#BounceExclusive: 5 Things You Need To Know About The Bill Osinbajo Signed Into Law
Iya Segun (not real name) owns a grocery supermarket in her estate somewhere in Lagos.
80% of her customers, who are resident in the estate, are civil servants.
They cannot afford to pay Iya Segun cash for the groceries they buy.
Most of them want Iya Segun to let them buy on credit and pay back when they receive their salary.
To remain in business, Iya Segun needs to allow these credits but she also needs to restock the shop to keep the business alive.
To achieve this, Iya Segun went to her bank to borrow some money. But the bank would not oblige her.
They needed a collateral. In her case, they asked for landed property somewhere in Lagos, which Iya Segun did not have.
So, Iya Segun could not get the loan.
Iya Segun’s story is not different from what most micro, small and medium enterprises, MSMEs face every day looking for money to either start or remain in business.
But all that is about to change following the signing into law of the National Registry Collateral Bill by the acting president, Yemi Osinbajo.
Here are 5 things you need to know about the National Collateral Registry Act:
1. The Act Solves The Collateral Problem For MSMEs: The main reason banks do not give small businesses loans is because of lack of bankable collateral.
This collateral often means immovable property like land, houses, etc.
But this Act now provides for movable assets such as motor vehicles, equipment and accounts receivable in the National Collateral Registry, to be used as collateral for accessing loans.
Under this act, a business owner like Iya Segun would not need a landed property as collateral to get a loan from her bank.
Her bank, would instead, give her the loan using her accounts receivable as collateral.
What is Accounts Receivable you may ask? For Iya Segun, those monies that his civil servant customers are owing her are accounts receivable. And according to the national collateral registry act, it may be used as collateral.
*Even market women would have access to loans under the national collateral registry act. Photo: World Bank Group
2. What Qualifies As Movable Assets: According to the national collateral registry act, these movable assets includes equipment such as farming machinery, printing plants, cash registers, taxi and even computers used by a business.
It also includes inventory which refers to goods that the business owner has in his or her shop for sale. Iya Segun could have used available goods in her shop to secure a loan. A furniture maker or seller could use tables and chairs in his furniture store. Inventory also includes raw materials or even work in progress.
More so, if you are farmer, you can secure a loan with your farmland or farm produce. Farm products include crops (growing, grown, or to be grown), fish stocks, poultry and livestock (and their unborn offspring), seeds, fertilizers, manure, and other supplies used or produced during the farming operation.
As a private individual who desperately needs a loan, your consumer goods also come handy. These consumer goods include assets like household appliances, furniture, car, laptop, etc.
3. You Can Apply For Loan Using Someone Else’s Property As Collateral: On a regular day, you know it is difficult convincing anyone let alone banks to give you a loan using a property belonging to your relative or close associate as collateral. That is the way it is with this Act too.
You may only use property that you actually own directly.
However, someone else may allow you to use their assets to secure your loan but it must be with their consent. Such a person must execute a security agreement as if he/she is the one obtaining the loan. For the purposes of the Collateral Registry Regulation, that person will be the debtor.
4. Virtually Anybody Qualifies For A Loan Under This Act: While it will be easier for a business to get a loan because of the kind of assets they may own. Private individuals may obtain secured loans using consumer goods, inventory or other movable property, such as cars.
If you own a business, it does not matter if it is a registered business operating in a tush location or a small shop at Onitsha market or even an Okirika shop at Katangowa. Under the Collateral Registry Regulation, everyone is welcome.
5. You Can Apply For A Loan As A Group: Yes, individuals may apply for a loan as a group. They may use their assets that they own individually or jointly as collateral for the loan.
Why does this law matter to the business community? As the vice president said while signing the bill, “the Collateral Registry Act’ ensures that MSMEs have increased chances at accessing finance.
Besides the secured loan comes at lower interest rate. It is far easier for a small business owner to forfeit a car or living room furniture instead of a land or house.
You may visit www.ncr.gov.ng for more information