Author: ONYINYE NWACHUKWU
A new sustainable banking principle being pursued by the Central Bank of Nigeria (CBN) is seeking to make deposit money banks to consider all loan requests made to them by customers without discrimination.
Under a set of new rules, a bank may not turn down non-compliant proposals out rightly, but the CBN says they must guide the customer through, to ensure that they incorporate environmental and social issues into their proposals before they can do business with customers.
Following the sustainable banking principles rolled out by the CBN, banks are to ensure that borrowing proposals comply with environmental and social standards before such loans can be created.
And to ensure compliance with the new principle, the CBN is already strengthening its own capacity to supervise implementation by banks.
Also, the CBN will soon commence the training of about 1,000 bankers on Sustainable Banking Principles and Environmental and Social Risk Management, as well as on how to properly manage environmental and social risks in their portfolios. BusinessDay learnt that this is coming at the request of the Bankers Committee.
At the commencement of the training for CBN staff Tuesday, in Abuja, Aisha Usman Mahmud, special adviser to the CBN governor on sustainable banking, explained that Environmental and Social Risk Management constitutes just one, out of the nine principles of the Nigerian Sustainable Banking Principles, which include things like human rights, women economic empowerment, environmental and social footprint etc.
She said the training was necessary since the topic was relatively new in Nigeria and globally, and would enable the apex bank monitor implementation effectively.
She said, “What it means for the banks is that whenever they are going to lend money to a customer, or whenever they are going to get involved in an investment, they will look at the proposal with environmental and gender lens, to ensure that it has taken into consideration environmental and social issues.
“And because the global trend is not to adopt too much of sanctions, these days, if a bank looks at a proposal and sees that that company is not conforming to environmental and social standards, it should make an informed decision not to reject that loan, but make sure that it advises the company to incorporate environmental and social issues into the proposal because it can do business with the customer.”
The Nigerian Financial sector mid last year, developed and adopted the Nigerian Sustainable Banking Principles (NSBP) in its quest for development that is not only economically profitable, but also environmentally and socially responsive.
NSBP involves managing environmental and social risk in lending and investment decisions; Managing the bank’s own environmental and social footprint as well as Safeguarding human rights.
It also involves Promoting women’s economic participation and empowerment; Promoting inclusive finance for people and communities who have little or no access to the formal financial sector and encouraging good governance, transparency and accountability, among others.
The major drivers for its implementation are the pressing environmental and social issues, such as absolute poverty, put at over 62 percent, rapid population growth, climate change (extreme weather) and energy efficiency.
In a brief talk, one of the trainers, Piotr Mazurkiewicz of the International Finance Corporation, said the training is to help the CBN build its internal capacity, so that the staff know how to properly supervise the banking sector in the implementation of the sustainability banking principles and proper environmental and social risk management.
He further noted that they are trying to build capacity among banks in Nigeria, so that they learn how to properly manage environmental and social risks in their portfolios.