Collateral Registry: Generator, farm produce listed as security for bank loans — Nigeria Today
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Collateral Registry: Generator, farm produce listed as security for bank loans

By Omodele Adigun

“In order to provide access to finance, Lagos Chamber of Commerce and Industry (LCCI) president mentioned two things – more credit to private sector as the engine of the economy. And in order to do this, the Central Bank of Nigeria (CBN), few years ago, initiated the establishment of  National Collateral Registry (NCR), which has been enacted into law. It is now a legal programme by which Micro, Small and Medium Enterprises (MSMEs) and entrepreneurs who have movable assets, whether it’s your generator or you have hair salon, you can buy a generator, use that generator to take a bank loan even while you are using it for your business. Just register it  with NCR. That is it. You can use  it to raise a loan.This is just to ease the difficulties encountered by small business people while they want to take a loan and collaterals are required. I want to enjoin entrepreneurs to register their assets and begin to enjoy credit.”

These were the words of Mr. Isaac Okorafor, the Acting Director of Corporate Communications Department of the CBN at the just-concluded Lagos International Trade Fair while explaining what the apex bank was doing to make credit available to the private sector.

The NCR is an initiative of the CBN (with support from International Financial Corporation – IFC) to improve access to finance particularly for MSMEs. 

Recall that last May 30,  Vice President Yemi Osinbajo( then acting president) assented to the Bill on Secured Transactions in Movable Assets (Collateral Registry Act), although the CBN had previously issued guidelines on the establishment of the collateral registry.

The act aims to provide for the registration and regulation of security interests in movable assets by enhancing financial inclusion in Nigeria, stimulating responsible lending to MSMEs and facilitating access to credit secured with movable assets.

The Collateral Registry, which operates under the Part III Schedule of the CBN’s Regulations on Registration of Security Interests in Movable Property by Banks and other Financial Institutions (Regulations No 1, 2015) is a web-based system that allows lenders to determine any prior security interests, as well as to register their security interests over movable assets provided as collateral. 

The Collateral Registry facilitates the use of movable / personal assets as collateral that remain in possession or control of the borrowers and thereby improves access to secured finance because movable assets/personal property often account for most of the capital stock of private firms and comprise an especially large share of MSMEs.

Movable assets are the main type of collateral that MSMEs, especially those in developing countries, can use to obtain financing; and given the opportunities in agri-business, among others, the Collateral Registry regime allows Nigerian farmers and entrepreneurs to unlock significant sources of capital with assets that would otherwise not be looked at by lenders as potential collateral.

Assets that can be used as “movable property” collateral under the Collateral Registry Regulation include equipment, inventory, accounts receivable, household items, bank accounts, farm produce, motor vehicles, boats, planes, consumer goods, trees that have been severed and oil, gas or minerals that have been extracted, among others. However, the frequently asked questions and answers on the NCR  are as follows:

Can you use someone else’s e.g. family or friend’s property to apply for a loan?

You may only give a security interest in property that you actually own. However, someone else may grant a security interest in their assets to secure your loan but it must be with their consent. Such a person must execute a security agreement as if he/she is the one obtaining the loan. For the purposes of the Collateral Registry Regulation, that person will be the debtor.

Can individuals pool assets and apply for a loan?

Yes, individuals may apply for a loan as a group. They may use assets they own individually or jointly as collateral for the loan.

How to access the registry

Any person can access the Collateral Registry system by entering the URL address in a web browser but only registered users are able to enter and save data to the database. Unlike a registered client, a public client needs no registration in the system in order to perform search in the registry. A registered client has to be a legal financial institution regulated by the CBN.

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This post was syndicated from The Sun News. Click here to read the full text on the original website.


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