The Bank of Ghana (BoG) says the move to introduce an online payment module into operations of the Collateral Registry has introduced efficiency and enhanced access to credit for individuals and businesses.
Speaking at the 2020 Annual Bankers’ Dinner (Governor’s Day), BoG Governor Dr. Ernest Addison said the successes gained as a result of the reforms have enhanced efficiency at the Registry.
“The Bank has improved operations of the Collateral Registry to enhance the credit infrastructure, established stronger data management systems, and put structures in place to strengthen financial integrity and promote financial inclusion. The Bank rolled out an online payment module in May 2020 for users of the web-based system, to reduce the challenges associated with the traditional mode of paying for Collateral Registry’s services.
“This single action has provided convenience – such that users can access the Registry’s services through cashless payments, either mobile money or Visa/MasterCard. As at the end of October 2020, online payment for the Registry’s services accounted for 76 percent of total pre-payments for the 28,403 online searches recorded. Indeed, the COVID-related restrictions did not deter banks and other lending institutions from registering their security interests in collaterals due to the online accessibility of the Registry’s system.”
The Collateral Registry is the body that registers charges and collaterals borrowers use to secure credit facilities. The register recorded 168,707 assets pledged by borrowers as part of the security interests from January to October 2020.
Of the registered assets, cash collaterals numbered 53,859 (31.9 percent), followed by consumer/household assets of 30,617 (18.15 percent), inventories at 29,090 (17.24 percent), company assets at 16,304 (9.66 percent) and fixtures and fittings were 15,950 (9.45 percent).
Also, the Collateral Registry recorded 80,172 security interests from January to October 2020. Of this, Savings and Loans Companies accounted for the highest number at 54,493 security interest registrations, representing 68 percent of the total; followed by rural banks with 11,663 (14.6 percent) and banks with 8,473 (10.6 percent). The remaining registrations were by Microfinance companies, Micro-credit Companies and Finance Houses, among other lending institutions.
The Registry has improved access to credit and has given Small- and Medium-scale Enterprises the opportunity to use their movable assets as collateral to access finance for growth. From the farmer pledging his cows as collateral for a tractor loan, to the seller of goods or services pledging his stock of inventory or expected receivables as collateral – and not only landed property.
The Registry has significantly improved the mechanism for enforcing credit agreements, whereby one need not avail him/herself to the court to realise collateral[s] in cases of default. An avenue has also been created that enables searches to be conducted to ascertain whether an asset such as land, building, vehicle etc. being sold or presented as collateral has been previously used to secure a loan from a financial institution or not.
There is also clarity and precision in the application of priority rules – where it operates on a first-come first-served basis. Lending has become less risky, since lenders have collaterals to fall on when a borrower defaults in payment. Once lending becomes less risky, interest rates on lending are expected to decline; which will lead to more credit for SMEs and greatly improve the act of doing business in the country.