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Credit freeze: Govt should provide support for risky businesses —Stanchart CEO

By Babajide Komolafe & Michael Eboh
Managing Director/Chief Executive, Standard Chartered Bank Nigeria, Mr. Christopher Knight, has called for policy to provide support for risky businesses as part of measures to unlock the flow of banks’ credit to those areas.

In an exclusive interview with Vanguard, Knight listed capitalisation, support for risky businesses and credit bureaus as critical factors to get banks’ lending to flow into the economy.

He said “I think three things are needed to be put in place in order for the Nigerian banks to start lending again.

“One, the issue of capitalisation. Banks need to, especially the ones that are more stressed, increase or find new capital. It’s not going to be easy because globally investors have been burnt and are probably investors are a bit shy to invest again. But it has to happen.

“One way this can happen is creation of the asset management company. Where the asset management company will actually buy some of the non performing loans at a discount?

“Yes, because actually it would be giving money back to the banks, so this will give them the wherewithal to start lending again.

“There are some areas that I believe the government should help. And that would be, if you take care of let’s say the risky areas traditionally such as the SME sector.

“It is so risky because quite often they are smaller businesses, they don’t have the same kind of management skill, and they don’t have the same kind of financial reporting.

“Those two elements make it rather difficult for banks to lend. So if the government or the central bank will have a policy where they would stand behind to some degree or guarantee either in whole or part behind this sector, it would get credit flowing to this sector.

“Actually I was at a meeting this morning with the central bank and my understanding is they are actually thinking of something like this and I think it would be good.

“Finally, the third point which I can think of is that, we now have some credit reference bureaus in Nigeria; I believe they are three that are operating.

“I would encourage that all the banks are required to give their data on loans to those credit bureaus. This will help in banks looking at new transactions.

“The reason for this is there is something that is called asymmetrical information. If I, a borrower, come to a bank, I know what my intention is whether or not am going to pay back the loan.

“The bank doesn’t know, but if the bank can go to a credit bureau and see how as this customer repay past loans, that might be a good indication of how I might treat the next loan. So this would help banks to start lending also.”

He said despite the impact of the banking crisis, Standard Chartered has been opened to business and lending to businesses that meets its financial criteria. He said, “Standard Chartered is very much open for business. We are, I believe,  seen as one of the banks that represent flight to safety for depositors in particular. But also we have noticed that a lot of companies have been turning to us because we have been open for business all through.

“Part of the challenge is that we are demanding from the point of view of our financial criteria. And I must say that is also a basis for competition which is healthy. I mean if you have a country with a large number of banks, not all the banks will have the same criteria.

“There is not necessarily one strategy that is right or wrong,  each bank has to has its own, and do what they have the talent and skill to do.”


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