A country that promotes a viable consumer credit system enables individuals to buy goods, access services on credit and pay later.
A developed credit system reduces cash transactions by enabling individuals to borrow to finance exigencies and other cogent projects, thereby, helping to stimulate domestic production and foster economic growth.
Nigeria’s statutory body for the control, supervision, and regulation of the credit management profession, the National Institute of Credit Administration, advocates an economy that promotes credit access and good repayment culture.
These credits are given out by the lending institutions whose jobs are to keep depositors’ funds and make credit available to the public for economic development.
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The credits can also be provided by the government, through a well-regulated programme..
According to reports, a large proportion of the country’s workforce are the small and medium-sized enterprises, because paid employment in the formal sector cannot employ all the youths.
These SMEs need adequate support to contribute significantly to the country’s Gross Domestic Product.
By giving the right support for expansion in this sector, there will be increased economic activities and unemployment will be reduced.
SMEs
In the country, consumer credit has been bedeviled by challenges such as the demand for collateral by the lending institutions which many of the SMEs lack, unwillingness of banks to give out long term loans, and high interest rates among other challenges.
These have hindered the dreams of many ambitious entrepreneurs and the regular salary earners from expanding their businesses, or acquiring other household items.
It has also worsened financial inclusion, most especially at the grassroots. Poor credit access hinders business growth, reduces production capacity, and adds to the poverty level in the economy.
To support the growing economy and unlock Nigeria’s economic potential, credit availability should be prioritized, according to the NICA.
Advanced countries.
Many advanced countries such as the United Kingdom, United States, Singapore among others, have thriving credit systems. They have the short-term loans in form of the credit card, medium, and other long term loans like mortgage. Through these credit cards, many households are able to acquire assets, while entrepreneurs can expand their business operations with longer loans. These countries also ensure regulations to safeguard the loans, by keeping records of repayment habits of individual consumers through the credit bureaus.
With the records, they are able to influence loan access to good borrowers, while bad debtors are denied future access.
GOVERNMENT
The present government of Nigeria has expressed its willingness to boost the credit system in the country.
The Federal Government recently disclosed its readiness to work with NICA to develop a framework for consumer credit in Nigeria.
In December, the Presidential Council on Industrial Revitalisation, formed the Technical and Regulatory Working Groups comprised of NICA.
NICA, under the new dispensation, will provide advisory, policy drafting, legislative and regulatory advocacy services, while serving as catalysts for the process, among others.
The Committee was given a five-month schedule to complete its objectives, according to a statement by the Minister of Industry, Trade, and Investment, coordinating the process.
As the Federal Government works with the professionals in NICA, the credit landscape in the country is set to experience a leap that will be a catalyst for economic development.
STAKEHOLDERS
Stakeholders in consumer credit services administration include the informal sector, the low income earners, artisans, SMEs, associations under the agriculture sector, cooperative societies, association of importers and exporters, association of market women, supervisory workers, middle class managers and their families, students in tertiary institutions, and other critical stakeholders.
These people form the bulk of the workforce in the country, but oftentimes, lack access to funds to achieve their dreams. With student loans, a Nigerian can have the credit to finance his education, and start paying back when he is qualified and working; exporters and importers can expand their trade and become relevant players in the international market; farmers can access the funds to increase their production from small scale farming to mechanized farming; traders can also get funds for expansion among others.
These people need to enjoy the benefits of credit, and feel more of the impact of the economic development agenda of the government. These groups form the resilience of the economy because they must naturally provide for their livings.
They have continued to make significantly contributions to the economies of developed countries because the governments recognize the players in this sector, and their contribution to the GDP outweighs even the big businesses.
