Nigerian Banks Activate BVN 2.0

Nigerian Banks Activate BVN 2.0

Bank Verification Number (BVN) is a very nice initiative in the Nigerian banking sector. For a nation without a mechanism of factually “knowing” its citizens, BVN offered a vista for banks to know their customers. With your biometric data in the banks’ database, they have a very good share of you!

Now, the banks are activating the BVN 2.0. The BVN 2.0 is the unification of debts. Yes, if you owe one bank, all banks in the nation can help that bank to get its money back: “… customers that you agree that should you default on the loan, the total amount of deposits you have across the banking industry would be applied towards repaying the loan.” I expect this to encourage banks to lend more.

The Central Bank of Nigeria (CBN) and commercial banks in the country have agreed that loan defaults will be settled using deposits made in other banks.

Addressing journalists after the Bankers Committee meeting on Monday, Aishah Ahmad,  CBN’s deputy governor, financial services system, said the directive is to encourage banks to increase lending.

“We are not unaware of the challenges/reasons why credit has not been growing. Part of that was the appetite of banks to lend especially when you have customers that willingly refuse to pay their loans,” she said

“In this respect, we have come up with a new clause that will be included in the offer letters that will be granted going forward.

“This is going to be a credit risk protection clause. Basically, it will contain the BVN details and TIN of the customers and more or less it will be a commitment on the part of the customers that you agree that should you default on the loan, the total amount of deposits you have across the banking industry would be applied towards repaying the loan.

“This is not uncommon because banks already have rights of set-off within a bank. Which means you take money from a bank, the bank usually has a clause in the letter that allows your bank to repay your loan from the assets you have with the bank.

“This is just extending it across the industry.”

 

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7 thoughts on “Nigerian Banks Activate BVN 2.0

  1. This is akin to sitting in front of CCTV monitor, watching people out there misbehaving…

    Well, I expect this to record some success, but those who wreck banks with huge NPLs rarely have decent amount that can be seized across their accounts.

    We seem to make it sound as if small guys are the ones who wreck banks, not really, the banks don’t give those ones breathing space; they are ready to cart your wife and children away; as part of debt recovery. But the big guys? The banks don’t even threaten them, rather they plead with them to drop something.

    The big hitters are too sophisticated to be caught by this BVN thing, they know who to call.

    Many of them in agbada and shiny suits are owing, and we are here talking about catching them via BVN reconciliation. Ok, they are reading too.

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  2. Also, how does this work with the principles of a limited liability? If a person is a shareholder albeit majority in a failed enterprise, would you sieze his personal assets or assets in anotger firmin if he hasnt signed a personal guarantee?

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    1. That is actually what CBN is trying to prevent where people use one company to take loan and move the money to another, and then take the company out, claiming a living entity has died even though the new one is operating just fine. The court will be busy!

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  3. As much as I agree that this will record a major breakthrough in Nigeria Lending Market, I think basically that it will be more useful/important to SMEs. Now, banks are more insured of possible collection of their money. It may not really apply much to the “BIG GUYS”. However, I opine, from an SME point of view, that there be a proper review of other conditions for Lending to these same SMEs to encourage them to TAKE! Structurally speaking, Nigerian Loan repayment percentage are outrageous on the average. Yet, desperation can make a man go for it all the same, and then face defaulting when the time comes. If that part of the bargain is taken care of, at least to a reasonable extent, that will be a massive improvement to debt portfolio management.

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