ENTERPRISE54 – World Bank development finance unit International Finance Corporation (IFC) has disclosed plans to help Nigerian Micro Small and Medium Enterprises (MSMEs) access loans using common moveable collateral like laptops, generators instead of parcels of land, buildings and other hard-to-own fixed assets.

A significant number of MSMEs have not been able to secure credit for growth and expansion due to the heavy collateral demand imposed by banks and other financial lenders. Overbearing interest rates and unreachable collateral demands have accounted for over 80 percent of credit gap in the MSME sector thereby crippling its growth.

According to a BusinessDay report, Nigeria’s N200 billion SMEs Credit Guarantee Scheme (SMECGS) which was established to encourage banks to lend to productive sectors of the economy achieved less than 20 percent utilisation, thereby defeating its purpose.

IFC’s innovative approach to launch a collateral registry in December, lets MSMEs present readily available securities like jewelry, shares and stocks, vehicles etc, as alternative collateral in exchange for loans.

“Movable assets often account for most of the capital stock of micro, small, and medium-size enterprises. As a result, movable assets are the main type of collateral that MSMEs, especially those in developing countries, can pledge in order to obtain bank financing,” said Maria Peria, research manager of finance and private sector development at the World Bank.

The country project manager of the IFC-led initiative, Ubong Awah, said to BusinessDay in an interview that “with the launch of the collateral registry and the use of moveable assets, the Nigerian MSME will explode.”

The launch of the same initiative in Ghana has benefited 224,000 business owners and increased financing to its MSME sector jump by $3.5 billion.

The collateral registry to be launched at the end of the year is a central electronic database where all moveable assets pledged as collateral are registered to avoid the re-pledging of those assets for another loan facility.

IFC has also been collaborating with Central Bank of Nigeria and the Ministry of Trade and Investments to draft the necessary legal framework to support this technology.