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MSME Growth: CBN, IFC Advocate For Credit Reporting System

By Tajudeen Balogun – The Central Bank of Nigeria (CBN) and International Finance Corporation (IFC), have advocated for use of the credit reporting system and a national collateral registry (NCR) to check difficulties being faced by Nigeria’s micro, small and medium enterprises (MSMEs) as well as ensuring that they access funds to develop their businesses.

Speaking at the workshop for the Working Group of the Credit Reporting and National Collateral Registry Education and Awareness, organized by the Lagos branch of CBN, the apex Bank’s Deputy Governor, Financial System Stability (FSS), Dr Okwu Nnanna, described NCR, which both the CBN and IFC, a member of the World Bank Group, are pushing for its launch before the year ends, as the single central and electronically driven database, where all moveable assets to be pledged as collateral for credit were registered to avoid the “re-pledging of the same encumbered assets that have existing liens, as the missing link needed to connect the MSME sector in the country to financial sources”.

Nnanna said: “A collateral registry is needed to assist in converting moveable assets into effective and risk-free collateral for use to obtain loan from financial institutions in the country making those assets useful by linking their owners to sources of financing for the growth of their businesses”

As a trouble shooting system, the banker explained that the establishment of the NCR for moveable assets became imperative to curb the challenges being faced by MSMEs as a result of their lack of access to financing, noting that the circumstance “manifested in the crippling of the sector’s growth and led to loss of latent innovation, creativity and productivity”.

In addition to the system, Nnanna indicated that the CBN had taken various actions to further strengthen the lending environment in the country, which he stated include the publication of the gazette of the Registration of Security Interests in Moveable Property by Banks and Other Financial Institutions in Nigeria (Regulations, No 1 of 2015) and the implementation of the Bank Verification Number (BVN) scheme, which is a unique identifier for all banks’ customers.

“The collateral registry for moveable assets had improved MSMEs’ access to financing in China, Vietnam and Ghana, recording disbursements to the tunes of $3.5 trillion in five years, $600 million in three years and $3.5 billion in seven years, respectively” Nnanna stressed.

IFC Principal Credit Bureau Specialist in Sub-Saharan Africa, Ms Luz Maria Salamina, in her presentation at the workshop, affirmed that a responsible NCR is enabled by the interplay of credit bureau, collateral registry and insolvency/creditor’s rights for enhancement of access to credit for MSMEs and individuals.

Salamina restated credit reporting would “provide data to minimize the gap between lenders and borrowers; provide positive data to promote access to credit; and reduce over indebtedness of borrowers. This results in increased access to finance for the small-scale business sector and enhanced inclusive economic growth, to the benefit of the economy as a whole.

The workshop was aimed at increasing access to credit among Nigerians by sensitizing lenders and borrowers in the country, on the opportunities and benefits offered by credit reporting and a collateral registry.

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