28th September, 2017
The Chartered Institute of Banker of Nigeria (CIBN) on Thursday cautioned Micro, Small and Medium Enterprises (MSMEs) against using false assets as collateral to obtain loans from banks.
The President of CIBN, Mr Olusegun Ajibola, gave the caution at a breakfast session organised by CIBN for stakeholders in the banking industry in Lagos.
The News Agency of Nigeria (NAN) reports that the breakfast session was themed: Collateral Registry Act: Pros and Coins for the banking industry and other stakeholders.
The National Assembly had in May 2017 passed into law the Collateral Registry Act which gave MSMEs the opportunity to acquire loans, using movable assets as collateral.
Ajibola said that the small operating scale of most MSMEs did not afford them the opportunity to meet collateral requirements of fixed assets such as real estate for accessing loan from commercial banks.
“On the contrary, banks are wary of the level of risk associated with such business considering the less-than-encouraging business environment in the country.
“For instance, the World Bank Ease of Doing Business Survey ranked Nigeria 159 out of 189 economies; hence the probability of business failure is high that lenders guide against the risk through high interest rates,’’ he said.
Ajibola said that for the reasons above, the enactment of Collateral Registry Act, which allows MSMEs in the country to apply for credit on the strength of movable assets as collateral is a welcome innovation.
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“A 2015 report by International Finance Corporation (IFC) noted that Indian MSMEs grew by 11 per cent each year consecutively between 2007 and 2011 and by 17 per cent between 2014 and 2015.
“The same development replicated itself in China and Mexico,’’ he said
He, however, appealed to the stakeholders to remain honest, faithful, ethical and professional in the use of movable assets.
He said there was also the need for National Collateral Registry (NCR) of Central Bank of Nigeria (CBN) to ensure the functions of the Registry were automated.
According to Ajibola, 24 hours may be too long to respond to an inquiry.
The Registrar, NCR, Mr Mainasara Muhammad, said there was need to tackle all the challenges confronting the ease of doing business in the country.
“In Nigeria, it isn’t only inaccessible loans that stall business growth; there are other factors like dearth of infrastructure, inaccurate feasibility studies of the business environment, among others.
“As a country, we need to factor in all these challenges and tackle them head-long,’’ Muhammad said.
NAN reports that over 100 participants attended the breakfast session.