For Loan Recovery Efficiency, CBN To Integrate Mortgage, Microfinance Banks Into GSI

The Central Bank of Nigeria (CBN) has revealed plans to integrate Primary Mortgage Banks (PMBs) and Microfinance Banks (MFBs) into the Global Standing Instruction (GSI) platform to tackle the growing challenge of non-performing loans in the financial sector.

This initiative, first implemented in August 2020, is designed to enhance loan recovery processes by enabling creditor banks to recover overdue debts from defaulting borrowers without their consent. According to the CBN, this is achieved through a direct set-off from funds held in the borrower’s qualifying accounts across participating financial institutions.

Olayemi Cardoso, CBN governor, disclosed the development during the 2024 Bankers’ Night held in Lagos. “Our strategy includes implementing model mortgage foreclosure laws to stimulate lending and reduce delinquency, integrating PMBs and MFBs into the GSI platform to minimise non-performing loans, and leveraging Development Finance Institutions (DFIs) more effectively to provide increased on-lending facilities to well-managed Other Financial Institutions (OFIs),” Cardoso said.

Cardoso highlighted the pivotal role OFIs play in boosting economic productivity and expanding access to financial services for underserved individuals and businesses. “Other Financial Institutions hold significant potential to drive productivity and economic growth. To unlock this untapped potential, we aim to strengthen key institutions—particularly Primary Mortgage Banks and Microfinance Banks—to enhance their efficiency and impact,” he noted.

The CBN governor also lauded the current state of Nigeria’s banking sector, stating that key indicators showcase its resilience.

“The non-performing loan ratio remains within the prudential benchmark of five per cent, and the liquidity ratio exceeds the regulatory floor of 30 per cent. These figures reflect strong credit risk management and ensure banks have adequate cash flow to meet operational needs,” he added.

Efforts to enhance the banking sector’s ability to support Nigeria’s economy are underway. Cardoso mentioned initiatives to bolster banks’ capital buffers, a measure announced in 2023, which gives banks a two-year window to meet revised capital requirements. “A significant number of banks have already raised the required capital ahead of the 2026 deadline. The banking sector is in a strong position to support Nigeria’s economic recovery by enabling access to credit for MSMEs and investing in critical sectors,” he affirmed.

He also acknowledged Nigeria’s progress in the fintech space, citing innovations that have positioned the country as a leader in Africa’s financial inclusion drive. “Nigeria’s dynamic fintech ecosystem has driven financial inclusion and attracted significant foreign investments. Several Nigerian fintechs have achieved global unicorn status this year, fueling growth in transactions and making financial services more accessible,” Cardoso said.

However, the CBN governor expressed concerns over delays in payment gateways, emphasising the importance of trust in digital transactions. “Trust is fundamental to fostering digital transactions. Delays in settling financial transactions often disproportionately affect vulnerable populations,” he stated.

To address this, the CBN plans to impose strict penalties on non-compliant institutions and strengthen Know-Your-Customer (KYC) protocols to prevent fraud. “I urge fintech companies and banks to ensure their platforms are not exploited for fraudulent activities. Strengthening the KYC onboarding process and prioritising consumer protection measures is essential to ensure that digital channels remain safe,” Cardoso said.

The integration of PMBs and MFBs into the GSI platform is expected to foster greater financial stability and expand access to credit for Nigerians. The CBN’s efforts underscore its commitment to leveraging technology, innovation, and regulatory frameworks to support the country’s economic recovery and growth.

As Cardoso said, “The banking sector remains a cornerstone of Nigeria’s economic recovery, and through strengthened institutions and innovative platforms, we can create a robust financial system that works for all.”