Remita Direct Debit and Its Impact on the Nigerian Economy –

Credit is increasingly recognized as a major driver of successful economies. Access to credit stimulates business growth while increasing citizens’ ability to buy, which ultimately leads to economic expansion.

According US Federal Reserve dataUS consumer debt stood at US$15.6 trillion in 2021. Thriving economies like the US, Europe and the UK have successfully built themselves around credit, which enables SMEs and individuals to access loans to support their daily activities.

The Nigerian economy, however, is different. As credit to large corporations and high net worth individuals continues to grow, SMEs and individuals find it difficult to obtain credit, usually due to a lack (or poor) credit ratings or transaction footprints to profile them properly for credit.

According to the Central Bank of Nigeria (CBN), Nigeria has 617.3 billion naira (US$1.472 billion) Credit gap for financing MSMEs.

Truth be told, consumer lending faces multiple frictions in Nigeria. The rise in cases of lenders extending credit to borrowers only for them to repeatedly default or refuse to pay altogether due to difficulty enforcing penalties has prompted many banks and non-bank lenders to adopt credit controls. stricter and stricter credit to reduce credit defaults.

Some lenders in an effort to reduce defaults resorted to underhanded tactics of “socializing” personal debt details of lenders through their personal and professional networks as a form of pressure to “shame them into paying”.

Some lenders, however, have taken the technology-driven approach of dramatically reducing consumer and SME loan defaults by adopting the industry-leading Remita Direct Debit solution.

Remita Direct Debit to the rescue

Remita Direct Debit is an end-to-end solution that allows bank and non-bank lenders to automatically receive loan repayment from any borrowers commercial or microfinance bank account on the due date. This is achieved by ensuring that as part of the loan application process, borrowers can easily set up electronic repayment mandates to any preferred business or salary bank account.

In the eyes of the law, these loan repayment mandates have the same weight as the issuance of cheques.

Failure to pay when due carries the same penalty as issuing an NSF check and may include denial of access to future loans from the same financial institution or other financial institutions or in extreme cases; the inability to open a bank account anywhere in Nigeria.

When a borrower sets up a loan repayment mandate in their bank account through Remita Direct Debit, lenders are assured that when the time of repayment is due, they don’t have to resort to “dragging” borrowers. Indeed, the borrower’s account will be automatically debited and the funds due will be immediately sent to the lender’s post.

In the event of occasional non-availability of funds on a loan repayment due date, Remita Direct Debit maintains an always-on (AAA) algorithm that ensures loan repayment is automatically made whenever the defaulting account is funded.

Remita Direct Debit makes it easy for lenders to secure loan repayments as it reduces the need to maintain a “collections team” while dramatically reducing the time needed to track repayments.

With Remita Direct Debit, customers of any bank in Nigeria can easily set up direct debit mandates to their individual or corporate bank accounts, with the assurance that a lender’s account in any which bank will be duly credited on the specified loan repayment date, whether for one person or multiple repayment schemes.

Lenders can ask borrowers to set up direct debit mandates on their websites, through Remita Direct Debit API integration, or ask customers to visit the Remita website to set up their direct debit mandates.

Value proposition for lenders

Lenders who sign up for Remita Direct Debit enjoy better loan repayments as customers’ bank accounts are directly debited at pre-agreed intervals to settle loan obligations.

Remita Direct Debit powers the loan repayment business of a plethora of lenders in Nigeria, including banks, cooperatives, finance companies, etc., who are now enjoying stress-free and faster loan repayments from individuals and SMEs.

According CBN economic report dataover 2 trillion naira has been disbursed in consumer loans in 2021 alone. naira for millions of credit transactions.

Changing the Face of Loan Repayment in Nigeria

Remita Direct Debit came to market with many unique features and capabilities at a time when many lenders were looking for alternative approaches to deal with the increasingly crippling problem of defaults.

It has since become the preferred option for the diverse range of approved credit providers, with enormous potential to significantly transform corporate, SME and personal lending in Nigeria.

Remita Direct Debit is one of the core offerings of Remita Payments Services Limited whose mission is to enable everyone, everywhere, to do more by making payments easier.

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