The Bank Verification Number (BVN) initiative will help to boost retail credit in the banking industry by helping banks to identify and blacklist fraudulent customers.
Managing Director of the Nigeria Interbank Settlement System (NIBSS), Mr. Ade Shonubi, who is responsible for the implementation of the BVN, stated this in a statement, explaining that once banks are able to identify and blacklist fraudulent customers, they would be encouraged to extend loans to those customers that are credit worthy and do not have any record of being delinquent borrowers.
The BVN is an initiative aimed at protecting bank customers and further strengthening the Nigerian banking system. It is an initiative of the Central Bank of Nigeria (CBN), in conjunction with the Bankers’ Committee meant to address the safety of customers’ funds, avoids losses through compromise of personal identification numbers and other criminal activities in the industry.
Shonubi noted that apart from the challenge of identifying customers, a major hindrance to retail credit in the Nigerian environment was the perception that most Nigerians are crooks who would look for ways of failing to repay loans. He pointed out that the BVN would address this problem by helping to identify and distinguishing fraudulent Nigerians from law abiding and honest citizens.
He said, “When the BVN project came up, there were three key things. First and most important of all is for us to identify our customers and to identify them uniquely across banks and across accounts. So, once you have BVN, even if you have 10 bank accounts, it is the same BVN that will be tied to the bank accounts. Now, relating to identifying is the possibility of banks blacklisting people who have committed financial infractions. It could be fraudsters; it could be people who have gone to forge documents because what happens today is that the same guy will go to a bank, commits fraud, then runs to another bank and because there is no way of tying all these activities across. So, we found out that there were quite a lot of losses related to these individuals from one bank to another.
Consequently, he said the BVN would allow lenders begin to build retail credit. He explained: “This is because a concern for bank is, if I lend you money now and you go away, how do I identify you? So, you find that the entire retail consumer lending is to people with formal employment, that is why you see everybody running to the oil companies to say ‘let’s give your staff car loan; let’s give your staff consumer loan; let’s give your staff TV loans.’ But there are a lot of self-employed people working in smaller organisations, who should also benefit. “Nobody wants to take the risk on them because if they resign today and run off, how are you going to get your money? Once they have bank accounts, the BVN allows us to identify them.”