Opinions are divided as to the propriety or otherwise of the National Collateral Registry (NCR),an initiative of the Central Bank of Nigeria which is expected to improve access to finance for Micro, Small and Medium Enterprises (MSMEs) across the country, reports Ibrahim Apekhade Yusuf
One of the initiatives of the Central Bank of Nigeria (CBN) that is tailor-made for the Micro, Small and Medium Enterprises (MSMEs) is the National Collateral Registry (NCR).
Launched in May this year by the CBN with the support of the International Finance Corporation (IFC), a member of the World Bank Group, is to allow low-income earners and small-scale entrepreneurs to secure loans against movable assets, will not only increase local production but will help in reducing unemployment. The long-term vision of the NCR is to ensure growth of the Nigerian economy by assisting Nigerian banks support MSMEs.
A survey conducted by the project team shows that only 31% of MSMEs in Nigeria currently have a loan with a bank or a microfinance institution, and that personal savings and business income are the most important sources of capital for financing businesses. At the same time, 82% of financial institutions surveyed said inadequate collateral is the most common challenge in granting loans.
About the NCR
In a document sourced from the apex bank’s website, the Collateral Registry, which operationalises Part III of the Central Bank of Nigeria’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 encumber 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.
The Collateral Registry system is a centralised web-based software designed and developed based on international standards that contains information relating to security interests in movable property included in financing statements submitted by registered users.
The web-based nature of the system offers remote access from the comfort of your location even beyond normal business hours without visiting the registry office. It reduces and frees officials of the registry operations from paper burdens, manual reviews, searches and storage costs.
A Collateral Registry is established for the purposes of receiving, storing and making available to the public information submitted by users in the form of financing statements relating to security interests. The software saves data submitted by registered users to a database and makes it available to the searchers who use the appropriate search parameter.
Justification for the NCR
Justifying the establishment of the Registry, Mr. Mainasara Muhammad, the Registrar/CEO, while speaking at the Kaduna Interactive Forum on the National Collateral Registry and Credit Reporting System, said the Collateral Registry will help bridge the MSME finance gap that has been estimated to be about 62 billion dollars.
“Knowing that these MSMEs contribute significantly to economic growth and job creation in Nigeria, as such, the National Collateral Registry will help bridge the MSMEs finance gap by facilitating easier access to funding which will ultimately boost production and lead to creation of employment.”
Nigeria, which has an estimated 37million MSMEs, many of who have been denied credit lines from the conventional banks in the past for their inability to present the requisite collateral security to back up the credit facility, he said.
“The benefits of the collateral registry include enabling businesses to leverage their assets to obtain credit for growth, improve assets liquidity especially short-term assets, and allow asset diversification as well as to reduce cost and promote prudent lending,” said Muhammad.
Echoing similar sentiments, Eme Essien Lore, IFC Country Manager for Nigeria, said “the online registry coupled with the credit reporting system has been implemented in other countries like Ghana and Liberia with success recorded.”
According to Lore, “Nigeria is the largest economy in sub-Saharan Africa and a focus country for the Universal Financial Access by 2020 initiative. This is why we are supporting the Central Bank of Nigeria and other stakeholders in initiating the Collateral Registry as well as strengthening the Credit Reporting System. It has previously been implemented in other countries with amazing outcomes. For instance in Ghana, the collateral registry has facilitated $1.3 billion in financing for the small-scale business sector since it was established in 2010, and $12 billion in total financing for the business sector using movable assets as collateral. We are very excited that a registry is now also in place in Nigeria.”
The Registry is supported with the strengthened Credit Reporting System to promote secured transaction and responsible lending framework in Nigeria. These two financial infrastructures are expected to enable businesses to leverage their assets to obtain credit for growth, improve assets liquidity, especially short-term assets, and allow asset diversification as well as reduce cost and promote prudent lending.
Besides, the Registry is supposed to complement the functions of the National Credit Bureau.
Modus operandi
From available information, The Nation gathered that interested persons can access the Collateral Registry System by entering the URL address www.ncr.gov.ng in a web browser. However, 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.
Postpaid client account access
Postpaid client account users are financial institutions regulated by the CBN who hold a clearing account with the CBN. Such financial institutions should open a client account with the Collateral Registry by clicking the Create New Account Tab on the home page to register and request to be setup on a postpaid account. This allows the institution through its authorised users to login to the application, register notices of financing statement and request for search certificates without making any advanced payments. The transaction fees are automatically deducted from the financial institutions credit account with the Central Bank of Nigeria and a statement is generated for the client at the end of each month, detailing all completed chargeable transactions.
How to search as public user
A public user however must first know how many searches to undertake before paying the fees through Interswitch WebPay and use the payment security code issued to you to search for registrations and then click the Search Tab on the home page to go to the search page and perform search.
How to make payment
Fees are charged during initial financing statement registrations, amendments, renewals and search. Registered clients holding postpaid accounts with the CBN shall pay for transactions through settlement payment. To pay for a transaction in the collateral registry as Public client, first determine the total amount of fees for the service you want from the fees option under the help menu. Then pay that amount through either Interswitch WebPay. On the home page click the search menu tab to redirect you to the main search page where you will find the payment menu. For WebPay click on the make an online payment and follow the steps to continue. If the payment transaction is successful, the client will be issued with a payment security code which will be used to search for registrations.
Poor testimonies
Although unconfirmed report stated that the platform which became operational on 16th, November, 2016, has recorded over N32billion worth of transaction so far, a cross-section of small business owners who spoke with The Nation at the weekend said most SMEs are still unable to access credit.
Mr. Abdullahi Inapeh, Chief Operating Officer, IBay Associates, Lagos, while lamenting the absent of credit to SMEs, said it has become impractically impossible to access funds from the banks with the strangulating interest rates.
Inapeh also said whatever benefits the Registry might have is being eroded with the poor publicity and awareness amongst businesses.
“The initiative is good on paper may be but what is also responsible for the apathy I think is the poor publicity around it. From experience, there is need for a good media component for such initiatives to generate the kind of success. But I want to believe that the initiators of this scheme may have their own hidden agenda after all,” Inapeh stressed.
Mr. Jide Buraimoh, Managing Director/CEO, Woodbridge Capital Leasing Limited, also shares similar sentiments with Inapeh.
According to him, the whole initiative itself is a misplaced one. As far as Buraimoh is concerned, successive policies of the apex bank have been a disincentive to business rather than a blessing.
The expert accountant who has over two decades of practice said the initiative while not a bad idea in itself can only work if the right infrastructures are put in place.
Specifically, he said the absence of a proper data base is at the root of the crisis in the financial service sector.
“Without a proper data gathering mechanism in place, we will keep going round the circles. Most financial systems in the world succeeds as much because there is a viable data base which can be readily accessed anywhere in the world with the click of a button. But in Nigeria, this is still a far cry.”
Reminded that the Biometric Verification Number (BVN) is supposed to aid this, the Woodbridge boss said, that is not enough because dubious people can still beat the system regardless.
“All that I’m saying is that the country is always putting the cart before the horse. Things need to be done properly if we must get the necessary results,” he stressed.
A member of the Manufacturers Association of Nigeria (MAN) who would not be named said many of their members have had to close shop because of their inability to access credit facilities from credit-awarding institutions in the country.
While making reference to the Bank of Industry (BoI), which has the mandate to support small businesses, the source at MAN said most of the requirements are such that many businesses cannot satisfy and are therefore cut off from funding even at that level.
But a source in one of the new generation banks told The Nation that though most banks are wary of extending credit to small businesses naturally because of a number of factors, he however said businesses with a good credit history, can readily have easier access to loans compared to others with poor credit history.