Global Standing Instruction (GSI): Central Bank of Nigeria (CBN)’s New Tool to tackle multiple loans

2019 is sure going to be busy year for the Central Bank of Nigeria (CBN) as the regulatory body is set to make sure the financial sector is placed on the right track. This we can testify to as the regulatory body continue to roll out policies aimed at meeting developmental standard.

The Apex bank plans to introduce the Global Standing Instruction (GSI) in 2019. This is a bid to stop existing bad debtors who plans to borrow extra money (ies) from other financial institution in Nigeria. What the GSI will do is to show the credit history of debtor with all banks thereby disallowing further loan.

The Global Standing Instruction (GSI) would be linked with the Bank Verification Number (BVN) of all depositors to detect borrowers who are on loan but have a bad repayment history and still have the intention borrow from unsuspecting financial institutions.

So far, the Bank Verification Process according to the CBN has recorded an increase in the number of registered BVNs with linked account out of a total of 66,974,029 active users.

The effectiveness of the Global Standing Instruction (GSI) will help address high cases of over indebtedness now common in the microfinance sector.

My concern and that of many individual is that, while the apex body is doing everything possible to discourage multiple loans which is one of the factors that causes default in payment, are microfinance ready to play along and be part of the change?

Looking at the above issue, we have instances where;

• Some MFBs are always ready to give out extra loan even when they are aware that the customer in question have loan with other MFB, knowing fully well that such customer’s repayment history is faulty.
• The trend of buying out loan is another growing trend that is not so healthy for the institution
• Financial transaction that takes place in the unregulated financial sector is high. You rarely know who and how much an individual owes an informal lender who does not have data of such transaction with the credit reference.

In my article Recapitalizing Microfinance Banks in Nigeria: The Pains and Gains, I discussed how it is not just enough to disallow multiple loans, but to seek for ways to make wilful defaulter accountable for the loans they collected.

The good thing about this GSI is that it will drastically reduce case of unethical practice in the country, all in a bid to increase the public confidence of the citizen.