5 ways GSI should be improved by the Central Bank of Nigeria (CBN)

Global Standing Instruction (GSI) is one of the most remarkable inventions by the Central Bank of Nigeria (CBN) in recent times. It has proven to be a highly effective tool in boosting loan recovery rates and instilling discipline in the lending market. 

Now, is the GSI as good as it should be? We don’t think so because every good thing can get better. After all, there’s always room for improvement. And here are five ways we feel like the GSI can get better:

Featured read: Global Standing Instruction explained

Better availability

One of the initial steps towards enhancing the GSI involves broadening its accessibility to lenders, whether licensed by the CBN or not. Given the CBN’s oversight of the country’s banking ecosystem, including lending practices even when lenders don’t directly report to them, expanding access is of utmost importance. To achieve this, the CBN can mandate registration for lenders seeking to utilize the GSI. These lenders would need to provide a valid license and updated financial statements, demonstrating their commitment as responsible members of society. Additionally, each time these lenders approve a loan, they must register on the CBN’s Customer Relationship Management (CRM) System; that way, the CBN can always keep an eye out for how the tool is being utilized.

Featured read: Common misconceptions about using GSI for loan recovery

Improved API capabilities

The documentation for the GSI APIs is currently lacking, even among commercial banks with access. It’s imperative for the Central Bank to improve this situation by ensuring thorough documentation that meets industry standards. They can make these APIs readily available by collaborating with the Nigeria Inter-Bank Settlement System (NIBSS). This includes providing thorough developer information, making it easier for lenders to access and utilize these resources.

Featured read: How to use Lendsqr’s APIs to power your loan app

GSI as a payment method

Why wait until a loan is delinquent before triggering GSI? We strongly believe that adopting it as a loan repayment method could have significant benefits. The CBN stands to generate revenue through this adoption. To incentivize lenders to utilize GSI, they could be required to pay a percentage to the CBN (1% of the loan). This ensures that the adoption is mutually beneficial. Besides, we all know the freemium model, often misused, does not provide sustainable solutions. Although integrating GSI as a loan repayment method from the outset of loan applications is key, some conditions must be considered; 

• It must be done with the borrower’s consent. 
• There should be penalties for lenders who misuse this method.
• Implementation of minimum KYC, regulatory, and operational standards 

These are essential before its widespread adoption as a loan repayment method.

Featured read: Possible upsides of making GSI the go-to loan repayment method 

Access GSI data

The Central Bank can also share GSI data with financial institutions utilizing it for recovery. This allows lenders to verify whether a potential borrower has a history of default and was pursued through GSI. It serves as a means for lenders to assess the likelihood of a borrower defaulting. Subsequently, lenders can make informed decisions regarding whether to extend loans to these individuals. 

Public access to GSI analytics

To highlight the effectiveness and significance of the Global Standing Instruction, the Central Bank can enhance visibility by showcasing its capabilities. For example, show the number of GSI payments triggered over a period, the amount demanded, and what GSI was able to recover. It show  the institutions connected, number of payments coming in to them and what each of them have received.,. 

This initiative can bolster confidence in GSI, demonstrating its efficacy to the public. Additionally, it may serve as a deterrent to delinquent borrowers who intend to default on loans from lenders integrated with the GSI. Ultimately, this approach is a win-win for all parties involved.

Beyond implementation, there’s more work to be done

The Global Standing Instruction framework implemented by the Central Bank of Nigeria (CBN) represents a significant step in improving loan recovery processes within the lending ecosystem. 

However, as with any groundbreaking initiative, there remain areas ripe for improvement. We believe the five areas highlighted above can elevate the GSI framework to new heights of efficacy and accessibility. We hope these will be implemented sooner rather than later. 
As always, send us a message at [email protected], and we’ll be more than happy to answer your questions.