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“Interest rate is a function of cost of fund, says Mohammed Mainasara, the Registrar of the National Collateral Registry (NCR). “If the financial institutions have all the information, the information that is sent to our data base, at their finger tips, we would reach a time when the cost of getting information about us is going to be less. It is going to reduce and then, the interest rate and cost of funds will be lower”, he added.
At the 27th Seminar for Finance Correspondents and Business Editors in Gombe recently, Mainasara said NCR was making frantic efforts to ensure that Small and Medium Enterprises(SMEs) access credits at reasonable rates.
This can be said to be the continuation of his press briefing in Abuja last month where he said that “ collateral registry is a financial infrastructure for Micro, Small and Medium Enterprises (MSMEs) lending, warehousing a notice board registry for collaterals with a publicly available database of security interest in moveable assets registered for the purpose of being used as collat- eral to obtain facilities from financial institutions.
“A collateral registry allows borrowers to provide their credit-worthiness and lenders to assess their priority interest in potential claims against particular collateral. A collateral registry is expected to improve both access to finance and induce prompt repayment by providing a win-win for the borrower and lender simultaneous- ly.” Then he explained that assets registered as movable collateral to be seized from their owners in case they default in meeting their loan obligations to their creditor institutions include 20 privately owned planes, 17,657 documents of title/negotiable instruments; 100 boats;13 intellectual properties; two minerals (undisclosed); 417 plants and machinery; 218 securities; 13,425 motor vehicles; 1,582 farm products; 1,166 deposit accounts; 10,579 consumer/ household goods which all form part of the 65,370 registered moveable assets on the NCR’s portal.
He stated that the number of registered financial institutions on the NCR portal has grown to 630 as of March.
According to him, 21 deposit money banks (DMBs); 552 Micro-finance banks; four Merchant banks; four Development Finance Institutions (DFIs); 34 finance companies; one non-interest bank and 14 non-bank financial institutions have all been registered on the portal. In the same vein, 165,456 debtors comprising of 157,077 individuals; 735 large businesses; 2,279 medium businesses; 3,457 micro businesses and 1,908 small businesses all with a financing value of N1.26 trillion have also been registered by the Registry.
He added that two of the registered Development Finance Institutions(DFIs) have the largest number of borrowers registered on the NCR portal with 114,894 borrowers on their list with financing statement of over N54. 13 billion; 21,144 borrowers are owing six non-bank financial institutions the sum of over N84.65 billion; a total of 24,318 women were registered with a combined registered value of over N45.18billion.
The NCR boss stated that the need for collateral registry became necessary because of the N7.4 trillion financing gap plaguing MSMEs.
According to him, N10.1 trillion capital is required by MSMEs but only N2.7 trillion has been raised so far. This comprises “the total capital base/seed fund of DBN, BoI, BoA, NMBM, NEXIM, NIRSAL, Agriculture Credit Guaranteed Scheme. (ACGS), Commercial Agricultural Credit Scheme (CACS), Re-discounting and Refinancing Facility (RRF), DMBs and MFBs.”
At the Gombe interface, he explained further.
Excerpts:
How NCR works
The National Collateral Registry (NCR) is not giving out loans. The NCR is not a platform for accessing loans. It is a platform that registers your interest on movable assets,. So it is only interest on physical assets that is registered. And when you look at the rudimentary, it is the creditors, the banks, that do the registration. They are the ones that give out credits.
Let me come down a little need N100,000 more. And I can go to another person to collect N100,000. If they check on the registry, they would find a level of encumbrance that I am still owing. So they will take decision, either to give me and take second priority or they decline and say go and pay those loans before you come to us.
So the registry does not register and keep physical collateral. It registers interest on that movable collateral. It is expected that the Registry and credit reporting will motivate banks to accept moveable assets as collateral. It is also expected that the Registry will reduce bank default rate, boost production and create employment. It will also cut down the cost of verifying borrowers by 35 per cent, therefore reducing the cost of credit and nonperforming loans.
Insurance
It is expected that each and every loan or credit provider supports to take what is called insurance. Now somebody would raise the question that the insurance is very costly.
This infrastructure has given an impetus to develop what we call micro-insurance; an insurance that would come to the level of those small items for the growing SMEs. So it is expected that each and every one, if you decide to ride Keke NAPEP, the bank will ask you to take a mi- cro insurance so that in case of theft or hazards, they will have something to fall back on.
And when you look into the law, if you decide to give false information, the law would charge and punish you for giv- ing such false information.
So don’t think of taking credit using a collateral and then tell the bank that I am sorry, thief came to my house yesterday and stole it.
When the bank investigates and discovers that you are not saying the actual truth, they will make you to face the law.
It is expected that you take insurance. The insurance companies would pay to the creditors because you are the borrower. We are trying now to safeguard your records by paying your debts. And as such, the insurance is supposed to pay to the creditor in order to reduce the level of exposure. If the insurance is able to cover the out- standing payment they (debt- ors) have not done otherwise, the insurance companies will still go back to get the balance of the debtors’ money and pay.
Interest rate
Interest rate is a function of cost of fund. Now if the financial institutions have all the information they needed at their finger tips prior to the coming of technology, which they would now build into the administrative cost, definitely, the cost of funds will come down. And you can see that these days, those of you that bank with deposit money banks, at the end of every month, you see alerts that you are entitled to salary advance. This is not because of your face or colour that they are giving you the salary advance. They are giving it to you because of your records they have at their disposal. It is the way that you turn around your transactions; it is the way you pay your debts that qualifies you for credit, even if you don’t ask for credit. It has started happening in Nigeria and it would continue to happen. For us , we pray that we have a very low interest rate. We would reach such a time when the cost of getting information about us is going to be less. It is going to reduce and then, the interest rate and cost of funds will be lower.
ICT
We have always be thinking of ICT. The Nigerian Communication Commission (NCC) is an integral part of our financial inclusion. And for us to have financial inclusion, effective financial inclusion, NCC must come in an onboard. I am aware that they are part of the govern- ing board of the National Finan- cial Inclusion Strategy. And they are trying to take the model of what is obtained in Kenya and Uganda to bring it here. All
the microfinance progress that has been achieved in these two countries I just mentioned, Kenya and Uganda, actually relies on ICT. And they will continue to rely heavily on ICT. We shall one day likely get there.
Credit bureaux
The credit bureau have been complaining about getting adequate and reliable information. They must have reliable and quality information in order to have information turned out to the public. This is as a result of you and me. Sometimes, we give out wrong information.
A typical example is when you are opening a bank account. You are given form to give out some certain information. We try to chide away from supplying such information. And this is information that is sent to our data base. Occasionally, we don’t make such information available when due. You then find out that only sketches of information are available in the data base of the credit bureaux. But there has since been a lot of improvement in the last three years.
I am sure they are normal complaints about the level of information or the quality of information they (the banks) are getting from their customers.
