By Moses Nosike

The Institute of Credit Administration, Nigeria has emphasized the need to enact policies and provide incentives that will encourage the growth of the credit economy and boost a healthy financial sector.

It gave this advice in its report on ‘ICA blueprint report for growth, development and sustainability of financial services sector in Nigeria’.

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According to the Registrar/CEO, Institute of Credit Administration, Professor Chris Onalo, the growing non-performing loans have been a major source of concern since 2009, which was a result of inadequate credit risk assessment and management, inadequate loan monitoring and economic recession among other factors.

Onalo said that the finance sector is the engine of economic growth, and it provides funds/access to enable entrepreneurs in other sectors of the economy to grow the economy to achieve the Gross Domestic Product. While mentioning incentives, he said that it was relevant to restructure credit by increasing the tenor and decreasing the interest rate to enable defaulters get back in business.

He further said that banks need to be closer to the obligor to know precisely where and how the funds are deployed as most defaults are because of poor monitoring by the banks. “While noting that early detection can avoid total deterioration, he stated that there should be preventive measures in place. Enforcement of credit scores to go beyond being able to access bank loans, and bank defaulters should not easily access certain services to serve as a deterrent to all. Stronger legislation/regulation against institutional-based causes of loan default, which includes the nature of the loans, time of disbursement, the profitability of customers’ enterprise, terms of the loan, interest rates etc.”

While explaining the policies needed to encourage the growth of the sector, he said that there should be implementation and enforcement of consequences for issuance of dud cheques and promotion of borrower’s character as a major consideration for loan policy.

Onalo said, “there should be other survival measures like renegotiation/ review and strengthening the CBN prudential guidelines and other regulatory frameworks on loan recoveries. Implementation of the existing prudential guidelines & enhanced regulatory framework on recovery of bad debts. All financial institutions should be compulsorily onboarded to the collateral registry platform”.

“The ongoing enforcement of the Credit Risk Management System should be fast-tracked along with total compliances with Monthly credit bureau reports.

“CBN and Bankers committee to ensure immediate implementation and deliberate enforcement of Global Standing Instruction to check activities of bad debtors, which has become a risk to the financial system stability and the economy.