Business News of Wednesday, 14 November 2012
Source: Daily Graphic
The collateral Registry of the Bank of Ghana has registered a total of 72,703 collaterals from 197 lenders between February 2010 to September 2012.
The lenders include the 27 commercial banks, the rural banks and non-bank financial institutions. Some trade creditors and foreign financial institutions have also used the service of the Collateral Registry. The rising figures show the interest lenders and borrowers have shown in the facility.
The establishment of the registry by the Bank of Ghana forms part of efforts at deepening public understanding of the Borrowers and Lenders Act 2008 (Act 773) to promote transparency in the credit delivery system by the introduction of Collateral Registry which allows banks to register the collaterals presented by borrowers
As part of this, an outreach programme was held in Takoradi in the Western Region for representatives of the financial sector, small and medium scale enterprises (SMEs), micro-finance operators, heads of departments, lawyers and the business community.
The Operations Officer of the Collateral Registry, Bank of Ghana Mr Edwin Osafo explained that the decision to set up the registry was in response to difficulties borrowers, especially SMEs face in Ghana's credit market.
According to him, the Registry is intended to facilitate the granting of loans and to help create jobs and improve the economy as a whole.
It will also help end or reduce the numerous unproductive litigations in court and substantially reduce the rate of bad debts recorded in the books of lenders.
The performance of the Registry since it commenced operations on February 1, 2010 has been very impressive. All the universal banks in Ghana and a greater number of the non-bank financial institutions have accessed the services of the Registry.
A number of rural banks, foreign-based banks and law firms have also patronised the services of the Registry.
Currently the International Finance Corporation (IFC), an arm of the World Bank, is working with the Swiss State Secretariat for Economic Affairs (SECO) to provide advisory support in improving the new Secured Transactions Regime in Ghana to ensure that the legal and regulatory framework established by the Borrowers and Lenders Act 2008 (Act 773) and the operations of the Collateral Registry translate into affordable long term credit for firms especially the Small and Medium-sized Enterprise (SMEs).
Mr. Edwin Osafo and Edward Nyarko, both Operation Officers at the Registry, urged entrepreneurs to make sure that they registered their businesses with the BoG’s collateral registry.
According to them, the act was meant to help address challenges faced by borrowers and lenders in their credit transactions.
These include the lack of transparency in the credit market, deficiencies in judicial enforcement of foreclosure processes, high interest rates and inadequate avenues to search on security interest.
The passage of the law, they believe had ushered in a new credit regime, dubbed the “Secured Transaction Regime”.
Since the establishment of the Registry, the BoG had been working to redesign the Registry’s systems, processes and procedures to conform to international best practices.
The Collateral Registry gives enough information about collaterals and determines the level of encumbrance of a charge (collateral). This helps to deal with credit risk.
According to the experts, such information could help the lender to structure the credit appropriately to the mutual benefit of borrower and lender.
Another risk manager from an indigenous bank said the Collateral Registry, a creation of the Borrowers and Lenders Act, 2008 (Act 773), provided enhanced information on borrowers that helps in structuring loans.
“The information the system provides helps to reduce the risk profile of the borrower, which affects the interest rate charged on the loan,” the anonymous risk managers said.
However, a lot would depend on the pre-lending disclosure information presented by the SME (or the borrower) to determine the structure of the loan,” Mr Osafo added.
He, therefore, called on SMEs to make full disclosure at the point of lending so as to contribute to the overall objective of lowering the general interest rates charged in the country.
“Small businesses stand to benefit from the new regime as a result of the higher degree of liquidity provided by the Register’s existence,” said one of the bankers.