PEBEC: MSMEs can now use generator, freezer, others as collateral for loans

PEBEC

A press statement released on Tuesday, May 30, 2017 confirms that the Acting President Yemi Osinbajo, has signed two bills, that will ultimately facilitate access to more affordable credits, into laws for Nigerians.

On February 21, 2017, the leadership of the National Assembly, publicly committed to passing the two bills as part of the 60-Day National Action Plan for Ease of Doing Business, initiated by the Presidential Enabling Business Environment Council (PEBEC).

This legislation was forwarded as part of Ease of Doing Business reforms, by the National Assembly for Presidential Assent.

The bills initiated by PEBEC which have now become ‘Acts’ are the Secured Transactions in Movable Assets Act, 2017 (also known as Collateral Registry Act) and the Credit Reporting Act, 2017.

The Collateral Registry Act allows Nigerian Micro, Small and Medium Entreprises (MSMEs) to register their movable assets (such as motor vehicles, equipment) and accounts receivable in the National Collateral Registry. They can then use these assets as collateral for securing loans. This will increase their chances of accessing finances and in turn combat the major obstacles experienced by MSMEs.

The Credit Reporting Act, on the other hand, provides credit information sharing between Credit bureaus and other lending/credit institutions (such as banks, telecommunication companies and retailers that provide services on credit.)

According to the Senior Special Assistant to the President on Media and Publicity, Mr. Laolu Akande, the laws would ultimately facilitate the achievement of the goals of the Presidential Enabling Business Environment Council (PEBEC), set up by President Muhammadu Buhari in August 2016, and make Nigeria a favourable place for businesses to start and thrive successfully.

“Access to credit is critical to economic growth and is considered to be the motor for driving private sector development. However, in Nigeria more than 70% of private enterprises, typically MSMEs, have limited or no access to credit. Credit applications get rejected due to insufficient credit history and information for the lender to use to make a reasonable judgement, as well as unacceptable collateral. The two new Acts remove those obstacles for MSMEs”.

– Laolu Akande

He further stated that since , banks only give loans to businesses that can provide fixed land and property as collateral, MSMEs which usually own only movable assets like motor vehicles and equipment are shut out. Hence, the Collateral Registry Bill, 2017, will give confidence to lenders to utilise the Registry and make credit available to MSMEs and individuals through the use of their movable assets as collateral.

With the passage of these PEBEC initiated Acts, lenders are able to make reasonable judgement on whether or not to extend credit to an individual, and reduces the cases of bad loans. More so, the existing Central Bank of Nigeria (CBN) Guidelines regulating the operations of the National Collateral Registry and Credit Bureaux have now been replaced by formal legal frameworks.

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