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The president of the Money Lenders Association, Mr Gbemi Adelekan, has urged Micro, Small, and Medium Enterprises to adopt a healthy credit lifestyle in a bid to have access to financial opportunities for business growth.
In a statement on Monday, he said he has noticed a trend, especially with microloans, where individuals move from one lender to another for funding despite having bad debts with other lenders.
According to him, a healthy credit history makes it easier to get approval for funding, negotiate better interest rates, and gain access to larger loan amounts when needed.
He said that MSMEs with multiple unpaid loans, frequent defaults, and poor repayment records often get blacklisted or disqualified from future opportunities.
“Do you realise that most licensed lenders in the country will first check your credit reports with the Central Bank of Nigeria-approved credit bureaus when you apply for a loan?
“With a negative credit profile, a person is more likely to miss out on major opportunities, like getting loans for unexpected expenses or to support their business endeavour, now and in the future.
“That is because the more loans are left unserviced, the lower the chance of qualifying for any other loans or accessing credit with good terms and conditions which in turn saves money on interest,” he said.
It also relates to various aspects of being financially literate and understanding various aspects of finance, including budgeting, responsible borrowing, and maintaining a good credit history and track record.
For MSMEs that often operate with limited capital and tight cash flows, maintaining good credit could be the difference between growth and stagnation.
He noted that money lenders, including banks, financial technology firms, and cooperatives, now employ the use of technology to assess the risk worthiness of borrowers.
He said a healthy credit history signalled that the business was trustworthy and likely to repay loans.
Adelekan noted that many digital lenders in Nigeria and across Africa relied heavily on data and credit scores to approve loans.
Adelekan, also the Chief Executive Officer of Trafalgar Associates, owners of Kwikpay Credit, revealed that out of the over 1,000 personal and business loan applicants received daily nationwide, almost 40 per cent of them have a bad credit history.
He said, “We are using machine learning and algorithms to also analyse alternative data and non-traditional like transactions and lifestyle choices, as part of our risk assessment to extend credit, mostly starting with a low amount, to build up their transaction history with us.
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‘This high number of people with bad credit reports, he stressed, must be reduced to the barest minimum to restore access to financing, protect business credibility and reputation, prevent over indebtedness and debt traps, and open doors to growth opportunities.
He asserted that there were validation mechanisms in place in line with approved credit bureaus to streamline beneficiaries.
He added that the company had plans to assist customers with its soon-to-be loan product service linked to financial education and financial wellbeing for customers.
Adelekan said the product would encourage customers to consider the repayment of defaults with other lenders when repaying monthly.
He added that it would consider additional factors such as educational background, employment, and income to assess loan eligibility.
