While Stakeholder Honest Active Participation, Improved Identity Management & Data Validation as well as Active Legislation and Law Enforcement are critical to driving credit in the economy (as discussed in the first part of my article), there are yet several factors that should be addressed to create the ideal environment for achieving a credit-driven country.
Niche Market Specialization
To improve credit inclusion in the country, we must encourage market segmentation and specialization while also ensuring that key areas are not abandoned. We need to promote the study of different markets, what differentiates them and also create the framework to support businesses in such areas. For example, the market dynamics in Mile 12 market in Lagos may vary from that in Onitsha main market or Alade market in Ikeja.
Improved Borrower/Credit Education
Beyond having access to financial services, borrowing has been considered a mystery especially among small businesses across several sectors like agribusiness, manufacturing, education, etc. Research has shown that low access to credit and poor loan management are largely caused by inadequate borrower education which is often reflected in the quality of credit applications, engagement with providers as well as loan management. We need to adequately enlighten existing and prospective borrowers on how to access credit and manage the process carefully using multiple engagement strategies that speak to different strata of society.
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Promote Acceptable Technology and Process
When the process for accessing credit is simple and seamless, there will be a leap in the number of borrowers. Despite the influx of new technology and increase in Fintechs offering credit services, the number of unique borrowers has not grown at the expect loaned rate owing to the difficulty and the friction applicants face when requesting for loans. While some will prefer platforms such as mobile apps, others will favour USSD, web, social media or even paper. Hence, measures need to be put in place to provide credit to borrowers through the most suitable means for them.
Consistency of Support Services Providers and Vendors
We easily remember the credit providers and borrowers without considering the role of those that supply what the money is used for. For instance, asset finance, auto finance and mortgages depend largely on the quality of goods supplied. Quite often, people who purchase home appliances or equipment for business have an emotional connection to the performance of the item. If a vendor supplies a refrigerator purchased through a finance company and the appliance performs below par or packs up within a few months of purchase, the borrower will most probably “punish” the financial institutions by refusing to service the loan as agreed.
We need to always remember that people leverage the credit system to meet a need and credit is most impactful when borrowers can easily access goods and repay over a period. This system can only be supported by financial institutions and credit providers partnering with departmental stores, auto manufacturers, original equipment manufacturers or authorized dealers but the real success can only be recorded when the items are durable, of the highest quality and come with adequate warranty.
Culture Shift and National Orientation
If we want a credit-driven society with reduced emphasis on ‘cash only’ transactions, we must be open to the idea as a nation and educate ourselves. A situation where some have benefitted from the credit system in the country and lead a campaign against loans without properly educating the people is selfish. How do we expect genuine business owners to grow in the midst of dwindling opportunities? This is a collective effort and must be championed at all levels of government as well as the private sector and informal economy.
Provision of false information is also a predominant issue within the small business space which often leads to wrong assessments and defaults. Our economy will do better if the right information is shared.
Ensure Provision of Value
As a credit provider, if I am unable to improve your current situation, I will not extend the credit. We must be seen and confirmed to have delivered value to everybody we provide financial solutions or give loans to. This is especially important for prospective borrowers who are over-leveraged and still request for loans to meet a pressing need. It is advisable to counsel such customers and provide the best financial solution that will ultimately ease their financial burdens. Building a working credit system should not increase the burden on borrowers or lenders but ease the pressure on an already over-stretched society. Let us always ask, “What value am I bringing to the table?”
At the forefront of making Nigeria a credit-driven society is Zedcrest Capital Ltd. Led by Adedayo Amzat, CFA, the company through a range of subsidiaries including Zedvance and Zed Cap Partners, is redefining the nation’s financial landscape by providing cutting edge services to its teeming customers nationwide. Currently a top-three player across the brokerage, investment and consumer lending spaces, Zedcrest Capital is championing the financial inclusion thrust with a technological approach.
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