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CBN, IFC seek improved credit system

By on August 29, 2015

The Central Bank of Nigeria (CBN) and the International Finance Corporation (IFC), a member of the World Bank Group, have said that the current difficulties being faced by the country’s micro, small and medium enterprises (MSMEs) in accessing funds to develop their business will be greatly reduced by the strengthened credit reporting system and the launch of a national collateral registry (NCR) for moveable assets before the end of the year.

The assertion was made during the workshop for the Working Group of the Credit Reporting and National Collateral Registry Education and Awareness programme held in Lagos recently.

The workshop, held to update members of the working group on the status and the mechanics of the credit reporting system and the collateral registry in Nigeria, also highlighted various ways parties within the credit system – lenders and borrowers – could leverage the strengthened credit infrastructure in Nigeria.

The Deputy Governor, Financial System Stability (FSS), CBN, Dr. Okwu Nnanna, described the collateral registry, the single central and electronically driven database where all moveable assets to be pledged as collateral for credit are registered in order to avoid the re-pledging of the same encumbered assets that have existing liens, as the missing link needed to connect the MSME sector in the country to financial sources.

According to Nnanna, who was represented by a Deputy Director in the Financial Policy and Regulation Department of CBN, Udofia Obot : “A collateral registry is needed to assist in converting moveable assets into effective and risk-free collateral for use to obtain loan from financial institutions in the country, making those assets useful by linking their owners to sources of financing for the growth of their businesses.”

A statement quoted him to have explained that the establishment of the collateral registry for moveable assets became imperative to curb the challenges being faced by MSMEs as a result of their lack of access to financing.

These challenges, according to him, had manifested in the crippling of the sector’s growth, and led to loss of latent innovation, creativity and productivity.

He further noted that the collateral registry for moveable assets had improved MSMEs’ access to financing in China, Vietnam and Ghana, recording disbursements to the tunes of $3.5 trillion in five years, $600 million in three years and $3.5 billion in seven years, respectively.

In her presentation, IFC’s Principal Credit Bureau Specialist in Sub-Saharan Africa, Ms. Luz Maria Salamina, highlighted the benefits of a functioning credit system to any economy. For her, a responsible credit system is enabled by the interplay of credit bureau, collateral registry and insolvency/creditor’s rights for enhancement of access to credit for MSMEs and individuals.