Stakeholders Rally Behind CBN’s Push to Tighten Noose on Bank Loan Defaulters

•New credit risk clause to facilitate recovery from borrowers’ verifiable assets
•Lender to recover loans from defaulters’ account domiciled in any bank
•Apex bank warns against fraudulent loan offers

Nume Ekeghe

Tougher days await habitual defaulters of bank loans as stakeholders in the banking industry have backed the moves by the Central Bank of Nigeria (CBN) and the Bankers’ Committee to tighten the noose on chronic debtors.

The stakeholders yesterday in Lagos, endorsed the CBN and the Bankers’ Committee’s plan to create a credit risk clause for consumer lending, which is aimed at making it difficult for habitual loan defaulters to operate.

With the clause, a lender would be able to recover its loan to a defaulter from its assets domiciled in another bank.
The stakeholders applauded the initiative, saying it would create sanity in the financial sector and enhance consumer credit.

Their support came just as the CBN warned loan seekers and owners of small-scale businesses against being duped by fraudsters who are making loan offers on the social media, purportedly from the apex bank.

Speaking at the 345th Bankers’ Committee meeting, CBN Deputy Governor, Financial System Stability, Mrs. Aisha Ahmad, said the initiative would aid economic growth.

She said the apex bank understood the banks’ reluctance to increase credit to SMEs, retail, and mortgage sectors because of customers that had either willfully or otherwise, refused to repay their loans.

“And so we have come up with a new clause that we will be including in the offer letters that we will be granting going forward,” she said, adding: “It is important to also remind us of the pronouncement we made to banks that by September 30 of this year, we should have grown the loan deposit ratio to 60 per cent for those that were below and by the time we made this pronouncement the industry was at around 57 per cent.”
She said if all the banks met this requirement, the apex bank would have about a trillion added to their credit balance.

Ahmad said the CBN was looking at the challenges and factors affecting the banks’ ability and willingness to lend, explaining that the new move would be a credit risk protection clause that would be in all offer letters going forward.

“Basically, it would contain the Bank Verification Number (BVN) details of the customers and the Tax Identification Number (TIN) of the customers and more or less it will be a commitment by the customers taking the loan from government. In taking the loan, you would agree that you would not default,” she explained.
She said the initiative was not entirely uncommon because banks already have rights of set-off within a bank if a customer takes a loan from it.

“If you take a loan from a bank, the bank normally has a clause to repay your loan from all the assets you have in banks, so this is just extending it across the industry,” Ahmad further explained, stating: “We think that there are honest Nigerians out there that are ready to take loans and repay their loans, however, the few that willfully do not pay are actually affecting others to have access to this credit.”

She said she was very optimistic that the new clause would enable the banks to lend more with more confidence and enable more Nigerians, in particular those in the MSM’s retail sector to get access.

Also, at the media briefing, Director, Banking Supervision Department, CBN, Mr. Ahmed Abdullahi, spoke in the same vein, explaining that the new clause had to be introduced to stem banks’ risk aversion and encourage them to increase their loan books to fulfil the apex bank’s LDR of 60 per cent.

“A main clause has now been developed in the system whereby all new loans that are coming on board have to have a BVN that would clearly identify the individual,” he stated and added: “Secondly, that there would be a clause whereby the borrower would have to sign an agreement that if for any reason that there is default of that particular loan, the bank has the right to set off the amount available in the industry.”

The Managing Director/ Chief Executive Officer Guaranty Trust Bank, Mr. Segun Agbaje, said efforts were being intensified to make the economy to push retail and consumer lending.

“Banks have started giving advance to salary earners and short term salary advances, but one of the things the Central Bank wants to promote is consumer credit, where you start to get loans to buy cars, where supermarkets start to extend credits and an incentive to help the banks,” he said.

Reacting to the decision of the Bankers’ Committee, the President, Chartered Institute of Bankers (CIBN), Mr. Uche Olowu, told THISDAY that the move was a welcome development, stressing that it would bring sanity to the nation’s lending space.

According to him, “If you owe a bank, you should pay and if there is a problem, they can restructure the loan to suit those situations. Some have the ability, but not the willingness to pay and that is what this process would check.”

Also, an analyst at Ecobank Nigeria Limited, Mr. Kunle Ezun, applauded the move, but urged the CBN and banks to ensure that the policy is properly structured before its implementation.
He added: “The economy is grown by SME and when SMEs have access to credit ultimately it can help drive economic growth. The loopholes initiative should be supported.”

CBN Warns against Fraudulent Loan Offers

Meanwhile, the CBN in a statement by its Director, Corporate Communications, Mr. Isaac Okorafor, said its attention had been drawn to fraudulent messages in the social media requesting unsuspecting loan seekers and owners of small-scale businesses to apply for loans provided by the federal government through an e-mail address (empowermentcbnloan@gmail.com) purportedly being handled by the bank.

In the statement posted on its website, CBN said while it had several development finance intervention programmes from which different categories of businesses had benefitted (and still benefit), the “bank does not do so through direct interaction with prospective applicants.”

It said: “For the avoidance of doubt, there are clearly spelt out procedures for accessing CBN intervention funds, which are disbursed through Participating Financial Institutions (PFIs), such as Deposit Money Banks (DMBs), Development Finance Institutions (DFIs) and Microfinance Banks (MFBs).

“Members of the public, particularly youth and owners of small-scale businesses, are therefore advised to disregard any message requesting them to send their personal details, including mobile phone numbers, to emails such as empowermentcbnloan@gmail.com or any other one that may be contrived.

“These messages are fake and anyone who enters into correspondence with them does so at his or her own risk. Prospective applicants are advised to approach their respective banks or the Central Bank of Nigeria (CBN) branch nearest to them for clarification on the procedure for accessing any of the CBN-related loans.”