The Central Bank of Nigeria, CBN, and stakeholders in the financial services sector have said a robust cashless policy system is capable of increasing Medium, Small, and Micro-scale Enterprises’ access to loans.
They spoke against the backdrop of the various challenges facing the cashless policy of the CBN in the country.
The stakeholders including the CBN spoke at a virtual event hosted by the Chief Executive Officer/Managing Director of First Central Credit Bureau, an independent credit intelligence firm, Mr. Deji Olamide, themed, “Harnessing the Benefits of Cashless Policy on Credit Allocation in a Developing Nation” recently.
Echoing the central bank’s vision around the cashless policy, the CBN Director of Banking Supervision, Haruna Bala Mustapha, noted that the intention has never been to eliminate cash “but to reduce the use of cash and encourage electronic payments using electronic channels.”
Mustapha, who was represented by Mr Adeniyi Adekunle, observed that although Nigeria is largely a cash economy, the cost of maintaining cash has become a burden due to the many vices arising from cash-based transactions.
According to him, the cashless policy has largely encouraged transparency, ease of doing business and access to loans for MSMEs.
“We see that it enables a faster and easier payment, you can do online transactions from the comfort of your home,” he noted.
Mustapha, however, observed that in terms of infrastructure to ensure seamless integration of digital payments, “we are not there yet but we are working with our payment solution providers to improve the payment gateway to cope with the increased volume.
Listing the benefits of the cashless policy, the CBN director said “It (cashless policy) has also increased cost saving; the less we release cash the more that we save in terms of cost. We talk about the increase in transparency and accountability; you are offered insight into the borrower’s credit history as well. The CBN will keep encouraging everyone to leverage the benefits of cashless policy so that we can also drive financial inclusion and promote economic growth in Nigeria.”
Also, the President of the FinTech Association of Nigeria, Mr. Ade Bajomo, who spoke on the rapid adoption of digital payments due to the cashless policy, said, “A cashless policy has the potential to revolutionise Credit Allocation in developing nations and by creating a digital trail reducing the cost of credit assessment providing greater transparency, making it easier to assess creditworthiness, improving credit scoring speed and open loan processing, risk management, promoting financial inclusion.
“All of these can enable both individuals and MSMEs to access credit, drive economic growth, improve the standard of living and the role of credit bureaus.”
Explaining the future impact of the cashless policy on digital lending systems, Bajomo stated that the cashless policy requires the promotion of electronic transactions and the reduction of cash transactions.
“It has several benefits as clearly articulated in terms of convenience, speed, transparency, security, customer experience, and others. However, one of the most significant benefits of the cashless policy is the impact it has on credit allocation in developing countries. The lack of credit is a significant barrier to economic growth and development,” he noted.
