Details regarding interest rates and repayment terms indicate that the Federal Government’s consumer credit program, which is spearheaded by the Nigeria Credit Corporation (CREDICORP), is starting to revolutionize the Loan market as it offers more benevolent interest rates than what online lenders currently offer. According to reports, the interest rates on loans available under this scheme varies from 4% per month to 22% per year. In comparison, the average monthly Interest Rate charged by digital lending companies is currently up to 10 percent, with an annual percentage rate of 120 percent.
With the scheme currently available to the civil servants only, CREDICORP is pushing forward to expand the program’s reach to the general public in order to eliminate market, structural, and legislative impediments and also aims to provide consumer credit to 50% of working Nigerians by 2030. Just five financial institutions have enrolled in the consumer credit program thus far, out of the 151 that the company claimed to have signed up for the program. They include Wema Bank, Accion Microfinance Bank, Letshego MFB, Abbey Mortgage Bank, and Credit Direct, which serves civil servants and teachers.
₦3.5 billion disbursed to 10, 942 beneficiaries in five days.
Wema Bank listed on the CREDICORP website that it is providing salary-based and payday loans to Nigerians at a monthly interest rate of 2% under the federal government’s program. Few weeks ago, CREDICORP confirmed the official start of the disbursement of consumer credit to economically active Nigerians countrywide, through its growing list of partner financial institutions (PFIs). The Corporation revealed that in just five days from the commencement, financial institutions taking part in its consumer credit initiative had disbursed a total of ₦3.5 billion to 10, 942 beneficiaries.
As listed by the corporation, the beneficiaries are 4,786 federal and state educators, 2,831 federal and state MDA administrators, 1,307 government physicians, 1,264 employees of law enforcement and paramilitary organizations, and 753 judicial staff. Additionally, CREDICORP disclosed that the loans provided under the program were intended for particular purposes, such as the acquisition of fuel substitutes like Solar Panels and the conversion to compressed Natural Gas (CNG). The beneficiaries’ other initiatives that are funded include home upgrades, paying for their children’s tuition and medical bills, and buying supplies for the home.
Targeting 80m economically engaged and income-earning Nigerians.
According to Uzoma Nwagba, the CEO of CREDICORP, the program is targeted at about 80 million economically engaged and income-earning Nigerians. He stated that the major objective is to ensure that all Nigerians with modest incomes can purchase essential items that will enhance their lives over time, including a laptop, car, house, and high-quality education. The Corporation claims that all Nigerians would soon be included in the program, which was initially launched for civil personnel.
In an effort to streamline the consumer program, CREDICORP recently revealed that it is collaborating with the National Identity Management Commission (NIMC) to expedite the process of establishing credit ratings for all Nigerians with the National Identity Number (NIN). According to industry analysts, if the government’s plan is implemented successfully, loan app companies may be forced to lower their rates or shut down given that the government program offers reduced interest rates than the existing predatory rates of digital lenders.
Related Article: FG to integrate credit score into NIN
Before now, there have been controversies raising concerns among users, regulators, and proponents of consumer rights. The majority of loan apps are tied to issues like exorbitant interest rates, dishonest debt collection tactics, breaches of user privacy, and a lack of regulations. Numerous operators of loan apps have been reported to violate privacy by hacking their contacts, harassing non-customers, and causing inconvenience to unwary citizens who are not even their clients. Users have suffered damages in terms of their reputation, finances, and emotions as a result. Due to this, the government has intervened to regulate the industry by tightening regulations and reducing credit rates.