Afrinvest West African Limited have asserted that effective implementation of the Collateral Registry Act will boost access to credit by Micro, Small and Medium Enterprises (MSMEs). Afrinvest is an independent firm active on investment banking, securities trading, asset management, and investment research with a focus on West Africa, and a provider of research content on the Nigerian market.
In a note to investors, the investment bankers stated: “In our view, the Credit Reporting Act would, to a large extent, improve credit information database available to lenders and could also make loan origination processes more efficient by bridging the information asymmetry gap between borrowers and lenders.
We believe successful implementation will go a long way in improving access to credit.” The Secure Transactions in Movable Asset Act 2017, otherwise known as Collateral Registry Act, enables MSMEs to register their movable assets such as motor vehicles, equipment and accounts receivable in the National Collateral Registry, which could then be used as collateral for accessing loans from banks.
Afrinvest further noted that the Act also complements the Collateral Registry Act as it allows credit information to be shared between lenders and credit bureaux in addition to other establishments who offer similar credit services such as fintechs, telecommunication companies and retailers.
Credit bureaux gather information on the credit ratings of individuals and make it accessible to institutions who offer credit services for the purpose of determining credit-worthiness of any applicant for credit extension.
The analysts at Afrinvest commended the commitment and vigour with which the ‘ease of doing business’ objective is being pursued, adding that if the current drive to implement reforms is sustained, “we expect to see more of the hurdles which constrain operating performance of the private sector to be scaled.
Access to credit remains a major hindrance to the development of the private sector in Nigeria as most MSMEs either have insufficient credit history for reasonable judgment or unacceptable collateral to secure loans”.