Senate President, Dr. Abubakar Bukola Saraki has said the new legislations – Secured Transactions in Movable Assets Act and the Credit Reporting Act – passed by the National Assembly last June and immediately signed into law by then Acting President Yemi Osinbajo will support the growth of micro, small and medium sized enterprises (MSMEs) through increased bank lending and reduce bank exposure to loan defaults through pre-examination of credit worthiness for would be borrowers.
Under the law, potential borrowers can now register assets other than land and property as collateral to secure a loan. Now, one can register his/her automobile or other worthy assets. Securing financing through loans has long been a problem for Nigerian entrepreneurs. Most MSME owners must rely on personal savings or loans from family and friends to launch their business ventures. The new law, also known and the Collateral Registry Act, allows banks to increase lending to MSMEs, while not negatively impacting their balance sheets.
Saraki who hailed the passage and the opportunity for economic and MSME growth the new laws afford Nigerians stated that “this is a win-win situation for our economy and society”. “The private sector, the Federal Government, and the National Assembly worked together to create the enabling environment for MSMEs to grow, diversify the economy and increase employment. We should all be proud of delivering a law that will allow many people to provide for their families and community.”
The Credit Reporting Act allows credit information sharing between credit bureaux and those companies that lend money or extend credit for goods and services. Under the Credit Reporting Act, companies will have access to the credit history to review whether there is a history of loan defaults or other financial blemishes. This extra layer of protection will serve to reduce lending risks while preserving credit services to borrowers with good credit histories.
“Combined, the new laws make good economic and business sense” stated Saraki. “Already bank lending to MSMEs has increased and is expected to grow considerably for the remainder of the year and in 2018.”
Saraki further noted that “in both developed and developing economies small business growth is the engine of the economy and employment growth. With a high unemployment in Nigeria, the growth and support for MSMEs is critical.”
“The National Assembly will also be looking to see what existing support programs are working and can be created to help MSMEs’ owners to better understand the use of credit, management skills training, mentor relationships, marketing and how to pursue government procurement contracts,” Saraki added.