Financial Services
Supply of credit to households will increase in Q1 2021 – CBN Survey
Supply of secured and unsecured credits to households to increase in Q1 2021.
Supply of secured and unsecured credits to households will increase in Q1 2021. This is according to the CBN’s Q4 2020 Credit Conditions Survey Report.
The report indicates that the availability of secured and unsecured credits to households increased in Q4 2020 and is expected to rise further in the first quarter of 2021.
This edition of the survey report, which was conducted in December 2020, presents trends and developments in credit conditions in the fourth quarter, and its expectation in the first quarter of 2021.
The report noted that changing economic outlook and increased market share objectives were major factors responsible for the increase in supply of secured credit. In addition to these factors, improving economic outlook contributed to increased availability of unsecured credit in Q4 2020.
These factors, according to the report, are part of the forces expected to drive increased credit in Q1 2021.
Despite increased availability of secured and unsecured credit in the fourth quarter of 2020, request for secured lending for house purchase decreased in Q4 2020. Lenders, however, expect demand for such lending to increase in Q1 2021.
While lending for purchase of houses decreased, demand for mortgage/remortgaging from households increased in Q4 2020 and is expected to increase in Q1 2021.
The report notes that the proportion of secured loan applications approved decreased. This is understandable, considering that lenders tightened the credit scoring criteria, according to the report.
Further, demand for total unsecured lending from households increased in Q4 2020 and is expected to increase in Q1 2021.
Lenders’ resolve to tighten the credit scoring criterion increased the proportion of approved unsecured loan applications in Q4 2020.
Key highlights from the report
- The overall availability of credit to the corporate sector increased in Q4 2020 and is expected to increase in Q1 2021, due to “Changing sector specific risk and market share objectives”
- Demand decreased for corporate credit for all business sizes except for small businesses and Other Financial Corporations (OFCs) in Q4 2020 but demand for all firm sizes is expected to increase in Q1 2021.
- Secured loan performance, measured by default rates, worsened in Q4 2020, while lenders expect default rates in Q1 2021 to remain unchanged.
- The performance of total unsecured loan to households, measured by default rates, improved in Q4 2020 and is expected to improve further in Q1 2021.
- Corporate loan performance rates worsened for small businesses and medium Public Non-Financial Corporations (PNFCs) but improved for large PNFCs and OFCS in Q4 2020.
- Lenders expect lower default rates on lending to all sized businesses in Q1 2021.
- The overall spread on secured lending rates on approved new loans to households relative to Monetary Policy Rate (MPR) narrowed in Q4 2020 and are expected to remain unchanged Q1 2021.
- The overall spread on unsecured lending narrowed in Q4 2020 and is similarly expected to narrow in Q1 2021.
- Changes in spreads between bank lending rates and MPR on approved new loan applications widened for all firm sizes except medium PNFCs in Q4 2020. It is expected to also widen for all firm sizes except for medium PNFCs in Q1 2021.
What this means
The projected increase in the availability of secured and unsecured credits is an indication that interested households can get the required capital to finance different kinds of relevant projects.
This is good, considering the effects of Covid-19 pandemic on the incomes of households. In this regard, Nairametrics reported on November 15th 2020 that income and consumption of Nigerian households remain unstable due to COVID-19. Nairametrics further reported on the 21st of December 2020 that income remains unstable for many households in Nigeria according to the NLPS survey.
Thus, the availability of these two forms of credits serves as a cushion for mitigating the effects of unstable incomes for households.
What you should know
- The survey is part of CBN’s strategy towards understanding trends and developments in credit conditions, as a way of achieving the mandate of nurturing an efficient monetary and financial system towards promoting macroeconomic stability in Nigeria.
- The survey covers secured and unsecured lending to households, lending to PNFCs, small businesses, and OFCs. The results are based on lenders’ own responses and do not reflect the bank’s views on credit conditions in the economy.
- To determine the aggregate results, each lender is assigned a score based on their response.
- Lenders who report that credit conditions have changed a “lot” are assigned twice the score of those who report that conditions have changed “a little.”
- These scores are then weighted by lenders’ market shares.
- The results are analysed by calculating net percentage balances —the difference between the weighted balance of lenders reporting that demand was higher versus lenders reporting that demand was lower.
- The net percentage balances are scaled to lie between ±100.
Business News
Top digital banking apps in Nigeria
These digital banking apps have offered a more convenient full-banking experience to their users.
Traditional banks have been facing stiff competition from fast-rising digital banks. These digital banks emerged with higher consumer demand and have offered a more convenient full-banking experience to their users including higher interest rates on savings thereby attracting more people to adopt their services.
This has caused some traditional banks like Wema Bank and Sterling Bank to adopt this trend and also develop their own digital banking platforms.
Here is a list of the top digital banking apps in Nigeria.
Vbank
VFD Microfinance Bank is a fully digital bank that offers a wide range of financial products and services to professionals and entrepreneurs across all sectors. The digital bank has over 100,000 downloads on Playstore. They offer zero charges on transactions. Free account maintenance, monthly interest on savings, swift and secure transfers, withdrawals, and bill payments.
Pros
- Instant account opening without any paperwork.
- Fingerprint authorization: Login with your fingerprint and authorize transactions using your 4-digit PIN.
- Good customer service.
- Set up and track your spend budgets.
- Order debit cards from the apps.
- USSD banking service available.
- Easy bill payments on the app.
- Target savings with 8% interest rate.
User complaints
- New update causes app to crash.
- Upgrading KYC takes relatively longer.
Kuda bank
Kuda Bank is a free, digital-only bank with a microfinance banking license from the Central Bank of Nigeria. The bank includes tools for tracking your spending habits, saving more, and making the right money moves. They don’t charge card maintenance or account maintenance fees. Kuda has 1M+ downloads on Playstore. Its customers get 25 free transfers to other banks every month.
Pros
- Free debit cards.
- Good user experience.
- Free withdrawals at over 3,000 ATMs across Nigeria.
- 15% annual interest rates on savings.
- No paperwork involved when signing up.
- Automatic budgeting tools for easier money management.
User complaints
- Cards often take a long time to arrive.
- No SMS notification when you get credited.
- No USSD code option for transactions.
- Identity verification takes time.
AlatbyWema
ALAT is Nigeria’s first fully digital bank, designed to help you do more with your money. Alat is owned by Wema bank. Just like every other digital bank, there is no need to visit a bank to open an account. Alat has over 500,000 downloads on Playstore.
Pros
- Free bank card delivery anywhere in Nigeria.
- A Virtual Dollar Card for online payments.
- Bill payments option.
- Collateral-free loans are available.
- Save easily with automated goal saving.
User complaints
- The virtual card does not yet work.
- Delay in physical card delivery.
Sparkle
Sparkle is a lifestyle and finance app. It is a digital ecosystem providing financial, lifestyle, and business support services to Nigerians around the world. Licensed by the Central Bank of Nigeria (CBN), Sparkle is all about helping people achieve what they want, whether it’s entertainment, education, saving, or investing in the future. Sparkle has over 100,000+ downloads on the play store.
Pros
- Create an account with just your Bank Verification Number (BVN), email address and phone number.
- If you ever lose or misplace your card, you can freeze and unfreeze it in the Sparkle app.
- Save using Sparkle Stash for different goals at the same time.
- Percentage savings where you determine what percentage of your account balance will be going to your savings every day, week or month!
- Get real-time instant notifications for your transactions.
- Bill payments; Pay your bills whenever you want, wherever you are.
- Split bills with friends and family on the app.
- Physical and virtual cards available.
User complaints
- New update causes the app to crash.
- Reversal on failed transaction takes time.
- Cards can’t be used for international transactions.
- Poor customer service.
Mint App
MyMintApp is a self-service platform developed for customers to carry out a range of digital and mobile banking transactions on their accounts. It offers customers benefits such as convenience, speed, online real-time access, the security of transactions and options to initiate basic service requests without having to physically visit the bank.
MyMintApp also offers different banking services such as SME Banking, Personal Banking, Corporate Banking, Internet Banking (Electronic Banking), Current Account Opening, Savings Account Opening, Business Services, Loans, e-Business Solutions, Personalized Money Tracking and Card Solutions, etc. Mint has over 10,000+ downloads on Playstore.
Pros
- Good customer service.
- Seamless account funding via Paystack or directly from your existing bank account.
- Different saving goals with competitive interest rates to help you save for a targeted purpose.
- Money Manager to help you tag your expenses according to the most common categories, and see real views of how and where you spend monthly.
- Zero transaction fees on bill payments.
User complaints
- No bonus when you refer someone to the app.
- The selfie verification process takes time.
Onebank
Onebank brings a whole new financial and non-financial experience to the digital space. This application comes with sophisticated features and an impeccable user experience. It is highly secure, convenient, and easy to use. Onebank also offers payments, lending, investment, advisory, informational, and lifestyle services which brings that intuitive banking experience on your mobile. Onebank is owned by Sterling Bank
Pros
- Create a wallet account instantly with your mobile number.
- Biometric authentication.
- Instantly create your virtual card for online shopping and decide the card’s usage and expiry.
- Investments; enjoy up to 100% returns on Naira and Dollar investments.
- Quick loans of up to N5 million in 5 minutes.
- Receive money from Onebank user via QR code scan.
- Pay for airline tickets, cable & internet subscription directly on the app.
- Cardless withdrawals are available.
User complaints
- Prone to error when you try to sign in.
- Bad user experience.
- Transaction history only shows debits and not credit transaction.
- Failed transactions take time to be reversed.
- Difficulty when you try to switch devices.
Rubies
Rubies is a digital bank that disrupts regular banking by providing 100% digital top-notch services and technology at its peak. With Rubies, you can decide what your account number looks like. Rubies give you the financial freedom to do more than just banking and the app has garnered over 100,000 downloads on Playstore.
Pros
- No maintenance fees.
- Free Debit Cards: Also comes with an option of free delivery.
- Independent Banker: Refer people and earn every time they transact on Rubies.
- Customizable Account: Decide what your Account Number looks like.
- Proximity Transfer: Transfer money easily to friends on Rubies around you with a single tap.
- Open Account: Get an account on the fly, from anywhere (App, Website).
- Request Money: Request funds from friends on Rubies with a single button.
User complaints
- Verification process takes time.
- BVN verification unstable.
- App downtime takes more than 24 hours to resolve.
- Difficulties upgrading account.
Why this matters
With the increasing number of digital banks and fintech startups, the competition for acquiring and retaining new and old customers is getting stiffer. More traditional banks will need to adopt digital banking to stay competitive.
Business
CBN moves against bad debtors to other financial institutions in new circular
The CBN has said it will extend its Credit Risk Management System to other financial institutions in the country.
The Central Bank of Nigeria (CBN) has further moved against bad debtors as it said it will extend its Credit Risk Management System (CRMS) to the other financial institutions (OFIs) in the country.
This follows the successful implementation of the CRMS in deposit money banks across the country.
This disclosure is contained in a circular titled, ‘Credit Risk Management System: Commencement of Enrolment of all Development Finance Institutions, Microfinance Banks, Primary Mortgage Banks and Finance Companies, issued by the apex bank and signed by its Director, Financial Policy and Regulation Department, Kelvin Amugo, on April 8, 2021.
CBN in the circular noted that this policy is to help promote a safe and sound financial system in the country as well as prevent the bad debtors from undermining the banking system.
READ: CBN warns banks against rising level of Non Performing Loans
What the CBN is saying in the circular
The statement from the CBN’s circular reads, “As part of efforts to promote a safe and sound financial system in Nigeria, the CBN introduced the CRMS to improve credit risk management in commercial, merchant and non-interest banks as well as to prevent predatory borrowers from undermining the banking system.
“With the successful implementation of the CRMS in deposit money banks, it has become expedient to commence the enrolment of Other Financial Institutions on the CRMS platform.
Accordingly, all DFIs, MfBs, PMBs and FCs are required to report all credit facilities (principal and interest) to the CRMs and to update same on monthly basis. OFIs shall note the Bank Verification Numbers and Tax Identification Numbers are the only basis for regulatory renditions.
READ: CBN reviews minimum interest rates on savings deposit to 1.25%
To ensure full compliance, OFIs are reminded to conclude the tagging of ALL life credits files for ALL individual and non-individual borrowers with BVN and TIN respectively by May 14, 2021.’’
The apex bank in the circular also advised concerned OFIs to acquaint themselves with the regulatory guidelines for the operations of the redesigned CRMS for commercial, merchant and non-interest banks in the country.
While noting that it would monitor compliance with the requirements of this circular, the CBN said that appropriate sanctions would be applied for non-compliance.
READ: U.S Government to unveil Crypto nemesis before end of July
What you should know
- The CRMS was introduced due to rising cases of non-performing loans in banks and this contributed significantly to the financial distress in the banking sector.
- This was also compounded by the existence of predatory debtors in the banking system who are fond of abandoning their debt obligations in some banks only to move to contract new debts in other banks. This led to the need for a central database from which consolidated credit information on borrowers could be obtained.
- The CRMS is web-enabled thereby allowing banks and other stakeholders to dial directly into the CRMS database for the purpose of rendering statutory returns or conducting status enquiry on borrowers.
