Consumertrics holds workshop on Responsible Lending and Borrowing

Consumertrics has launched its advisory series and will be holding its maiden workshop, themed Responsible lending and borrowing: Balancing Access to Credit and Consumer Protection in Nigeria Digital Economy.

The event, which is expected to draw together finance industry regulators, consumer protection agency, credit facilitators, among others, will be holding at The Zone Tech Park on September 8, 2022.

Consumertrics will be serialising the workshop document for the reading public.

Increasing internet penetration rate by Nigerians has engendered a growing digital economy, with an expanding digital financial services sector (DFS). With this development comes the growing presence of various financial technologies (fintech) delivering different services –payments, credit, savings, remittances, etc – using digital channels. Part of the offshoots of the widening DFS sector is the multiplicity of digital lending platforms leveraging popularity of mobile phones and rising broadband usage in the country. The digital lenders (loan sharks) leverage access to consumers’ mobile phone data to deliver quick and easy uncollateralized loans, with typically high interest repayment within a short period. The relationships between loan sharks and borrowers are however not perfect, due to consumer protection issues. These include susceptibility to data fraud, breach of privacy in situations of loan recovery from defaulting borrowers.

Based on the foregoing, there is an exigency by regulators to emplace effective financial consumer protection laws, and proper regulatory framework among other requirements.

Digital Credit and financial consumer protection

Digital credit (loan) is rapidly becoming one of the fastest expanding solutions to narrow the credit gap. Their existence, therefore, provides tremendous opportunity to the underbanked and MSMEs needing easy access to loans. However, the unbridled operations of digital lenders continue to pose several challenges that can only be addressed through the followings: effective legal mandate and regulatory structure; adequate supervision; comprehensive credit reference services; avoidance of over-indebtedness; disclosure and transparency; data privacy and protection; cybersecurity; digital financial literacy; fair competition; and, complaint redress system.

On the other hand, it is important for regulators to promote robust financial consumer protection within the Nigeria digital financial economy. This entails ensuring fair and responsible treatment of financial consumers in their purchase and use of financial products and their dealings with financial services providers.

According to the G20/Organisation for Economic Corporation and Development (OECD) Task Force, authorities are expected to enshrine specific principles on Financial Consumer Protection. These cover the following under-listed:

  • Legal, regulatory and supervisory framework
  • Role of oversight bodies
  • Equitable and fair treatment of consumers
  • Disclosure and transparency
  • Financial education and awareness
  • Responsible business conduct of financial services providers and authorised agents
  • Protection of consumer assets against fraud and   misuse
  • Equitable and fair treatment of consumers protection of consumer data and privacy
  • Disclosure and transparency complaints handling and redress financial education and awareness
  • Competition

… to be continued