CBN Predicts Boost in Credit with Moveable Collateral

•Acting CJN gives assurances on speedy resolution of disputes

James Emejo in Abuja

The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, yesterday stated that given that the inherent risks in granting loans to Micro Small and Medium Enterprises (MSMEs) by banks is now reduced tremendously through the introduction of the National Collateral Registry (NCR), small businesses will now be able not only to access credit but also access such at reasonable rates.

This is coming as acting Chief Justice of Nigeria (CJN), Justice Tanko Muhammad, has assured that the judiciary will on its part continue to ensure that disputes arising from moveable assets lending are resolved speedily in line with constitutional provisions.
Emefiele assured that MSMEs in the country would be able to access credit at reasonable interest rates through the implementation of the NCR, which allows them to present moveable assets as collateral, for bank loans.

Emefiele spoke at the opening of the first national workshop for judicial officers on Secured Transactions in Moveable Assets Act (STMA) and National Collateral Registry with the theme: “Leveraging Moveable Assets for Credit Delivery in Nigeria: Legal and Regulatory Framework.”
He observed that small businesses had practically been denied access to credit as well as subjected to high interest charges by commercial banks largely as a result of their inability to provide acceptable collateral.

The governor, however, said given that the risks inherent in granting loans to MSMEs by banks had now been reduced tremendously through the introduction of the NCR, small businesses “will be able not only to access credit but also access credit at reasonable rates.”
The CBN is already moving towards the enforcement of the Secured Transactions in Moveable Assets Act (STMA) across all financial entities.
Highlighting some of the achievements of the NCR since its creation in 2015, Emefiele said as at January 31, 2019, 628 financial institutions comprising 21 deposit money banks, four merchant banks, one non-interest bank, four development finance institutions, 551 microfinance banks, 13 non-bank financial institutions, and 34 finance companies had been registered on the Registry’s portal.

He said lending banks had also registered interest on movable assets worth N1.23 trillion, $1.14 billion and €6.08 million through 41,408 financing statements.
He added that within about 18 months, over 41,000 moveable assets with values of over N1.4 trillion, including those in dollar and Euro denominations had been registered in registry.
“This underscores the potential of movable assets as collateral to enhance access to credit and, hence, our resolve to drive its effective implementation,” Emefiele added.

On the rationale for the NCR, Emefiele said: “You will all recall that one of the biggest problem that the MSMEs face in Nigeria given the fact that we recognise their contribution to economic growth and development in any economy- the biggest constraints they have often gone through is their inability to provide acceptable collateral for the loans they seek to obtain from the banks.

“Banks and financial institutions themselves have often used their inability of these MSMEs to provide collateral as the reasons why they cannot lend to them.
“So, at the CBN, we thought that we must break this jinx and so we said access to finance must be a thing of the past in Nigeria for small businesses.”

He said: “And that was how we thought about the fact that if you are a hairdresser and the equipment you have is your hairdressing equipment, if you are a tailor and what you have is a sewing machine, if you are a barber and the barber equipment is your machine; these are moveable assets which banks say they cannot accept as collateral.

“We thought there is a need to set up a secured transaction and movable assets registry, that is the National Collateral Registry, wherever these assets are registered with the Bank Verification Number (BVN) of these potential borrowers that it is possible for banks to accept these collaterals for loans.”
The apex bank boss further stated that despite the importance of MSMEs to economic development they continued to face structural drawbacks, particularly due to their peculiar nature.

He said MSMEs are typically deemed risk-laden, plagued with high mortality rate, and often lacking adequate collaterals acceptable for conventional credit.
According to Emefiele, MSMEs in the country are characterised by about $158 billion or N48.3 trillion financing gap, reflecting the risk-driven apathy of financial intermediaries to MSME lending.

Essentially, he noted that the workshop was informed by the realisation that the judiciary was key to the enforcement of the provisions of the STMA Act especially as the use of moveable assets for collateral gains more acceptance.
According to him: “Banking is a relationship based on trust and it is our belief that bankers will respond more positively to the financing yearnings of MSMEs given the assurances that their legitimate interests will be protected under the enabling laws of the land.

“The CBN is moving towards enforcement of the STMA Act across all financial entities. In this regard, it is pertinent that we solicit and get the full support of the judiciary and law enforcement agencies towards providing a robust and resilient financial infrastructure.
“This will deepen credit delivery to our productive sectors, especially among the MSMEs, and foster sustainable and inclusive growth

CJN Assures on Speedy Resolution of Associated Disputes

Meanwhile, the acting CJN, Justice Tanko Muhammad, assured that the judiciary will on its part continue to ensure that disputes arising from moveable assets lending are resolved speedily in line with constitutional provisions.
Noting that access to finance remained vital to the development of any economy, Muhammad lauded the CBN for the establishment of the NCR, describing it as a clear indication that government is ready to grow the economy.

Also, the Managing Director/Chief Executive, Bank of Agriculture (BoA), Dr. Kabiru Adamu described the NCR as one of the programmes that had made funds available to the MSMEs subsector of the economy as well as currently impacting on MSMEs lending in the country.
He said BoA had between November 2016 to date registered about 36.9 billion assets including over 15,000 small holders.

“Apart from providing alternative to traditional collateral in Nigerian banking industry, the registry is equally generating database for credit history for micro enterprises which was a problem for the banks.

“We cannot thank the CBN enough for the establishment of NCR and that goes to tell you that clearly, the current CBN governor has left indelible mark in the sands of history, we are eminently proud of him as a bank,” he said.

He recommended the establishment of a special court to handle cases of NCR, noting that this “will encourage the banking industry in Nigeria to deploy micro credit to MSMEs”.
Nonetheless, the acting CJN stressed that one of the functions of judiciary is the interpretation and application of laws, adding that all laws will have to be properly digested by judicial officers in preparation for adjudication regarding loans attached to moveable assets.

He said the passage of the STMA made it possible for moveable assets to be used as collateral to access credit from banks in an effort to protect the creditors.
He commended the CBN for recognising role of judiciary in ensuring financial system stability in the economy.