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In this exclusive interview, Ahmed 'Tunde Popoola, CEO, CRC Credit Bureau Limited, reflects on the milestones the Nigerian credit bureau industry has achieved over the last decade, and provides insights into the socio-economic benefits of an efficient credit information system. He was interviewed by Jide Akintunde, Managing Editor, Financial Nigeria magazine.    

Jide Akintunde (JA): The Nigerian credit bureau industry is a decade old. Would you say the industry has come of age?

 Ahmed 'Tunde Popoola (ATP): It could be said that the industry officially launched in 2008 with the release of the Guidelines for Licensing, Operations and Regulations of credit bureaux by the Central Bank of Nigeria (CBN). Before then, the operators were not backed by any legal or regulatory framework. They were also not taken seriously by creditors and other stakeholders.
    
The guidelines provided structure for the industry to grow, while compelling those interested in operating credit bureaux to apply for licences. By 2009, three credit bureaux were licenced, including CRC Credit Bureau. The first guidelines were revised in 2013, having taken cognizance of the challenges that operators and regulators had observed after the licenced credit bureaux had operated for about five years.

However, in recognition of the need to improve protection of the information of millions of people and thousands of institutions, and in line with global best practice, it became imperative to have a legislation in the country's credit bureau industry. This was achieved in 2017 when the National Credit Reporting Act 2017 was passed by the National Assembly and signed into law by then-Acting President, Professor Yemi Osinbajo.

When CRC Credit Bureau commenced its live operations in June 2009, only nine commercial banks were ready to submit data and access the credit information in our database. Today, over one thousand commercial entities use the credit bureau by submitting credit data or by accessing credit information.

Although adoption has been very slow, most regulated banks and non-bank financial institutions now submit data and/or obtain information from the credit bureaux. A lot of non-financial institutions such as pharmaceutical companies, conglomerates, insurance companies, and a host of others subscribe to credit bureaux.

The industry is still growing as we continue to encourage more adoption of credit reporting by both creditors and borrowers. We also encourage borrowers to have responsible credit behaviour. Lenders are encouraged to recognise and adopt reputational collateral for advancing credits to eligible borrowers. We recognise that no economy can truly thrive without a robust credit system.

JA: What have been the headline contributions of CRC Credit Bureau (CRC) in the evolution of the credit information market in Nigeria?

ATP: We have been at the forefront of providing credible credit reporting in Nigeria. We are the trailblazer in product development in our industry, having developed and introduced various products for the Nigerian economy, including the world's most popular credit score - FICO (Fair Isaac Corporation) Scores. The adoption of the scores is changing the consumer lending landscape and enhancing risk management in Nigeria.
    
We spearheaded the advocacy that led to the introduction of the Bank Verification Number (BVN) when we made a presentation on the need for a unique identification in the banking system to the Bankers' Committee in 2010.

We pioneered the introduction of various credit bureau products in Nigeria, such as self-enquiry, credit monitors, portfolio reviews and data management. We were the first to go live with the Dud Cheque portal, which enables banks and other institutions to conduct searches on returned cheques or instruments in Nigeria. Recently, we launched our mobile credit check channel, which enables individuals carry out personal credit checks via their mobile telephone by simply dialling *565*8#.

JA: After a few years preceding the recession of 2016 – 2017 when non-performing loans of the banks moderated, NPLs have now spiked. One could simply attribute the NPL trends to the business cycle. But that would neutralise the impact of the credit bureaux. So, are the banks using the credit reports as adequately as they ought to?

ATP: The Nigerian economic downturn, which began in 2014 to the end of the recession in Q1 2017, took its toll on loan performance. We had celebrated the downtrend of NPLs to as low as 3.2% in 2014; but the spike you are referring to started when the economy began to experience a downturn in the wake of the drop in oil prices. Nigeria was not immune from the impact of the decline in the price of crude oil in the international market. Ours was compounded by significant decline in oil production, occasioned by the activities of militants in the Niger Delta. A combination of low production and drop in prices led to big problems for oil companies who became unable to meet their loan obligations, which in some cases were denominated in foreign currency. With the naira massively devalued during the same period, the value of foreign denominated loans due for repayment increased. The recession led to decline in foreign reserves, rising inflation and depreciation of the national currency. Other issues manifested in the form of job losses, rising unemployment, closure of factories, foreign exchange scarcity, and erosion in purchasing power. All these affected the capacity of firms and individuals to repay loans and meet credit obligations.

The issue of rising NPL was, therefore, precipitated by the state of the economy, as opposed to the failure of credit bureaux.

Banks are mandated by regulation to use credit bureau services for the review of credit applications, as well as renewal and restructuring of loans. Banks also use credit bureaux to review existing loans and conduct Know Your Customers (KYC) checks before taking on new customers. My view is that there is much more the banking industry can leverage from the products and services of credit bureaux than they are currently doing. Most of the banks have not taken full advantage of the enormous information and products available in the credit bureaux, beyond what the CBN stipulates.

We have to keep reiterating to the banks and other lenders that using credit bureaux enhances confidence in lending and credit administration. Credit reporting systems promote information sharing; they also enable creditors to know the capacity of borrowers and their willingness to repay loans. Credit reporting shapes the behaviour of consumers and commercial entities and forces all economic agents and consumers to honour their debt obligations. It rewards good behaviour and punishes bad attitude towards credit. The system is optimal in promoting robust risk management, improving access to credit and enabling risk-based pricing. Ultimately, it significantly opens up opportunities of access to finance to economic agents with the attendant effects.

JA: For Nigerians who are passive about their credit information, what risk do they run, and what are the benefits of credit reports in an economy?

ATP: Credit checks are essential as they enable individuals and entities keep abreast of their credit status and avoid surprises. Periodic checks are recommended the same way medical check-ups are advised. With periodic checks, individuals and corporate entities have the information available to creditors or others who use a history of credit behaviour to make decisions on new loans, post-paid products/services and other critical non-financial transactions.

Where errors are noticed in the information received from the credit bureau during these periodic checks, the supplier of the information can be contacted to effect corrections. Individuals and entities who do not conduct periodic checks might get unpleasant outcomes when they try to carry out transactions that require a successful credit check prior to approval.

The credit bureaux and the law have made it easy for individuals to have access to their credit reports. The Credit Reporting Act 2017 mandates credit bureaux to allow individuals have one free credit report a year. This can easily be obtained by approaching any of the credit bureaux physically or online. Beyond this, CRC has developed a number of products and services to assist individuals and corporate entities monitor their reported credit information. I strongly suggest that everyone should try to subscribe to some of these services.

The credit reporting system provides a lot of benefits to borrowing customers, lenders and other creditors, and the economy at large. For borrowers, the credit report and the credit score serve as reputational collateral, which shows the extent of creditworthiness.

Credit reporting enhances market penetration and business expansion. It promotes financial system soundness, by helping to reduce the incidence of fraudulent practices and the level of non-performing loans due to its effectiveness in managing credit and operations risks. Overall, credit reports reduce information gap and asymmetry between lenders and borrowers, thereby helping industries to function efficiently.

As a result of the foregoing, credit reporting promotes economic growth, by improving effective demand, economic productivity and employment opportunities. One other important benefit of credit reporting is that it shapes social behaviour as it promotes a sense of reputation as part of the moral values of the society. This can potentially stimulate a new culture towards financial obligation.

JA: What are the core products of CRC Credit Bureau and who are their targets?

ATP: At the heart of CRC's product development initiative is our zeal to unlock access to credit and support decision-making with confidence. Such decisions, which are hinged on an individual or entity's credit history and behaviour, could be financial (loans, pre-paid products or services) or non-financial (employment checks, key or strategic appointments, KYC) requirements. CRC today has produced fifteen products and services that are available in the Nigerian market, targeted at lenders, creditors, other firms and individuals. Some of the products are designed to help lenders in credit assessment while others are to help in portfolio monitoring, collections and product development.

Products that assist credit application assessment are credit information reports and credit scores. Our portfolio monitoring products enable lenders to review loans granted and also monitor the performance of customers regarding loan repayment. Our Data Management Services help in data cleaning for banks and other firms.

We also have referencing services, which help firms to do due diligence. Our Skip Tracing and Prospecta products are veritable tools available to firms in locating long-lost customers. These services also help in product development, identifying new customers in new markets and supporting credit collections and loan work-out.

Individuals and firms can benefit from our Self-Enquiry, ICON/CON Plus (Individual Credit Overview Notification) products as they help in credit self-check. Our Credit Monitors give opportunities to lenders to obtain instant information on current updates about their customers. Individuals and firms can also subscribe to this product to receive updates as their information changes in our data base. We also have the CRC Financial Education Centre established to support the development of capacity, particularly in credit and risk management in Nigeria.

JA: You could, quite deservedly, be called the doyen of the Nigerian credit bureau industry. What has been your experience leading CRC, and also leading the industry in particular as the current President of the Credit Bureau Association of Nigeria (CBAN)?

ATP: I have been fortunate to be a pioneer CEO of multiple institutions. I was the pioneer CEO of Abuja Enterprise Agency (AEA) at a time when public establishment of institutions to support entrepreneurship development was non-existent. As the pioneer CEO of CRC, it was yet another opportunity to advance a new initiative in Nigeria. It has been an interesting but very challenging one.

We came to the market as a supply-leading institution at a time the market was not ready for lending models based on borrower information/credit history and credit scores. At the same time, the country did not have structures and frameworks to support an efficient credit reporting system, including an enabling law, a national means of identification, and good and up-to-date data quality. But we have been able to surmount most of the challenges. Building a first-class institution like CRC Credit Bureau requires a lot of insight and deployment of my experience to create operational and governance structures to support sustainable efficiency.

Part of the contending issues entailed how to raise funds, attract the best technical partners for our credit report and credit score products, and surmount the challenge of working with diverse stakeholders, who in some cases, are competitors among themselves but are our customers and shareholders.

I recognised the need to build an industry coalition. This was why I was at the forefront of establishing an industry association now known as the Credit Bureau Association of Nigeria. CBAN has helped us as an industry to relate with the regulators, the market, the Bankers' Committee, the Association of Microfinance Banks, the international community through the World Bank Group and other stakeholders.

JA: In the early days of the credit bureau industry, the CBN provided advocacy and policy support to the industry. Do you think regulatory support is needed to raise the performance profile of the industry in its second decade?

ATP: I need to give a special appreciation and commendation to the CBN for the full support they have been giving to the industry. It has been a very stimulating experience working with the entire credit bureau team at the Central Bank. Through the CBN, we obtained tremendous support from the World Bank Group – in particular the IFC – in accelerating the development of our industry in the areas of market engagement, data collection, legislation, on-boarding of financial institutions, support for our annual conference, awareness creation to business member organisations (BMOs) and capacity development of the credit bureau operators and relevant staff in the banking industry.

Though we will mark our ten-year anniversary next year, the industry is still in its infancy – indeed the credit bureau industries in matured economies have been around for decades. Therefore, we will continue to need the support of our regulator and the World Bank Group. There is still a lot that can be done to support the industry, especially in the areas of awareness creation, skills development and improvement in data quality.