Why Fintechs are Struggling with CBN GSI Gaps Even After Six Years

Six years after its introduction, Nigeria’s Global Standing Instruction (GSI) continues to pose significant challenges for fintechs, microfinance banks (MFBs), and digital lenders. Originally designed by the Central Bank of Nigeria (CBN) to curb rising non-performing loans (NPLs), the GSI allows banks to recover overdue loans by directly debiting a borrower’s accounts. 

However, fintechs and MFBs have yet to be included in the framework, leaving many lenders unable to fully utilize the tool, which has worsened loan recovery efforts.

When GSI was rolled out in 2020, the goal was simple: strengthen credit discipline by allowing creditor banks to recover unpaid loans without requiring fresh consent from defaulting customers. Under the system, commercial banks can debit funds from a borrower’s multiple accounts across participating banks. 

However, this tool remains largely exclusive to commercial banks, leaving many fintechs and MFBs to rely on outdated and inefficient recovery methods.

The GSI exclusion is a major gap for Fintechs and MFBs

Fintechs and MFBs are growing frustrated as they continue to face challenges recovering loans. Adedeji Olowe, founder of Lendsqr, explains that the exclusion of these institutions from the GSI has created an escape route for borrowers with no intention of repaying. 

Borrowers often take loans from commercial banks, move them to fintechs or MFBs, and exploit the GSI loophole, knowing that these institutions cannot access funds across their bank accounts.

This gap is especially concerning given the rise in loan defaults. Despite using tools like the Bank Verification Number (BVN) and credit bureaus to assess borrowers, many lenders are still seeing high levels of defaults.

Gbemi Adelekan, president of the Money Lenders Association, points out that some borrowers deliberately destroy their cards or switch to new banks to evade repayment. This has made recovery nearly impossible, especially in the digital lending space, where neobanks and multiple digital wallets make tracing and recovering loans more difficult.

Impact on Loan Recovery and Credit Culture

Without access to the GSI, fintechs and MFBs are finding it difficult to build a credit culture. Henry Obiekea, managing director of FairMoney, underscores the problem, stating that the phased rollout of the GSI has taken too long, and extending it to fintechs and MFBs would improve repayment behavior significantly. 

When borrowers know that their funds could be debited across accounts, they are more likely to repay their loans.

Moreover, fintech operators have called on the CBN to expand the GSI to include regulated fintechs and MFBs. In a recent survey, stakeholders urged the CBN to move swiftly on this matter, as it would reduce defaults and promote healthier financial practices within the digital lending sector.

It is a systemic risk for digital lenders

The gap in access to GSI is now seen as a systemic risk, especially for digital lenders who serve lower-income customers with limited financial literacy. 

The inability to recover loans across all banks means that fintechs and MFBs are at a disadvantage in managing defaults. “We need GSI like yesterday,” said Adelekan. “Our contribution to the economy is massive, yet we are excluded from critical financial tools.”

Regulatory intervention is urgently needed, and many digital lenders are calling for action from oversight bodies like the Federal Competition and Consumer Protection Commission. The lack of direct regulation for many fintechs has left them out of the policy conversation, resulting in the exclusion from tools like GSI.

What’s next for GSI and financial inclusion?

The CBN has acknowledged the issue and pledged to integrate MFBs and fintechs into the GSI framework. According to the CBN’s recent fintech report, the expansion is expected to be completed by 2026. 

However, stakeholders are not convinced that this timeline is swift enough, given the scale of the problem.

While some MFBs, such as NIRSAL Microfinance Bank, have been using the GSI to recover COVID-19 loans, the broader rollout to other institutions has yet to materialize. As Nigeria’s financial ecosystem continues to evolve, including the integration of fintechs and MFBs into the GSI platform is essential for creating a more robust loan recovery system.