National Collateral Registry Established To Aid MSME Financing

Nigeria’s apex bank, the Central Bank of Nigeria has reiterated the strategic importance of the National Collateral Registry (NCR) as a catalyst in the growth of the Nigerian economy by assisting Nigerian banks support Micro, Small and Medium Enterprises (MSMEs).

This was stated at the 3-day workshop with the theme “The Secured Transaction & National Collateral Registry As a Tool for Deepening Access to Finance MSMEs” organized by the Bankers’ Committee’s sub-committee on Economic Development, Sustainability & Gender for MSME desk officers in Nigerian banks in conjunction with the CBN, NCR and the IFC/World Bank.

According to the apex bank, MSMEs are the engine room for economic growth, vehicle for job creation, tools for poverty alleviation and wealth creation for any country’s economy. In his opening remarks, the Director, Development Finance Department of the Central Bank of Nigeria, Dr. Mudashiru Olaitan said the workshop was organized by the Bankers’ Committee to keep the industry operators abreast of the efforts being put in place to assist in MSME financing through the establishment of the National Collateral Registry (NCR). According to him, “there are about 37 million MSMEs in Nigeria and most of them have no access to financing, this has created a huge gap and thus the reason for the establishment of NCR to facilitate credit with movable assets”. He enjoined participants to use the opportunity the workshop provides to acquaint them with the process and take advantage of the coming on board of NCR to improve their lending to MSMEs.”

Bola Adesola, Chairperson of the Subcommittee on Economic Development, Sustainability and Gender (EDSG) of the Bankers’ Committee noted that the NCR, which is a form of Modern Secured Collateral Registries; has increased the availability of credit and reduced the cost of credit globally. These registries provides the basis for free-flowing credit markets, reducing the potential losses lenders face from non-payment, ultimately resulting in positive dramatic economic impact. Lending against movable assets is not very widespread in banking in Nigeria. Whilst the CBN Regulation on registration of security interest in movable assets and the National Collateral Registry are meant to provide regulatory and institutional framework for movable asset lending, the lack of awareness by key banking operatives that are meant to carry out registrations on the requirements of the Regulations and workings of the Registry system will render the platform ineffective. To achieve optimal adoption of the NCR, there is therefore the need for this Awareness Workshop to be conducted for these bank operatives. The banking community hopes this workshop along with other planned awareness initiatives will catapult the NCR towards achieving its overarching goal of improving access to credit for the MSMEs.

The Senior Financial Advisor, International Finance Corporation (IFC)/World Bank, Ubong Awah in his paper said, IFC in collaboration with Central Bank of Nigeria has been at the forefront of the establishment of the National Collateral Registry to stabilize MSME financing and also boost the confidence of Nigerian banks in playing active roles in financing the sector in Nigeria. According to him, the MSME sector is an important catalyst for economic growth and financing the sector needs serious attention. “As an organization, IFC is bringing the experience we have garnered over the years across geographies to bridge the knowledge gaps and to lay emphasis on the fact that globally, collateral for MSME is moving away from fixed assets to movable assets, hence the reason for the establishment of the collateral registry for the finance industry. The establishment of NCR is so strategic to MSME financing because of the new economic imperative due to the need for diversification of the economy, focus on production economy, increasing demand for credit products, meet the expectation gap and the changing market dynamics”, Awah said.

Speaking further, he said lack of adequate legal framework, registry for security interest in movables, know-how on movable assets and interest are some of the reasons why financial institutions are not willing to accept movable assets as collateral, but with the coming of NCR, financial institutions have nothing to fear.

Dr. Musa Olasupo of National Collateral Registry advises the financial Institutions to take advantage of the registry to reduce the concentration risk through diversification of their lending portfolio. According to him, the coming on board of NCR will bring about decrease in loan default among MSMEs and it will assist the MSMEs boost their production and create employment. The registrar, Mainasara Muhammad thank the participants for attending the workshop and assure them that NCR will partner with all financial institutions in bringing about the confidence required to accept movable assets as collateral in order to increase their lending portfolio, thereby helping to boost the Nigerian economy through diversification.

Participants who were drawn from various financial institutions, were full of gratitude to the organizers as the workshop provided the needed opportunity to hone their skills and learn new things about the collateral registry as it relates to MSME financing. This they believe will aid them in deepening their banks’ MSME loan portfolio, as they agree it will assist to a great extent in minimizing the risks associated with MSME financing.

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