Six years after the Central Bank of Nigeria (CBN) introduced the Global Standing Instruction (GSI) to curb loan defaults, microfinance banks (MFBs) and fintech lenders say gaps in its implementation are worsening non-performing loans across the digital lending space.
While commercial banks can recover unpaid loans by debiting funds from a borrower’s accounts across participating banks, most fintechs, finance houses and microfinance institutions remain excluded, a loophole operators say serial defaulters are actively exploiting.
Launched in 2020, the GSI was designed to strengthen credit discipline by allowing creditor banks to recover overdue principal and accrued interest without seeking fresh consent from defaulting customers. However, its rollout beyond commercial banks has stalled.
Founder of Lendsqr, Adedeji Olowe, said limiting GSI access to commercial banks has created an “escape route” for borrowers who deliberately avoid repayment.
“Because GSI is currently limited to commercial banks, finance houses, microfinance banks and fintechs are either not connected or not using it,” he said.
According to him, some borrowers now take loans from banks and move funds into accounts held with MFBs or fintech platforms, effectively shielding themselves from recovery under the GSI framework.
Henry Obiekea, Managing Director of FairMoney, described the delay in expanding the platform as a major setback.
“The deployment of the GSI was going to be done in phases. Unfortunately, the phasing has taken quite a long time,” he said, noting that broader access would significantly improve repayment behaviour.
“If customers know that this is what can happen, it will incentivise them to behave the right way and to pay their loan,” he added.
Fintech operators who participated in a recent CBN survey also called for the extension of GSI to regulated digital lenders and microfinance institutions to strengthen credit discipline across the ecosystem.
President of the Money Lenders Association, Gbemi Adelekan, said digital lenders already rely heavily on Bank Verification Numbers (BVN) and credit bureau data to screen borrowers, yet defaults remain high.
“Most of us use BVN for biodata and credit registries to check credit history. Yet, we still have a lot of people that do not repay. In many cases, they have the ability but not the willingness to pay,” he said.
He added that borrowers increasingly exploit the growth of neobanks and multiple digital wallets.
“As soon as you give them money, some borrowers will destroy their card and move on to other banks. At that point, you cannot reach them. It’s a major problem,” Adelekan said.
Operators warn that rising non-performing loans now pose a systemic risk, particularly as many digital lenders serve customers at the lower end of the income spectrum.
“We need GSI like yesterday. Non-performing loans are a major issue, and our contribution to the economy is massive, yet we are excluded from critical financial tools,” Adelekan added.
