Professor Chris Onalo, Registrar/CEO, Institute of Credit Administration (ICA), has offered a prognosis as to why the issue of non-performing loans amongst deposit money banks has lingered thus far, noting that at the root of the crisis lies the problem of insider-abuse, poor monitoring and lax laws.
According to the professor of Credit, who gave useful insights on how the country can navigate the problem of toxic debts in the latest ICA blueprint report, noted that the growing non-performing loans have been a major source of concern since 2009, which was a result of inadequate credit risk assessment and management, inadequate loan monitoring and economic recession among other factors.
The ICA boss further stated that it was relevant to restructure credit by increasing the tenor and decreasing the interest rate to enable defaulters to get back in business.
He stated that the banks need to be closer to the obligor to know precisely where and how the funds are deployed as most defaults are because of poor monitoring by the banks, while noting that early detection can avoid total deterioration, it stated that there should be preventive measures in place.
The report suggested “Enforcement of credit scores to go beyond being able to access bank loans, and bank defaulters should not easily access certain services to serve as a deterrent to all.
“Stronger legislation/regulation against institutional-based causes of loan default, which includes the nature of the loans, time of disbursement, the profitability of customers’ enterprise, terms of the loan, interest rates etc.”
Pressed further, Onalo said, “All financial institutions should be compulsorily onboarded to the collateral registry platform,” stressing that, “The ongoing enforcement of the Credit Risk Management System should be fast-tracked along with total compliances with Monthly credit bureau reports. The CBN and Bankers committee should ensure immediate implementation and deliberate enforcement of Global Standing Instruction to check activities of bad debtors, which has become a risk to the financial system stability and the economy.”