Banks drive lending with salary advance

CBN eyes $10b revenue from palm oilIn line with the Central Bank of Nigeria (CBN) directive to banks to explore opportunities in the consumer credit segment of the market, many banks are opening new credit opportunities for salary account holders. Polaris Bank’s quick credit solution named Polaris Salary Advance, which is collateral-free, allows employees to borrow up to 50 per cent of their net monthly salary to meet basic needs before their next pay day. The bank rides on convenient and accessible digital channels, such as the mobile phone to provide the short term financing to its customers, writes COLLINS NWEZE.

Felix Stephen, an Abuja -based civil servant was leaving home for work when his smartphone reminded him that his Cable TV subscription had expired. Although his monthly salary is regular,it was hardly enough to meet his basic needs.

As the football season resumed on August 8, Stephen was yet to renew his Cable TV subscription fee until one of his colleagues informed him about the Polaris Salary Advance.

“I was able to access 50 per cent of my salary after I dialed *833*12# on my mobile phone to requests for a Polaris Salary Advance. In less that than a minute, I received the credit alert in my Polaris Salary Savings Account. I quickly logged on to PolarisMobile, renewed my Cable TV subscription and was reconnected immediately to watch the football season matches. There is nothing sweeter than getting credit at the right time to solve a pressing need,” he said.

The product, launched by Polaris Bank Limited, offers easy and quick salary advance loans to customers. The product addresses short-term financing for critical needs and requires no collateral.

It enables employees to get up to 50 per cent of their net monthly salary to meet basic needs before their next payday. The product is designed to provide short-term financing to its customers via convenient and accessible digital channels such as the mobile phone.

Explaining the key features that set the new solution apart from competition, the Group Head, Products & Markets Development, Adebimpe Ihekuna, disclosed that it was designed to provide leverage for consumers to meet pressing financial needs, such as paying their child/ward school fees, emergencies requiring funding, bill payments, among others.

According to her, the facility is very easy to access: “All you needed do is to dial *833*12# to connect to Polaris Unstructured Supplementary Service Data (USSD) Banking, a dialogue box appears showing customer’s eligible loan amount and option to input required loan amount; next menu shows the requested loan amount with the pricing, with an option to select ‘1-Accept’ or ‘2-Decline and the customer selects ‘1 –Accept’, and loan amount is immediately disbursed into customer’s salary account.

“Beyond the financial empowerment that Polaris Salary Advance offers to our customers, access to such soft loans improves the consumers’ lifestyle and helps them to be in charge of their resources rather than banking on uncertain sources. Polaris Bank is a customer-centric bank positioned to deliver industry-defining products, services and platforms across all the key market segments,” she said.

Continuing, Ihekuna noted: “The social impact of the Polaris Salary Advance solution cannot be over-emphasised given its ability to meet customers’ needs on the go”.

On the process of accessing the funds, she explained that it has been affirmed to be the fastest in the industry as one can easily access the salary advance solution and get his/her account credited in a minute, with no documentation required. Customers can access up to 50 per cent of their net monthly salary capped at N500,000 for a 30-day tenor or next salary date by dialing *833*12#. The service is available 24/7 on all telecommunication networks.

Commenting on the new development, the  Managing Director/CEO, Tokunbo Abiru, said: “Our commitment to the road not travelled, has led to the development of several product innovations beginning with the salary advance initiative. Over the next few weeks, we will be unveiling other tailor-made products targeted at making life more meaningful and convenient for our customers and the general banking public. Our product development strategy derives from customer feedback on the needs and aspirations of the new age. As an enterprise, we are focused on partnering with our customers into the future which is largely digitally enabled’’.

He said the bank is customer-centric bank and positioned to deliver industry-defining products, services and platforms across all the key market segments.

Access bank has also launched salary advance scheme. The Access Bank PayDay Loan/Salary Advance Scheme is also making credit available to borrowers fast, without stress and collateral.

Launched in collaboration with Remita, the product was created to make loans available to salary earners irrespective of what bank their salary account is domiciled. Such offerings are intended to enable the customers meet their financial obligations especially in difficult times.

For instance, a study released by Stutern showed that the average Nigerian graduate earns less than N50,000 as the first salary. Another research by Salary Survey disclosed that the average Nigerian salary is N658,324 annually – basically N54, each month. Many eagerly await their paydays, especially when it is important to access quick cash.

Besides, business owners also breach contracts with their employees by delaying the payment of salaries while expecting them to continue performing optimally at their jobs. This, unfortunately, leads to work-life imbalance that affects delivery and Key Performance Indicators (KPIs).

While it can be agreed that salary workers in Nigeria do not earn enough, every person hopes to address personal financial issues timely and appropriately with as little hassle as possible.

Access Bank’s Executive Director, Personal Banking, Victor Etuokwu, said: “This offering is unique given that the beneficiaries do not have to be existing customers of Access Bank but hardworking salary earners who now have the opportunity to obtain instant loans without a guarantor or stress.

“With USSD code *901*11#, Access Bank will approve the application for the PayDay Loan almost instantly when you provide the necessary information. The application process is simple and quick. Loan applicants can get up to 75 per cent of their monthly salary in less than five minutes”.

An economist, Tunde Alabi,  said there was need to campaign more for people to know they can access loans. “Many banks are doing a lot to get customers to borrow.

Understanding Payday loan

An Executive of Agusto & Co, Osaze Osaghae, explained that Payday Loans” (also referred to as salary advances, payroll loans and payday advances) are typically small, short-term unsecured loans that are tied to a borrower’s payday.

These loans are designed to meet the short-term needs of an individual until the next payday, when the loan is usually repaid in full.

“Payday lending first emerged in the early 1990s as banks in developed countries dialed back on small credit offerings, leaving consumers in need of quick-fix cash and emergency funds with little choice but to turn to alternative lenders and financiers. Since then, these short-term, high-cost loans have risen in popularity across the globe, particularly in first world countries. Over the last decade, evolving financial technology has disrupted lending activities in many parts of the world, with a large number of online lending platforms emerging in countries such as the Netherlands, United States and Canada,” he said.

He explained that despite an active (adult) population of 99.6 million in 2018, only 39.7 per cent are banked by registered financial institutions. Furthermore, only eight per cent of the total active population is formally employed, considerably lower than other major nations in sub-Saharan Africa.

The Polaris Bank boss, Abiru, has spearheaded several growth initiatives which have placed the lender on upward trajectory. The bank’s management team under his leadership has continued to entrench sound corporate governance and risk management practices and transforming Polaris into fully fledged retail and commercial bank with strong digital backing.

The bank has invested significantly in technology with copiously integrated service models enabling customers enjoy banking services through a wide range of channels.

Today, Polaris Bank can boast of a strong market share going by several transformative business initiatives.

Abiru has successfully implemented cost management initiatives which have enhanced liquidity and efficient service delivery to the bank’s customers.

Through his aggressive recovery initiatives, the bank has been able to recover over N200 billion of outstanding bad loans within a shortest period.

Under his watch, the bank has been able to reach settlement and restructuring agreements with many of the chronic bad debtors resulting in substantially improved payments and prospects of future recoveries.

In line with the bank’s broad mandate which includes cost management and optimisation, as well as divestments to improve the institution’s financial position, Abiru has embarked on several initiatives aimed at restructuring and repositioning the bank.

Some of the initiatives embarked upon by Abiru include: branch rationalisation, review of service contracts and cash management operations which have resulted in hundreds of millions of financial savings. Also, through some of the initiatives, the bank has successfully settled many matured trade and bilateral obligations and restructured outstanding balances with the relevant institutions and counterparties.

Polaris Bank under Abiru has also continued to promote the CBN’s National Financial Inclusion Strategy aimed at reducing the number of eligible adult Nigerians that are excluded from the formal financial system from 46.3 per cent to 20 per cent by the year 2020. The lender has been remarkable, strutting the length and breadth of Nigeria to promote financial inclusion.

These and many other moves leveraging technology and building a culture of innovation is fast repositioning the bank.Today, Polaris Bank’s branches are fast becoming a hub for transactional activities witnessing a huge footfall of customers trooping in to carry out transactions, open bank accounts and experience the innovative trends that the bank has introduced to its business. This overall experience has also been boosted by the enhancement of staff morale which inherently drives the commitment to serve their customers better.

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