Lessons from Trader Moni: Ensuring CrediCorp’s civil servant loan scheme succeeds

BY CHUKWUNWIKE KONWA

As the Nigerian Consumer Credit (NCCC), also known as CreditCorp, launches its ₦100 billion consumer credit scheme for 500,000 civil servants, it is crucial to learn from the challenges that faced Trader Moni, a similar initiative aimed at empowering small-scale traders.

CreditCorp was established by the Federal Government of Nigeria (FGN) on three core pillars: To strengthen Nigeria’s consumer credit infrastructure; to provide capital funding and credit guarantees to financial institutions that are extending access to consumer credit access; and to enable a cultural and responsible consumer credit re-orientation of the public and institutions. Trader Moni, on the other hand, was a loan scheme initiated by FGN, under the execution of the Bank of Industry, to provide loans to petty traders, artisans, and farmers at Zero interest rates.

While Trader Moni had good intentions, it was marred by implementation issues, lack of transparency, and political motivations. To avoid repeating these mistakes, CrediCorp, must prioritise robust guarantees and safeguards. There are four ways to ensure that these measures are securely in place at this initiative stage of implementation.

One is to clearly define the eligibility criteria and enable thorough credit assessments as vital requirements to ensure that the loans reach deserving beneficiaries. CrediCorp must establish a transparent and merit-based selection process devoid of political interference. The goal is to ensure that those who really should get these loans are the ones getting them.

Two is to activate flexible repayment plans and financial literacy training that will help beneficiaries manage their loans effectively. This will minimise default risks and empower civil servants to make informed financial decisions thereby helping them to actualise the purpose for which they sought the loans.

Three is that CrediCorp must prioritise transparency and accountability in loan disbursement and repayment processes. Regular monitoring and evaluation will help identify areas for improvement and ensure the scheme’s effectiveness. This is important for initiative if it must go the long haul and remain effective over the long term.

Four is to establish partnerships with reputable financial institutions and establishing a strong institutional framework will provide the necessary oversight and support for the scheme’s success. The collaboration nexus that will keep these partnerships functional must not be overlooked at this initial stage.

It has been reported that the Corporation will roll out the scheme in September to offer discounted consumer credit to more than 15,000 civil servants per round. The loan applicants are entitled to amounts between ₦30,000 and ₦3 million. Meanwhile, CreditCorp said it has signed a Memorandum of Understanding with Credit Direct, a subsidiary of FCMB Group, as a partner to kick off the scheme for civil servants on the integrated payroll and personnel information system (IPPIS) to begin to access credit and exclusive offers, including reduced interest rates and flexible payment plans.

This brings us back to the fourth recommended measure, above, to ensure the success of this scheme. With the emergence of Credit Direct as CreditCorp’s implementation partner, one would ask if more financial institutions would not have been involved at this onset, for a scheme of the magnitude? What yardsticks were considered in choosing Credit Direct as the pioneer partner? It is a long journey ahead and the goals are lofty. A step has to be taken to get the journey started. Nevertheless, these are crucial questions to ask and imperative measures to consider.

By learning from Trader Moni’s shortcomings and implementing these guarantees, CrediCorp can create a loan scheme with a positive impact on civil servants, promoting financial inclusion and economic growth. The success of this initiative depends on CrediCorp’s ability to prioritise transparency, accountability, and beneficiary empowerment.

Konwa is a Lagos-based public affairs analyst.