The Federal Government’s consumer credit scheme, led by the Credit Corporation of Nigeria (CREDICORP), is starting to take shape with details on interest rates and payment terms, making it more favorable compared to what digital lenders are currently offering. It shows the interest rate system.
Nairametrics confirms that interest rates on loans under this scheme range from 4% per month to 22% per annum.
By way of background, digital lending platforms currently charge up to 10% monthly interest and 120% annual interest on average.
Although the scheme started with civil servants, who are now receiving up to N3.5 billion in a few days, according to the latest data available to the Corporation, CREDICORP is in the process of expanding it to the general public.
Two of the partner financial institutions, Axion Microfinance Bank and Abbey Mortgage Bank, confirmed to Nairametrics that working class Nigerians can apply for loans through these institutions.
The five financial institutions already participating in the scheme include FCMB Credit Direct (for civil servants), Wima Bank, Axion Microfinance Bank, Leshego MFB and Abbey Mortgage Bank.
consumer finance interest rate
A customer support agent at Axion MFB who gave his name as Charles, said in an interview with Nairametrics that under the scheme, Nigerians can avail loans of between N50,000 and N1 million at a monthly interest rate of 4%.
According to him, the minimum loan period is four months and the maximum is 12 months. However, unlike digital lenders that offer same-day loans, the process takes three days, he said.
Regarding the requirements for the loan, he said applicants must be working-class individuals who can provide proof of employment and must have worked with an employer for at least six months before applying for the loan. Similarly, a customer agent at Abbey Mortgage Bank, a woman who also identified herself as Desola, told me over the phone that the bank had just completed the first phase of financing for public servants and that she was currently employed by “reputable organizations” and He said he is about to start the second phase for individuals. She further revealed that the loan from. Banks under this scheme attract an annual interest rate of 20 to 22% for a term of one to three years. But she pointed out that the bank, as a mortgage bank, is not licensed to offer personal loans and does so through personal lenders. partner. A link to apply for a loan with a bank on CREDICORP’s website shows that the bank is offering loans through its digital lending company Fast Cash. Meanwhile, Wema Bank on the CREDICORP website, which lists participating financial institutions, said it was offering loans. Salary-based and payday loans with a monthly interest rate of 2% are available to Nigerians under the Federal Government scheme. Applicant’s experience
CREDICORP announced last week that a total of N3.5 billion has been disbursed to 10,942 beneficiaries in just five days since its launch, but several applicants have complained about the slow pace of disbursements.
Applicant Ehwarieme Goddey said CREDICORP needs to involve more financial institutions to speed up loan disbursements as many applicants are still waiting.
Currently, there are only five financial institutions participating in the scheme, and only one of them, Credit Direct, was responsible for the first phase of payments to civil servants.
“More financial institutions need to be brought on board quickly to reduce the complexity of the payment process.
“Right now, Credit Direct is overwhelmed! I’ve been standing in line for 4 days now! Plus, they (Credit Direct) don’t seem to be taking care of my credit needs as a new initiative by CREDICORP. I haven’t,” Godie said.
Many others have also complained of not receiving feedback months after applying for a loan. One of the applicants, Mr. Femi Abdulkadri, said he applied through the CREDICORP website three months ago but had not received any feedback or approval for his application.
Digital lending business expected to be disrupted
Industry analysts believe that if the government scheme is implemented well, loan app companies will be able to reduce interest rates or We see new challenges that may force us to pack up.
Martin Joseph, CEO of Edge Financial Services, said it was not unexpected that interest rates would be lower under the government scheme, but if the scheme was successfully rolled out, private digital lenders and He pointed out that there would be direct competition.
“These lenders typically charge higher interest rates to compensate for the risks of unsecured loans. Private digital lenders are adjusting their offerings as consumers gravitate toward cheaper government-backed credit. Unless they do so, they may struggle to attract new borrowers or retain existing ones.
“To remain competitive, these lenders may be forced to lower interest rates. However, these lenders rely on higher interest rates to manage risks associated with their loan portfolios, such as unsecured loans and high default rates. This can pose a challenge, as they are often
“Reducing interest rates without reducing risk could put pressure on profit margins,” he said.
However, Gbemi Adelekan, chairman of the Money Lenders Association, an umbrella body for registered loan app companies in Nigeria, told Nairametrics that members of the association have also applied to join the scheme.
“Many digital lenders applied when (CREDICORP) was advertised and were ready to cooperate.
“But what we discovered is that they only want to work with companies licensed by the Central Bank of Nigeria (CBN), not with companies licensed by the Federal Competition and Consumer Protection Commission (FCCPC). It was.
“There’s no way they understand this business any better than we do, so we’re still watching,” he said.
What you need to know
President Bola Tinubu has announced the launch on April 21 of the first phase of a consumer credit scheme aimed at providing credit to working citizens in the country.
Special Assistant to the President on Media and Publicity, Ajuli Ngerale, said the first phase of the scheme would begin with civil servants and then expand to key citizens. Mr Ngerale stressed that consumer credit plays a vital role in the modern economy, empowering individuals to improve themselves. Improve your standard of living by acquiring goods and services upfront and managing payments responsibly over time. The system facilitates critical investments such as housing, transportation, education, and health care that are essential to maintaining stability and pursuing personal aspirations. Follow us for breaking news and market information.
