Why Interest Rates Remains At Double Digit In Nigeria.

By Emeka Ucheaga

One of the greatest financial challenge for businesses and even the federal government of Nigeria is the high cost of credit in the country. Prime lending rate which is the rate at which banks lend to the most credit worthy customers has remained persistently high in Nigeria since the late 1980s. In fact, the last time Nigeria ever enjoyed a single digit prime lending rate was in 1985 when the lending rate was 9.25 percent (according to financial statistics collated from the Central Bank of Nigeria). 34 years on, prime lending interest rate has stubbornly remained in double digit, averaging 18.79 percent during the period (double its 1985 level) despite several contractional monetary policy efforts to reduce interest rate in Nigeria. Two key questions then arise from this issue, how important is a single digit interest rate in Nigeria and why has it been difficult to achieve since 1985? I attempt to answer both questions in this article.

The importance of a single digit interest rate

  1. It could lead to rapid economic growth: The myth that only borrowers benefit from single digit interest rates is untrue. Indeed, single digit interest rates is desired by all financial markets’ stakeholders including borrowers, lenders and financial markets regulators. Single digit interest rate is considered healthy for economies around the world as it encourages borrowing for manufacturing and consumption. The lower the level of interest rate, the more producers will borrow from financial institutions to increase production of goods and services which leads to a faster growth in the national output. As economic growth quickens, the poverty level in a country typically declines. Asides increasing production on the supply side, low interest rate encourages borrowing by households for today’s consumption. Low level of interest rate can allow individuals take a loan to pay school fees, pay house rent, pay for hospital bills, buy a car, shop for loved ones and decide to pay in installments for items that they would not have ordinarily been able to afford without availability of cheap credit. Cheap credit encourages a debt financed consumption that typically drives economic growth. Little wonder, economic studies have shown that economic boom typically occurs in periods of low interest rate.
  • It increases the value of financial assets and collateral: Investors also enjoy periods of low interest rate as the value of their assets typically rise rapidly during such periods through proper allocation of investments. Since the discount rate (interest rate) with which most financial assets including stocks and bonds is low, their worth and returns tend to be high. The reverse occurs when interest rate rises as the discount rate will also increase, thereby suppressing asset prices and leading to significant wealth loss for investors. Since assets are often used as collateral (for secured loans), lower interest rate could increase the value of the collateral and increase the amount of loan that can be assessed from a lender. Higher interest rate could cause this collateral to lose value and cause a panic in the financial market as collaterals may no longer be sufficiently valuable to secure the loan originally disbursed to the customer.
  • It increases the amount of money you can access as loan from lenders at a given level of income: Since the interest on the loan is low, borrowers at the same level of income will be able to access more loans from lenders which can be invested in private businesses, acquisition of assets or for consumption. Any of these activities are positive for economic growth and the more money spent on them, the faster the economy will grow. However, if a borrower at the same level of income approached a lender to borrow funds in a double digit interest rate environment like we are currently experiencing in Nigeria, the borrower will not be able to access as much loans as he did when interest rate was lower because the interest payment is significantly higher and will prevent the borrower from easily covering repayment of loan principal and interest within the same agreed period using his fixed salary.

Why has single digit interest rate remained elusive after three decades?

For decades, a narrative from the Apex bank (i.e. Central Bank of Nigeria “CBN”) has been a mandate to make credit more affordable by reducing interest rate to single digit. While most Nigerians believe that the power to do so rests in the hands of the monetary authority and with one simple decision it could be done, the reality is that this decision is not as simple as many believe. Even though the monetary policy committee (a committee within the CBN that meets often to set interest rate for the country) have the power to make the decision to reduce the monetary policy rate (which is the anchor for all interest rate in the economy including treasury bill rate and prime lending rate) to single digit, there are restrictions to doing so because the country’s economic fundamentals currently does not support such low interest rate. Any attempt to do so forcibly will lead to financial instabilities that could bring our financial system grinding to a halt, thereby causing what could be the greatest economic disaster the economy has ever faced.

Essentially for the monetary policy committee to comfortably reduce interest rate to single digit, a single digit inflation rate must first be achieved. This is because interest rate is generally used by Apex Banks as a monetary policy tool to ensure price stability. If inflation rate is high, interest rate will be high not only to ensure that inflation declines (since they share a negative relationship) but to also ensure that suppliers of monies “investors” to the financial system get compensated above the rate of inflation. This compensation is referred to as real interest rate which makes investing in such an economy attractive. If real interest rate was to be negative such that the rate of inflation exceeded the prime lending rate in the country, banks will refuse to lend as there will be no real financial benefit to lending and this will starve the economy and customers of much needed credit required to survive and grow. This explains why anytime the National Bureau of Statistics announces that inflation is trending upwards in Nigeria, the expected monetary policy response from the CBN will be to adopt a contractionary monetary policy stance which includes increasing interest rate to bring down the rate of inflation and make investing and lending in the economy remain attractive.

Since we have now established that single digit interest rate is beneficial to most stakeholders in the financial system and that inflation is the single greatest influence of the direction of interest rate in a country, we must then turn our focus on inflation to understand why for three decades, interest rate in Nigeria has remained in double digit. In the last 34 years, average inflation rate was 19.69 percent, including 6 years when inflation level exceeded 40 percent. Single digit inflation rate in the country has been rare, occurring only 6 times in the last 3 and a half decades. If we agree that investors should earn a premium above inflation rate for taking investment risk and inflation has remained at double digit for 28 of the last 34 years, it should then be no surprise to Nigerians that lending interest rate in the country is persistently at double digit.

-Emeka Ucheaga.

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Before Engaging In a Price War…Is It Your Price?

One of the interesting P’s in the four (4) P’s of marketing is Price. It may interest you to know that of the 4P’s of marketing (Price, Product, Promotion and Place), Price is the only element that speaks directly to the top-line or the revenue earning potentials of the business. Will it be safe therefore to assume how you price your product or service has a direct consequence on the profitability and sustainability of your business? 

I am of the opinion that the intensity of competitive rivalry in the Nigerian business environment is as fierce as other business capitals in the world. This reality sometimes pushes a lot of businesses especially Start-Up’s, Micro, Small and Medium Enterprises (MSME’s) to consider competing, on the basis of pricing. The practice whereby competitors lower their prices repeatedly to gain an improved share of the market is referred to as a “Price War”. While a price war has the short term benefit of attracting customers your way, the long term impact is that you will be most likely out of business sooner than you can imagine. 

In his book Competitive Advantage: Creating and Sustaining Superior Performance, Michael Porter one of the leading voices in Business Strategy, came up with a framework that suggests how companies can sustain their competitive edge in business. This framework also referred to Porters Generic Strategies identified three strategies organizations can use if they are to build sustainable competitive advantage. These strategies are Cost Leadership, Differentiation and Focus. 

Cost Leadership is often misrepresented as lower pricing when in essence it suggests that for an organization to have a sustainable competitive advantage, it has be so efficient and effective in the management of its resources such that it is able to produce a unit of its product or service at the least cost in their chosen industry. Please note that being able to produce a unit of a good or service at the least cost for a given level of quality in the industry is borne out of efficient and effective management of the resources available to the business and not an arbitrary reduction in prices because of the desire to increase market share. Differentiation Strategy on the other hand speaks to the uniqueness of the product or service as identified by the customer themselves; and for which they are willing and able to purchase the product or service regardless of the price. Organization’s that adopt focus strategy, identify a narrow segment of the market and within this narrow segment or narrow market focus, attempt to achieve either a cost leadership or differentiation. 

The above definitions actually give an insight on what organizations regardless of size should consider before fixing their prices. Some other important factors to remember in determining the price of a product or service are stated below: 

1. Customers buy VALUE not price per se. 

2. Not all customers are homogenous – different customers will value a product or service differently and as such will be willing to pay different prices for such a product or service. 

3. Customers always buy the product or service they perceive to represent best value. The customer’s perception of value is therefore always relative to the competition. 

4. The price of your product or service should at least cover all your variable costs with an added provision for profit. 

Let me explain further with this illustration. 

Abiodun and Gboyega are die-hard Premiership followers. Abiodun supports Arsenal while Gboyega supports Manchester United. Both men have an undeniable passion for football and decided within themselves to start selling football accessories. Abiodun and Gboyega situated their respective football accessory stores near a newly opened football park called Goal Centre. Every day hundreds of football enthusiasts went to Goal Centre to play five-a-side football. Abiodun and Gboyega stocked all kinds of football accessories including Jerseys, Socks, Shin-Pads, balls and boots. 

Gboyega gets all his football accessories from the UK. He travels there every three months to replenish his stock. Whenever he travels, he flies at least premium economy and spends a minimum of five days staying in a three star hotel. He has a bank overdraft priced a 28% per annum with an annual clean up cycle from one of the leading Banks in the country. He has to pay cash every time he purchases stock from the manufacturers as he has found it difficult to obtain credit from the manufacturer. He has four sales staff and offers a free drink every time a customer comes to his store. 

Abiodun also gets all his football accessories from the UK. His cousin Akin who lives in the UK helped him obtain a distributor’s credit from the same manufacturer Gboyega gets his football accessories from. The company ships a sufficient quantity of football accessories to him based on an agreed order level. He also has a credit period of 90 days. Abiodun is a very hands-on manager and has two sales assistants working with him. Abiodun sells a replica Manchester United jersey for Twenty-Five Thousand Naira and has a lot of patronage from the football enthusiasts who play football at Goal Centre. The total cost of getting a Manchester united jersey to Abiodun’s store from the UK was Twenty-Thousand Naira. 

As he returned from his last trip, Gboyega was informed by his staff that sales remained low because his Manchester United Jerseys were sold for Thirty Thousand Naira and customers complained that they were too expensive (the total cost of getting a Manchester United jersey to Gboyega’s store was Twenty Five Thousand Naira). Unhappy that he was unable to compete with Abiodun, Gboyega reduced the prices of most of the items in his store when he announced a 30% reduction in prices such that a Manchester United Jersey in his store sold for twenty- one thousand naira. He saw a significant improvement in his monthly sales performance following 

this decision. A few months later, he went back to the UK to replenish his stock but could only afford to buy 70% of his usual inventory as he had less cash following the heavy discounts given to customers. More people heard that the price of a Manchester United jersey at Gboyega’s store was cheaper so he continued enjoying increased patronage. Abiodun, seeing a decline in sales, offered everyone who bought a jersey free name customization and a ball (these added freebies cost him only two thousand naira). This decision once again endeared a lot of customers to Abiodun’s store. By Gboyega’s next trip he was only able to purchase 50% of the stock levels he started off the business with and he was due in a month to pay down his Bank overdraft and rent. He was unable to meet these obligations as and when due and held a clearance sale to shut down the business. Abiodun enjoyed increased patronage as Gboyega’s former customers became his. The Manufacturers gave him an extended credit period because he now significantly surpassed his previous order levels and met his financial obligations to them as and when due. 

The illustration above attempts to capture what happens to a lot of MSME’s. Both businesses sold the same products but had different cost structures. Price wars at best only give short term gains. All entrepreneurs should remember that building a sustainable business requires incorporating sustainable practices borne out of a clear thought process. Fighting a price war can be likened to running another person’s race. Most of the time, we don’t know the basis or circumstances that influence the pricing decisions or cost structures of our competitors, yet many entrepreneurs reduce the prices of their products because a competitor just did so. Price determination should be strategic, borne out of a deep understanding of the market, cost structures, industry, environment and circumstances unique to the business. Entrepreneurs’ should always run their race and not another’s, keeping their eyes on the price by seeking ways of improving their product offerings, service delivery, getting favourable terms of trade etc. not fighting price wars that may be counterproductive. Let price determination be borne out of the fundamentals unique to every business not by mimicking what your rivals do every time. Their Price doesn’t have to be your price.

Chukwuma Nwanze- Executive Director, Credit Direct Limited.

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The Parable Of Assets, Liability And Equity

The Parable of Assets, Liabilities and Equity- Chukwuma Nwanze

A young man once asked his Father, what must I do to be a successful entrepreneur? His Father looked at him and with a big smile on his face then beckoned on him to take a seat. As both men sat, his Father told him a parable.

There were two women, one with a degree from a reputable University named Zeo and another named Zara who didn’t go to the University but learnt the art of trading from her mother. Zeo and Zara set out to start-up businesses in their chosen fields. Zeo was a gifted Baker and set out to start a Bakery while Zara a very good cook set out to start a Restaurant. Before departing from home, Zeo was given some money by her parents and also obtained a loan from her best friend Zikora which was to be paid up in six months. Zara’s mother applied for a six month loan from her co-operative, sold some of her possessions and gave the money she had put together to her.

Zeo chose to situate the Bakery in an upscale neighbourhood where most of the residents appeared to live healthy lives as most of them were seen jogging very early in the morning every day. She got a space in a high street shopping mall and contracted a leading interior decoration company to help with the interior and exterior design of the Bakery she named “Zeo’s”. After finishing the interior and exterior design of the Bakery, Zeo set out to buy Bakery equipment’s only to realise that she had spent more than she should have on leasing and renovating/ upgrading the space where the Bakery was situated. Instead of buying new equipment’s, she resorted to buying fairly used equipment’s. With the money she had left, she had a launch party where she and her very excited friends sang, danced and posted pictures on social media all night.

Zara elected to open her restaurant close to a major bus terminal in a densely populated part of town where hundreds of people took the bus on a daily basis. Her Restaurant named after her, served local delicacies with the option to sit in and eat or take-away. She ensured her environment was always clean and made sure her sales girl was courteous to everyone who came to buy a meal. Her investment in acquiring assets for use in the restaurant was minimal as she bought only the basics with the mind-set that she will buy more equipment’s as the restaurant grew.

Both businesses started about the same time but three months into starting the Bakery, Zeo complained that her patronage was not as she envisaged. Her friends always came around and she was more than happy to give them pastries and bread every time they were leaving and even when they decided to buy, they bought on credit most of the time. Her oven started developing problems and she was unable to produce on some days. She had issues with the service charge at the shopping mall; the management of the mall wanted to collect service fees upfront for a three months period going forward. Zeo was distraught, everything seemed to be falling apart. She had not repaid her loan, no money, no customers, faulty equipment’s and increasing administrative overheads were her new reality.

Zara was having a different experience. Her native jollof rice was the rave of the moment as customers from within and outside her locality patronized her. She employed a “pay before service” philosophy. Her sales girl did the serving while she collected the money from the customer. She had repaid the monthly instalments on the loan her mother took on her behalf as and when due. Business was really good.

The young man appeared to be enjoying the story when his father asked him if he was able to extract any lessons from the parable. As he was about to respond, his father motioned towards him and continued speaking. “To become a successful entrepreneur, you need to understand the role of Assets, Liabilities and Equity in the business” he said. He went on to explain what he meant by Assets, Liabilities and Equity. The accounting equation (Assets= Liabilities+ Equity) truly sums it all. It suggests that assets can be acquired either through liabilities (debt) or equity or a combination of both. Assets can be referred to as resources controlled by a business from which future economic benefits are expected to flow to the business. “Future economic benefits” from that definition refer to the income generated by the business and it is safe to assume therefrom that cash will flow to the business. Liabilities on the other hand can be described as a “present obligation, arising from past transactions which when settled or paid will lead to an outflow of economic benefit from the business’’. Equity can be described as an “owners claim to a business’s net assets” and net assets refers to total assets less total liabilities. Equity is sometimes referred to as the cash or idea the owner of the business makes available to start up the business.

Assets can either be acquired by way of debt (loans, borrowings from family and friends) or Equity (personal savings, inheritance, funds from partners etc). One of the principal things done with loans or equity is the acquisition of assets (note that for a start-up, debt and/or equity can also be used for set-up costs). These assets are expected to generate income or enable income generation. It is this cash that is in turn used to settle expenses that maybe incurred during the course of business or liabilities as and when they fall due. Excess cash can also be used in acquiring new assets, used for growing the business or even paid out as dividend to the owners of the business.

Looking lost, the young man asked “Father, how does all this relate to your parable”? His Father answered with the following points

  1. The monies obtained by Zeo from her parents and the proceeds from Zara’s mother’s possession were equity in the business. Every start-up business needs equity as it shows a level of belief in the business idea or as some will say skin in the game.
  2. The six month loan Zeo took from Zikora and the loan Zara’s mum took on her behalf from the co-operative are Liabilities. These loans have cash flow implications as principal and interest will have to be repaid based on the terms of the loan. Start-ups and small businesses are encouraged to use more of equity at the start and when the business starts generating a regular cash flow pattern, they can consider taking debt by way of loans if and only where necessary.
  3. Zeo and Zara used their debt and equity differently. While Zeo used her’s  for non-income generating assets leading to poor cash flows, Zara used hers wisely, spending wisely and being more deliberate about getting the proceeds of her sales.
  4. To be a successful entrepreneur, you need more than talent. Zeo and Zara were gifted at what they did but the decision making required to manage a successful enterprise was evidently better with Zara.
  5. Cash is the life-blood of any organization. Any business that is starved of cash will find it difficult to operate whether in the short, medium or long term. Cash is used to fund day to day operations of the business, repay loans, settle overheads, invest, acquire assets and at the right time pay dividends.
  6. An understanding of your market and the interplay of product, price, promotion and place (4p’s of marketing) are as important as the talent, capital and passion any entrepreneur possesses.

The Father asked his Son, is there any other lesson you have learnt? The son replied heartily, “business thrives when friends and family pay for goods and services”.

  • Post by Chukwuma Nwanze- Executive Director (Credit Direct Limited)

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Five Reasons Why Small Businesses Fail

If you cast your mind back to your interaction with most entrepreneurs (and if you are an entrepreneur yourself), there is a high probability that you will find a common denominator amongst all the entrepreneurs you meet. There is an unbelievable dosage of passion and energy that is always evident when an entrepreneur is describing the inspiration behind his or her business model and why the model was on the verge of heralding “the next big thing”. Sadly, passion and ”big talk” are not often enough to help small businesses survive the first twelve (12) to twenty four (24) months of their business life. 

So why do small businesses fail? 

1. The quality of the business idea: The primary aim of a business is profitability and the seed that births profitability is the idea that is translated into a business model. Most often than not, entrepreneurs do not subject the quality of their ideas through the required rigor and stress testing before taking it to market. This is one main reason why small businesses in Nigeria fail. No matter how exciting and innovative an idea might sound, it is pointless taking it to market if its profitability and sustainability have not been tested. 

2. Motivation and Passion is not always enough: In today’s Nigeria, motivational speaking and inspirational talk appear to be the new “cool” and as such many entrepreneurs find themselves listening to a lot of these speakers, as they attempt to start or reposition their businesses. While there is nothing wrong with the activities of motivational speaking and coaching, the reality of starting a business goes beyond the excitement that comes after being exposed to a “think big, dream large” session or a “don’t walk on the earth, start from the sky” message. There are many other things that must support one’s passion or excitement – such as technical competence/skills, structured execution of strategy, effective cash-flow management, hiring the right people for the right roles at the right time to mention a few. These elements when mixed with passion, energy and excellence in the right business environment will help a great deal in achieving success. 

3. Taking giant strides instead of baby steps/Poor planning: “The journey of a thousand miles, starts with a step”. This is a simple but difficult reality to implement for most small businesses in Nigeria. The going-concern status of every business should be considered 

a marathon and not a sprint. Unfortunately, most start-ups today have elected to take giant strides at the commencement of their business operations instead of the required baby steps. In Nigeria, societal pressure sometimes pushes a lot of entrepreneurs to do things in the early days of their business. This ends up being detrimental to the medium or long term survival of such a business. They sometimes begin with incurring expenses that at best can be described as wasteful. For example, setting up fancy offices, aggressive above-the-line marketing, acquisition of operational vehicles, a full complement of staff etc. While there is nothing wrong in doing these things, the reality is, most small business owners commit funds that should be used for the core of the business on non-essentials – which at best satisfy their egos and give them a false sense of societal acceptance. In no time, they have used up funds that should be used for the core of the business on non-core business activities. 

4. No Staying Power: Most entrepreneurs, today, lack what may be termed as “staying power” as they give up their ideas once they hit any brick wall on their journey. Entrepreneurs are expected to brace up for turbulent times especially at the beginning when it appears that all that was thought through may have been wrong. The right mental attitude, coupled with a clear plan, proper structures and effective cash flow management will be required as you ride the waves. A dogged and resilient attitude in the face of serious opposition to the set objectives is most often missing in most entrepreneurs especially within the younger generation. The saying that life is not a bed of roses is applicable to businesses too. It may not always be smooth but entrepreneurs with staying power ride the waves and always come out stronger and more profitable. 

5. Poor Records Keeping: Most entrepreneurs are guilty of not keeping proper records of activities concerning their businesses. Truth is, most entrepreneurs don’t set out with the mind-set of not keeping proper records; yet a large number fail to keep track of business activities or transactions. 

Many small business entrepreneurs fund their activities from savings, friendly loans or even gifting’s from family members. These funds, which may come in form of cash in hand, are easily expended without keeping track of such outflows. Sometimes, assets may be purchased, transferred or even given out but most entrepreneurs fail to recognise and record these activities as they occur. At every stage of a business, from ideation right through to actual incorporation and commencement of the business, resources are deployed and put to use. Sometimes these resources are deployed so quickly that capturing them at a later date may either be impossible or done without the required 

accuracy. Absence of accurate records often leads to poor decision-making, and poor decision-making is normally the foundation for failure. 

The above five reasons are non-exhaustive and the jury is still out as to what percentage of start-ups or small businesses fail within the first two years of commencement of business operations. While some researchers have put it between 80% and 90% failure rate, some others have estimated it to be around 50%.

Chukwuma Nwanze- Executive Director

Responsible Lending As A Credit Risk Management Strategy

The principles of responsible lending became popular after the infamous United States subprime mortgage crisis which occurred between 2007 and 2010 but had been introduced earlier in some countries like the United Kingdom. The crisis itself was caused by sharp decline in home prices but made worse by a housing bubble driven by the proliferation of subprime mortgage loans. Loans are classified subprime when offered to individuals who ordinarily do not qualify for loans at prime rate typically because of bad credit history. Though expensive, subprime loans are good when used responsibly because it increases the opportunity of home ownership. Subprime loan is a problem in the absence of responsible lending. Many countries adopted the principles of responsible lending to prevent consumers against over-indebtedness, typically caused by predatory lending practices but some lenders have gone further to adopt responsible lending principles as a credit risk management strategy.

Credit risk is the inherent risk of a borrower (in this case an individual) defaulting on his/her loan obligation. Loan losses happen when a borrower fails to make payments on loan instalments on the agreed dates in a term loan or fails to make minimum payments on his/her credit card on the due date. These losses range from the opportunity cost of funds utilization through cost associated with recovery to outright loss on unrecovered funds. Credit risk management is therefore a priority for banks and non-bank lenders, and it starts with responsible lending. 

So, how do you SEE your customers? SEE, is used as an acronym for Suitability, Eligibility and Education.

Suitability

The suitability of a loan to a borrower depends on his/her need at the time of applying. The first responsibility of a lender is to match that need to its product offering. In the Nigerian context, a simple example of an unsuitable loan is selling an expensive unsecured loan to a customer who needs to buy a property. Another example is a mismatch in the loan tenor for the purpose of maximizing revenue; this instance may lead to what is known as a repayment fatigue. In fulfilling its responsibility of selling suitably, a lender must design its processes and/or train it’s sales agents to identify customers’ needs before offering the loan. Without such processes above or the necessary training, the risk of default due to mis-selling becomes high.  

Eligibility

The eligibility of a customer relates to affordability of loan repayments, having the appropriate source(s) income and/or stability of the income source. Eligibility must be determined at the point of sale and approval of the loan. As a responsible lender, your loan product must have a well-defined eligibility criterion (based on risk appetite) that guides both the sales team and loan underwriters. Also, key to loan eligibility is KYC (Know-your-customer) guidelines which prevents fraud and ensures that the loan is disbursed to the person identified as applicant. The idea behind eligibility of a loan is not a set of rules that have been created and passed down to the sales team but more important a credit risk culture that spreads across the organization. Eligibility assessments may be automated as part of your loan process, into an application score card and it typically requires completion of a form containing demographic and financial information. Non-eligible borrowers are more likely to struggle with repayments or even default outrightly.

Education

Loan defaults can also be associated with how poorly educated the customer is on the loan features. It is not enough to assume that customers are aware of the interest rate, repayment dates, settlement charge, loan tenor and other features because it was agreed during sales. As a responsible lender, these features must be captured on the offer letter or loan contract and possibly explained clearly to the customer verbally. More recently, technology has made it easy to communicate with loan customers via email, short message service (sms) and a client portal. There are several communication touch points in a loan cycle that must be well utilized; at point of sales, pre-disbursement and post disbursement. Post disbursement, a lender may send repayment reminders a few days before due date to reduce the risk of default.

Most of the points discussed so far relates to onboarding and management of the customers but SEE can also help a lender with remedial management. In the event of default where it becomes necessary to restructure a loan, these principles are required of a responsible lender.

Today we see local financial services companies in Nigeria adopting responsible lending principles as a tool to protect their organizations from reputational risk but evidence from countries that have adopted it shows that it also serves in managing credit risk. 

  • Gboyega Adelowore

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