Unsecured lending to households increased in the third quarter (Q3) of 2019. This is disclosed in the latest Credit Conditions Survey Report released by the Central Bank of Nigeria (CBN).

According to the CBN, the increase in unsecured lending was traceable to market share objectives and higher appetite for risk as factors. However, while unsecured lending surged in the period under review, the CBN stated it expects a decrease in Q4 2019.

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The details: Irrespective of the resolve of lenders to leave credit scoring criterion for unsecured lending (personal loans) unchanged in Q3 2019, the proportion of approved total loan applications for households increased.

While lenders expect to tighten the credit scoring criteria in the next quarter, it is anticipated that the proportion of approved total loan applications in Q4 2019 will increase.

On the other hand, secured lending in Q3 2019 increased. According to the CBN report, the increased availability of secured credit to households in Q3 2019 came as a result of increased market share and high-risk appetite of lenders. Essentially, the high-risk appetite of lenders means lenders are willing to take high chances when lending to households.

Meanwhile, the CBN report showed that secured loans to households are expected to increase in the fourth quarter of 2019. According to the CBN, this will be due to improving liquidity position and higher risk appetite of lenders.

While there was an increase in both unsecured and secured lending to households, lenders recorded lower losses given by default from households lending in Q3 2019 and this is expected to further improve in Q4 2019.

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The bottom line: A quick look at the trend of unsecured credit to households over Q1 to Q3 2019, showed that despite the fluctuations in trend of approved loan applications, the availability of unsecured credit to households improved.

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While the CBN attributed the increase in unsecured credit provision to improved risk appetite and improved liquidity, this might also be attributed to the rising number of fintech companies in the lending market in Nigeria.


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