By Tony Navah Okonmah
It is encouraging seeing most Nigerian banks now using Credit Quest Software in analysing credit clients. This is a necessary and vital step forward in the pursuit of financial standards in line with the practices in other developed worlds.
However, there is still a major concern which I fear will undermine credit management issues and will scuttle or derail any progress made in this sector of our economy. I am afraid that the standard of the rating modeling administration adopted by the banks in assessing credit applications is not entirely convincing. Considering the level of the sophistication of the Nigerian economy, there remains the concern that the Credit Quest Software used by the banks may not exactly be reliable.
Financial computing which provides the basis for the development of most credit software applications takes cognisance of various environmental issues, ranging from key business and regulatory issues to providing input to public policy on financial services.
The software functions and its capabilities to capture the Nigerian economic volatility through the use of Computational Finance and Financial IT are in doubts. Both Computational Finance which deals with issues such as risk management, algorithmic trading, market simulation, portfolio optimisation, etc., and Financial IT which covers scalable high performance computing, financial software engineering, graphic processing unit (GPU) also known as visual processing unit (VPU), and cloud computing relies on efficient market information and effective data collation among others.
Nigeria has no adequate market information channels and no reliable data collation especially as related to organised pattern of financial behaviour of individuals and corporations. This makes the accuracy of the analytical results of financial clients obtained by the current credit software precariously unreliable.
In using information obtained on the evidence of the result from the credit software, the banks should also adopt caution. The system is still very much in its infancy and personal knowledge of each credit applicant should not be discountenanced while we continue with the development of credit software which can improve the banking and credit efficiency.
The system can only be effective when other sectors of our economy are also developed. There must be a functional regulatory system for the financial sector, the judiciary and law enforcement agencies. The standard and method of information sharing must be improved by empowering the agencies responsible for data collation – offices of statistics and information ministries. We must understand the country’s demography in relation to change patterns.
Financial modeling is all involving. The current Credit Quest Software and any other credit software used by the banks are not robust enough to capture vital trends that pivot the building of credit client’s image needed to make a critical credit decision. Most clients’ images as represented presently by the credit software may not accurately march their portfolio.
Despite the obvious imperfections which may have been observed that dogs the pioneering of the use of credit software in making credit decisions by the banks, the Nigerian banks are better positioned for business and this will benefit the economy. The use of the credit software is a step in the right direction but there is need for continual development and evolvement.
•Tony Okonmah, a financial adviser and analyst wrote from London.