In Nigeria, for the average worker operating under a wage system that can hardly sustain him, seeking other means of augmenting his income is an imperative. Before now, even that was constrained by the issue of high interest rates and difficult-to-provide collaterals. Without doubt, these became a hindrance to efforts by many people to access loans and, invariably, discouraged the growth of Small and Medium Enterprises (SMEs). Worst hit are individuals who try to access small loans to meet emergency personal needs.
While many civil servants and professionals belong to various cooperatives and can access small funds, this has not always been the case for employees of private organizations as access to small and fast loans for personal needs has remained a herculean task.
In the not too distant past, an alternative to banks was micro finance institutions. That, too, raised its own challenges with the collapse of most them which, in the process, went down with customers’- savings and investments. Interestingly, some new systems are coming up to cater for the needs of small borrowers. The new loan facilities, often regarded as payday loans (small loans that can help augment salaries, pending salary payments), have emerged and are providing alternative loan sources for workers, private individuals and even alternative funding sources for small businesses.
Some of these new facilities include Palm-credit, Branch, Aeilla, Fair-money, Payday Loans, Pay-later and a host of others that give loans as low as two thousand naira and as much as several hundreds of thousands, depending on the borrowers’ banking credibility.
The benefit of these alternative loan facilities is that they are available to both private and public sector employees, they require no collaterals, and they often require no guarantors and are also very fast and prompt. Other benefits include access to small funds for small and medium business, access to funds to meet emergencies as well as protection of one’s pride as one wouldn’t have to go begging and borrowing.
This newspaper commends the promoters of these alternative loan facilities that have the potential to lessen the pressure on banks and other public financial institutions. We are persuaded to argue that these alternative loan facilities, if well managed and regulated, will help to lift many out of the poverty threshold as well as reduce the rate of crime and criminality.
However, like all good things, these novel channels of easing the financial burden on people come with their own challenges, one of which is the lack of regulation. They mostly operate online and so have little or no visible office addresses where they can be traced. While we welcome these affordable alternatives to raising fund, we call for caution on the part of those who, due to exigencies of the moment, unwittingly mortgage their lives. We point this out because of the high risk users are exposed to in the attempt to patronise them. It is worrisome that the loan applicants have to disclose their financial and account details. The facilities also demand exorbitant interest rates and in some cases operators use unorthodox means to harass customers who are unable to meet their payments schedule.
While one may argue that there is nothing to regulate considering that the operators are the ones who give out their money, it is important that they are held accountable to ensure the protection of Nigerians who expose their accounts details to them in search of these loans.
The need for regulation is cogent so as to moderate the charges and interests rates requested to ensure that citizens in need are not abused and taken advantage of.
There is also the possibility that some operators of these facilities could be involved in money laundering, drug trade and other unwholesome activities. So, there is the need for government to beam its searchlights on operators so as to trace their sources of funding to guard against such.
The Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC) have roles to play in this regard to protect citizens pushed by circumstances beyond their control to patronise these operators. We are by no means calling for the scrapping of these facilities which have the capacity to expand the loan options open to Nigerians. In our opinion, the operators must be compelled by law to register with the appropriate authorities with easily traceable names and addresses. Even with the novelty they are introducing into the financial market, the operators must convince their prospective customers that they are legal and genuine. They must come out from their hiding in computers to real life.
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