Anna Okon
Small business owners have expressed fears about hidden charges by banks associated with loans under the Collateral Registry Act, also known as the Secured Transactions in Moveable Assets Act, which was signed into law on Tuesday by the Acting President, Prof. Yemi Osinbajo.
The Secured Transactions in Moveable Assets Act mandates banks to accept movable assets such as motor vehicles, equipment and accounts receivable as collateral for loans to small businesses.
According to a statement issued to that effect by the Senior Special Assistant to the Acting President on Media and Publicity, Mr. Laolu Akande, the Act ensures that Micro, Small and Medium Enterprises in Nigeria can register their movable assets such as motor vehicles, equipment and accounts receivable in the National Collateral Registry, and use same as collateral for accessing loans.
“This in turn will increase their chances of accessing financing and tackle one of the major obstacles faced by the MSMEs,” Akande had said.
However, small business owners said the success of the bill would be determined by its implementation by the banks.
The President, Nigerian Association of Small and Medium Enterprises Farmers Cooperative, Dr. Adams Adebayo, said that the only challenge with the bill would be the attitude of banks towards the collateral that would be presented to them.
He said that for assets such as motor vehicle and other equipment, the banks might want to take depreciation into account while calculating the charges.
“If one has a car that is worth N3m, for instance, the banks could calculate depreciation on the car based on its age and the customer would be asked to pay the depreciation charge. This will in turn add to the hidden charges on the loan.
“Also, the banks usually may ask the owner of the assets to pay for comprehensive insurance, which may amount to a half of the cost of buying the car,” he said.
He suggested that the banks should accept the equipment and motor vehicles at their face value.
Adebayo added that land without any Certificate of Occupancy should be acceptable as collateral since the capital of most business owners could be tied up in the land where their businesses were situated.
The Secretary, Yaba Industrial Estate (SME association), Mrs. Alaba Bamgbose, shared Adebayo’s sentiment about the implementation of the law and advised the government to put up structures to ensure its successful implementation by the lenders.
“When a bill is passed, there must be a way of enforcing it,” she stated.
The Director-General, Lagos Chamber of Commerce and Industry, Mr. Muda Yusuf, suggested that the Central Bank of Nigeria should use moral suasion to get the banks to cooperate with the government in successful implementation of the law.
A moral suasion is a persuasion tactic used by an authority (such as the Federal Reserve Board) to influence and pressure, but not force, banks into adhering to a policy. Tactics used are closed-door meetings with bank directors; increased severity of inspection, appeals to community spirit, or vague threats.
Yusuf admitted that banks might not be comfortable with the Act but added that development banks, which were government-owned, could be prevailed upon by the government to relax certain rules for granting loans to small business owners.
He said, “The CBN and Federal Government should structure a way of getting the banks to support the Act and ensure effective implementation.”
Copyright PUNCH.
All rights reserved. This material, and other digital content on this website, may not be reproduced, published, broadcast, rewritten or redistributed in whole or in part without prior express written permission from PUNCH.
Contact: editor@punchng.com
from Punch Newspapers
No comments:
Post a Comment