Following the unveiling of debtorsafrica.com platform and the launch of its maiden reports with the theme “Debtors, NPLs & Bad Debtors- The Case For A New Industry Approach”, stakeholders in the financial sector have applauded the initiative.
Just as they also calls for continuous sectorial regulatory support in addressing the issues of delinquent debtors in the system.
The emerging global economy requires more credit but it also requires more confidence in the credit to debt system and strong integrity that will support the economy.
The spread of the digital economy, big data, artificial intelligence and informatics will lead to new approaches of credit evaluation, initiation, monitoring and recovery.
This, Bayo Awoyemi, Team Lead, Debtors Africa, said the platform set to address, “The Debtors Africa Website is a searchable database of delinquent borrowers which enables speedy assessment of the character of a prospective customer. Of equal importance is that, investors can use the database as a starting node for assessing the quality of the management of a business they intend to either partner or invest in”.
According to him, “The searchable database is designed to allow contributors such as banks, loan fintech and credit companies, cooperatives, tax authorities, private businesses, government agencies, utility providers, etc. list their delinquent debtors and their indebtedness on the platform as a contributor to the platform”.
With this listings, a moral and business burden is placed on delinquent borrowers as prospective lenders would use the library to fact-check the borrowing history of a loan applicant and use the history to set up a character rating index that would guide Credit Appraisal Memorandums (CAMs) and inform acceptance or decline of credit requests.
Commenting on the introduction of Debtors Africa platform, Moses Igbrude, Chairman Consumer Rights Awareness Advancement & Advocacy Initiative (CRAAI) said, the idea is noble, only if it will not face implementation challenge.
He strongly believe, it will help to sanitize the credit system in Nigeria. Adding that the promoters should work closely with credit registry companies to identify the chronic debtors in the financial system.
The consumers Advocacy expert, noted that the Debtors Africa platform will also help lenders to identify genuine customers and enhance better debt management in the Nigeria credit system.
For David Adonri, Executive Vice Chairman Highcap Securities Limited, expressed delighty for the initiative, which he said, is highly commendable.
While hoping that all reasonable measures to authenticate the records are taken by all parties involved.
Adonri, raised a concern, that including the electricity utilities companies, may not be advisable, because according to him, the Discos are fraudulent organizations.
In his words “they charge their customers for electric power not consumed through estimated bills”.
He is of the opinion that, publishing any debtors list from them will be misleading. Adding that for the capital market, through the Securities and Exchange Commission (SEC), list of debtors can be verified and published.
However, the Managing Editor Proshare Nigeria Limited, Teslim Shitta-Bay, in his contribution, said, this a shift from the era of publishing names of delinquent debtors on various media platform with no central portal to harness the information published or achieved the objective creditors desire, which is repayment and resolution.
Shitta-Bay, explained that “With Debtors Africa, the new model provides a central hub to access this information and goes beyond naming and so-called shaming, to informing prospective creditors and other institutions that require character validation, while name removal from the database is subject to the review and removal by the contributor after debt resolution is attained”.
This unlike the days when banks published their delinquent debtors list on online digital platforms in which they had no control of content update, modification and removal, the Debtors Africa platform puts the burden on creditors who are expected to take the action of delisting themselves further to showing proof of resolution, such that it also serves as an independent check on contributors who may choose to delist a debtor, based on mutually agreed terms of settlement .
In his contribution, the Chief Dealer, City Code Trust & Invest Company Limited, Fakrogha Charles, noted that the issue of Non Performing Loans (NPLs) has really affected the growth of African economy and Nigeria in particular.
This according to him, has made the financial services firms, mainly banks handicapped in creating more credit to support the real sector.
“We know business climate in Africa is really harsh and this is affecting the business men to be able to do genuine businesses, make profit and pay their loan as at when due”.
Fakrogha, explained that a situation where the creation of these credits, disbursement and servicing due process is not adhere to properly, Debtors Africa platform will go a long way in instilling transparency and commitment on the part of the lender and the beneficiary to do business ethically, since they know that the platform will reveal the identity of debtors.
While commending the initiative, the Managing Director / Chief Executive Officer of PFI Capital Limited, Peter Elege, took a holistic look at the achievement of the banks between 2017 and 2018, noting that most of the banks had their cost of risk decline, signifying reduction in impaired Loans.
He said, this showed that the banks were on recovery path, because they have been able to reduce their risk portfolio.
However, Elege, said with the impact of Covid-19 ravaging the global economy, this would have an adverse effects on the banks, as NPLs are expected to increase in 2020, as companies and individuals are enroute to default on Loans.
The investment banker and portfolio manager emphasized that “this will be more severe for banks that have greater exposure to the oil and gas, hospitality and aviation sector. Hence the creation of Debtors Africa is an idea that it’s time has come”.
Meanwhile, in subsequent reports, debtorsafrica.com in collaboration with its partner Proshare Nigeria Limited, said they would include a deep dive on sectors adversely affected by COVID-19 and the implications for the sectoral credit status of each industry.
Sectors that would likely be most severely affected by loan delinquencies once the pandemic is over, according to them, would include, but would not be limited to, the following: Airline sector, Hotels and Hospitality sector, Transportation sector.
Others are, Logistics sector, manufacturing sector (supply chain and cash flow disruptions), Entertainment sector, Large Retail sector (Shopping Malls), Oil $ Gas sector, Power sector, Financial services sector, Fintech sector (short-term credit payments), Fashion and Clothing sector.