Collateral registry to bridge N48trn MSMEs funding shortfall —Emefiele

TRACKING>>The registration of financial institutions with the National Collateral Registry (NCR) will go a long way in bridging the funding shortfall in the micro, small and medium enterprises (MSMEs) in Nigeria estimated to be N48 trillion.

Governor of Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, stated this in Abuja at the opening of a workshop for judicial officers on the Secured Transaction in Movable Assets (STMA) Act to acquaint them with the workings of collateral registry.

He lamented that the huge financing gap in the small business segment of the economy has persisted despite the numerous intervention schemes by the apex bank to boost the sector. According to him, the situation is compounded by the lack of acceptable collateral and inherent information asymmetries among others.

The CBN boss said the N48 trillion funding shortfall was a reflection of the risk-driven apathy of financial institutions to lend to the sub-sector, adding that the statistics bring to the fore the urgent need for stakeholders to synergise, support and promote the development of MSMEs through improved access to affordable finance.

Emefiele said the apex bank had collaborated with the International Finance Corporation (IFC) and the World Bank Group to establish the STMA Act and NCR which allows Nigerians, particularly MSMEs, seeking to access credit, to use their movable assets as collateral.

Emefiele said that financial institutions, especially banks, have registered interest on movable assets valued at N1.23 trillion, $1.14 billion and €6.08 million through 41,408 financing institutions.

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He stated: “As at 31 January 2019, 628 financial institutions comprising 21 deposit money banks, four merchant banks, one non-interest bank, four development finance institutions, 551 microfinance banks, 13 non-bank financial institutions, and 34 finance companies have been registered on the Registry’s portal,” he said.

“Despite this impressive registered assets by banks, there is an estimated financing gap in excess of N48 trillion for these enterprises and their significant share in our Gross Domestic Product (GDP). Poor funding directly translates to weaker economic performance.

“Strongly related to this is lack of acceptable collateral and the inherent information asymmetries. MSMEs are typically deemed risk-laden, plagued with high mortality rate, and often lacking adequate collaterals acceptable for conventional credit. Accordingly, the estimated $158 billion or N48.3 trillion financing gap which characterises MSMEs in Nigeria reflects the risk-driven apathy of financial intermediaries to MSME lending.”

Emefiele recalled that the National Collateral Registry was established in 2015. “To legalise and institutionalise the authority and power of the registry, the Act was signed into law on May 30, 2017 while the CBN, had earlier in February 2015, issued and gazetted the Registration of Security Interest in Movable Property by Banks and Other Financial Institutions in Nigeria Regulations (No.1, 2015) to facilitate the seamless operation of the collateral registry.

In his address, the Acting Chief Justice of Nigeria (CJN) Justice Ibrahim Tanko Mohammed commended the CBN for recognising the role the judiciary plays in ensuring financial system stability in the economy.

He said the judiciary on its part will continue to ensure that disputes arising from secured lending in moveable assets are resolved speedily in line with sacrosanct constitutional and statutory provisions.