The Central Bank of Nigeria and stakeholders in the financial services sector have said a robust cashless policy system is capable of increasing Medium, Small and Micro-scale Enterprises’ access to loans.
They spoke against the backdrop of the various challenges facing the cashless policy of the CBN in the country.
The stakeholders including the CBN spoke at a virtual event hosted by the Chief Executive Officer/Managing Director of First Central Credit Bureau, an independent credit intelligence firm, Mr Deji Olamide, themed, “Harnessing the Benefits of Cashless Policy on Credit Allocation in a Developing Nation” recently.
Echoing the central bank’s vision around the cashless policy, the CBN Director of Banking Supervision, Haruna Bala Mustapha, noted that the intention has never been to eliminate cash “but to reduce the use of cash and encourage electronic payments using electronic channels.”
Mustapha, who was represented by Mr Adeniyi Adekunle, observed that although Nigeria is largely a cash economy, the cost of maintaining cash has become a burden due to the many vices arising from cash-based transactions.
According to him, cashless policy has largely encouraged transparency, ease of doing business and access to loan for MSMEs.
“We see that it enables a faster and easier payment, you can do online transactions from the comfort of your home,” he noted.
Mustapha, however, observed that in terms of infrastructure to ensure seamless integration of digital payments, “we are not there yet but we are working with our payment solution providers to improve the payment gateway to cope with the increased volume.
Listing the benefits of cashless policy, the CBN director said “It (cashless policy) has also increased cost saving; the less we release cash the more that we save in terms of cost. We talk about the increase in transparency and accountability; you are offered insight into the borrower’s credit history as well. The CBN will keep encouraging everyone to leverage the benefits of cashless policy so that we can also drive financial inclusion and promote economic growth in Nigeria.”
Also, the President of FinTech Association of Nigeria, Mr Ade Bajomo, who spoke on the rapid adoption of digital payments due to cashless policy, said, “A cashless policy has the potential to revolutionise Credit Allocation in developing nations and by creating a digital trail reducing the cost of credit assessment providing greater transparency, making it easier to assess credit worthiness, improving credit scoring speed and open loan processing, risk management, promoting financial inclusion.
“All of these can enable both individuals and MSMEs to access credit, and drive economic growth, improve the standard of living and and the role of credit bureaus.”
Explaining the future impact of the cashless policy on digital lending systems, Bajomo stated that the cashless policy requires the promotion of electronic transactions and the reduction of cash transactions.
“It has several benefits as clearly articulated in terms of convenience, speed, transparency, security, customer experience and others. However, one of the most significant benefits of cashless policy is the impact it has on credit allocation in developing countries. The lack of credit is a significant barrier to economic growth and development,” he noted.
The Head of Personal Banking at First Bank Nigeria, Mr Ikemefula Nwachukwu, explained that the CBN’s open banking framework has leveled the playing field for data access.
This, according to him, is expected to impact the calculations of credit scores for lending agencies.
“Today, banks as well as fintechs are doing a lot in the nano and micro-lending space because of the availability of data. So data is very crucial as you bring more customers or more players or more participants into the financial transaction net,” he added.
Nwachukwu posits that predictive analytics enables “ lenders to be able to project the probability of the propensity of the customer to repay the loan. You also are able to foresee ahead of time and take corrective steps for the customer to repay loans.”
Also, the National President of the National Association of Microfinance Banks, Mr. Joshua Ukute, urged stakeholders to leverage the cashless policy to create viable and more innovative financial products.
“Once we can do this as microfinance banks, we are contributing to enhancing financial deepening financial measures.”