The Federal Government’s consumer credit scheme anchored by the Nigeria Credit Corporation (CREDICORP) is beginning to take shape with details of interest rates and payment tenure showing a more friendly interest rates regime compared with what digital lenders currently offer.
Nairametrics can confirm that the interest rates on loans under the scheme range from 4% monthly to 22% annually.
For context, digital lending platforms, on average, currently charge up to 10% monthly interest rate and a 120% annual percentage rate.
Although the scheme started with civil servants, who have now received up to N3.5 billion in a few days according to the latest data received by the Corporation, CREDICORP is forging ahead with the expansion to the general public.
Two of the partnering financial institutions, Accion Microfinance Bank and Abbey Morgage Bank confirmed to Nairametrics that the working-class Nigerians can now apply for the loans through them.
Five financial institutions already onboarded in the scheme include FCMB’s Credit Direct (serving civil servants), Wema Bank, Accion Microfinance Bank, Letshego MFB, and Abbey Mortgage Bank
Consumer credit interest rates
Speaking with Nairametrics, a customer support agent of Accion MFB, who identified himself as Charles, said Nigerians can access between N50,000 and N1 million loans under the scheme at a 4% monthly interest rate.
According to him, the tenure of the loan is a minimum of four months and a maximum of 12 months. However, unlike the digital lenders that offer instant, same-day loans, he said this would take three days to process.
- On requirements for the loans, he said the applicants must be a working-class individual who can show evidence of employment and must have worked with his employer for at least six months before applying for the loan.
- Similarly, a customer agent of Abbey Mortgage Bank, identified as Desola in a phone call noted that the Bank had just concluded first phase of its disbursement for civil servants and now about to begin a second phase for businesses and individuals that are employed in “reputable organisations”.
- She further disclosed that loans from the bank under the scheme attract 20 to 22% annual interest rate with tenure of one to three years.
- She, however, noted that as a Mortgage Bank, the bank does not have the license to offer retail loans but does so through a retail lender partner. A check on the loan application link for the bank on the CREDICORP website shows that the bank is offering the loans through Fast Cash, a digital lending company.
- Meanwhile, Wema Bank on the CREDICORP website where participating financial institutions are listed, said it is offering Nigerians salary-based and payday loans under the federal government’s scheme at 2% monthly interest rate.
Applicants’ experience
While the CREDICORP last week announced that a total of N3.5 billion had been disbursed to 10, 942 beneficiaries in just five days of the launch, several applicants have been complaining about the slow pace of the disbursement.
An applicant, Ehwarieme Goddey, said the CREDICORP would need to onboard more financial institutions to fast track disbursement of loans as many applicants are still waiting.
Currently, only five financial institutions are participating in the scheme and only one of them, Credit Direct handled the first phase of the disbursement to civil servants.
“More Financial Institutions need to be brought in fast to make the disbursement process less cumbersome.
“For now, the Credit Direct is overwhelmed! I have been in the queue now for 4 days! Moreover, they (Credit Direct) don’t seem to be handling credit needs as a new initiative by CREDICORP. I’m not pleased,” Goddey said.
Many others have also complained of not receiving any feedback months after applying for the loan. According to one of the applicants, Femi Abdulkadri, he had applied three months ago via the website of the CREDICORP and had not received any feedback or an acknowledgement of the application.
Digital lending business set to be disrupted
With the government scheme offering more friendly interest rates compared with the current cutthroat rates of digital lenders, industry analysts see a fresh challenge that may force loan app companies to cut their rates or pack up if the government’s scheme is successfully executed.
The CEO of Edge Financial Services, Mr. Martin Joseph, noted that while it is not unexpected that the interests under the government scheme should be lower, a successful implementation of the scheme would provide direct competition to private digital lenders.
“These lenders typically charge higher interest rates to compensate for the risk of lending without collateral. As consumers gravitate toward cheaper, government-backed credit, private digital lenders may struggle to attract new borrowers or retain existing ones, unless they adjust their offerings.
“They may be forced to reduce their interest rates to remain competitive. However, this could pose challenges as these lenders often rely on higher interest rates to manage the risks associated with their loan portfolios, such as non-collateralized loans and high default rates.
“Lowering rates without a corresponding decrease in risk could squeeze their margins,” he said.
However, the Chairman of the Money Lenders Association, the umbrella body of the registered loan app companies in Nigeria, Mr. Gbemi Adelekan told Nairametrics that the members of the Association had also applied to be part of the scheme.
“A lot of digital money lenders applied when their (CREDICORP) adverts came out and they were ready to collaborate.
“But what we found was that they only want to collaborate with those that are licensed by the Central Bank of Nigeria (CBN) rather than those that are licenced by the Federal Competition and Consumer Protection Commission (FCCPC).
“We are still watching because there is no way they will be able to understand the business more than us,” he said.
What you should know
President Bola Tinubu announced the launching of the first phase of the Consumer Credit Scheme on April 21, a programme designed to offer credit facilities to working citizens in the country.
- The President’s special adviser on media and publicity, Ajuri Ngelale, said the first phase of the scheme will begin with civil service members before extending to the main public.
- Ngelale emphasized that consumer credit plays a pivotal role in modern economies, empowering individuals to elevate their standard of living by acquiring goods and services upfront and responsibly managing payments over time.
- The scheme facilitates vital investments like housing, transportation, education, and healthcare, crucial for sustaining stability and pursuing personal aspirations.
