CBN Proposes ATM Loan Disbursement to Boost Credit Access

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CBN Proposes ATM Loan Disbursement to Boost Credit Access

  • The Central Bank of Nigeria (CBN) has suggested that banks upgrade their ATMs to offer loan services in addition to cash withdrawals.
  • CBN wants the ATM upgrade to be implemented by 2025 to improve credit access.

Central Bank of Nigeria Proposes Upgrading ATMs to Provide Loans, as UBA and Four Other Banks Fail to Meet LDR Requirement

The Central Bank of Nigeria (CBN) is seeking to address the issue of limited credit accessibility within the country by proposing a solution that involves upgrading Automated Teller Machines (ATMs) to provide loan services. This recommendation comes as a response to data revealing that five major Nigerian banks failed to meet the CBN’s loan-to-deposit ratio (LDR) requirement of 65% in the 2022 financial year.

The loan-to-deposit ratio ensures that banks allocate a significant portion of their deposits as loans, thereby facilitating the flow of credit into the economy. However, Access Holdings Plc, Guaranty Trust Holdings Company Plc (GTCO), United Bank for Africa Plc (UBA), Zenith Bank Plc, Sterling Bank, and Stanbic IBTC fell short of this requirement.

In 2022, Access Holdings recorded a 58.70% LDR, while Zenith Bank Plc’s LDR stood at 51.6%. GTCO closed the year with a 39.81% LDR, and UBA’s LDR decreased to 34.87% from 38.17% in 2021. Sterling Bank reported a 54.10% LDR, and the FCMB group concluded the list of banks falling short of the 65% target with a 60.30% LDR.

To address the issue of suboptimal loan disbursement, the CBN has proposed upgrading ATMs to incorporate credit scoring and facilitate loan disbursements. The Payments System Vision 2025 document published on the CBN’s website suggests that ATMs should be optimized to offer services beyond cash withdrawals, including credit scoring and loan disbursal, while also being accessible in remote areas.

By upgrading ATMs to offer loan services, the CBN aims to enhance credit accessibility in Nigeria. This innovative approach aligns with the goal of the Payments System Vision 2025 to promote financial inclusion and improve the efficiency of the banking sector. The proposed implementation of these upgrades is expected to be completed by 2025.

In conclusion, the Central Bank of Nigeria has recommended that banks upgrade their ATMs to provide loan services, aiming to address the shortfall in meeting the loan-to-deposit ratio requirement. This move highlights the CBN’s commitment to promoting credit accessibility in Nigeria and strengthening the country’s banking system.

Source: Editorial Times