies to reduce delinquencies and losses” he added.
He said that this would also help to provide credit line marketing opportunities, with an overall ability to optimise revenues, stressing that because of the accessibility of information, customers now get competitive responses from multiple lenders.
“Very soon, people won’t have to be applying to banks for loans. The banks themselves would begin to send messages to their customers, asking them if they are interested in acquiring loans” he said.
These services give users access to the most comprehensive credit bureaux database to make more effective decisions. It also gives access to reliable information to grow customer base and increase profitability.
“It is not all about the users of the data offered by the credit bureaux companies. Customers too do have a lot to derive from the programme as well. Customers have an opportunity to demonstrate responsible credit behaviour and then enjoy more credit to enable business expansion.
It also affords customers the ability to dispute erroneous information on credit reports”.
Chief accountant officer of XDS Credit Bureau Limited, Ubong Awah, said that the coming on board of the Asset Management Corporation of Nigeria (AMCON) and the threat of compliance enforcement by the Central Bank of Nigeria (CBN) has resulted in an upswing in the patronage of the credit bureaux by the banks in the past few months.
“The banks are beginning to see the benefits in real terms of credit reporting as incidences of multiple borrowing and bad loans have reduced since embracing credit bureaux,” he said.
Stating the challenges facing the industry, he said the sector was still plagued by the dearth of information on individuals, noting that poor data gathering techniques was still affecting the quality of data available.
“Coverage is yet to be total and unique identification and poor data quality remains a challenge. The industry can fare better with more regulatory support like enforcement of compliance with extinct regulations, he added”
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