The Federal Government’s consumer credit scheme anchored by the Nigeria Credit Corporation (CREDICORP) is beginning to take shape with details of interest rates and payment tenure showing a more friendly interest rates regime compared with what digital lenders currently offer.
News sources confirm that the interest rates on loans under the scheme range from 4% monthly to 22% annually.
It is worthy of note that digital lending platforms, on average, currently charge up to 10% monthly interest rate and a 120% annual percentage rate.
Although the scheme started with civil servants, who have now received up to N3.5 billion in a few days according to the latest data received by the Corporation, CREDICORP is forging ahead with the expansion to the general public.
Two of the partnering financial institutions, Accion Microfinance Bank and Abbey Morgage Bank confirmed to news sources that the working-class Nigerians can now apply for the loans through them.
Five banks are already participating in the government’s low-interest credit scheme. These banks are FCMB Credit Direct, Wema Bank, Accion Microfinance Bank, Letshego MFB, and Abbey Mortgage Bank.
Nigerians can borrow between N50,000 and N1 million at a monthly interest rate of 4% through Accion MFB. The loans have a term of 4 to 12 months. However, it takes 3 days to get a loan from Accion MFB, unlike the instant loans offered by digital lenders.
To be eligible for a loan, applicants must demonstrate at least six months of continuous employment and provide supporting documentation.
Abbey Mortgage Bank has recently completed the first phase of loan disbursements to civil servants and is now initiating a second phase targeted at businesses and individuals employed by reputable organizations.
Loans offered by Abbey Mortgage Bank under this scheme carry an annual interest rate ranging from 20% to 22% with a tenure of one to three years.
Due to its primary focus on mortgage lending, the bank partners with a retail lender, Fast Cash, to provide these retail loans.
Meanwhile, Wema Bank on the CREDICORP website where participating financial institutions are listed, said it is offering Nigerians salary-based and payday loans under the federal government’s scheme at 2% monthly interest rate.
While the CREDICORP last week announced that a total of N3.5 billion had been disbursed to 10, 942 beneficiaries in just five days of the launch, several applicants have been complaining about the slow pace of the disbursement.
An applicant, Ehwarieme Goddey, said the CREDICORP would need to onboard more financial institutions to fast track disbursement of loans as many applicants are still waiting.
Currently, only five financial institutions are participating in the scheme and only one of them, Credit Direct handled the first phase of the disbursement to civil servants.
Many people have complained about not getting a response after applying for a loan. One person, Femi Abdulkadri, said he applied three months ago on the CREDICORP website and has not heard anything.
The government’s scheme offers lower interest rates than digital lenders. This could be a problem for loan app companies, who might have to lower their rates or stop doing business.
Martin Joseph, the CEO of Edge Financial Services, said that the government’s scheme is expected to have lower interest rates. He also said that if the scheme is successful, it will compete directly with private digital lenders.
The head of the Money Lenders Association, Mr. Gbemi Adelekan, told news sources that loan app companies have also applied to be part of the government’s scheme.
“Many digital money lenders applied when the CREDICORP ads came out. They were willing to work together. “But we found that they only want to work with companies that are licensed by the Central Bank of Nigeria, not those that are licensed by the Federal Competition and Consumer Protection Commission.
“We are still watching because they cannot understand the business as well as we do,” he said.
The loan application process can be initiated through the CREDICORP website.
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