Non-Bank financial institutions, typically micro-finance institutions and savings and loans companies, are taking advantage of the new system to register all collaterals with a specialized registry.
Daily Graphic checks from the Collateral Registry Ghana indicate that over 35,700 financial transaction or charges between financial institutions and borrowers has been registered. The charges represent the deals reached for which collaterals were presented to guarantee their security.
Out of the registered charges, non-bank financial institutions seem to have a head start with 26,443 transactions, with the rest spread among commercial banks, rural and commercial banks, trade creditors and foreign-based financial institutions.
The registration of collaterals with the Collateral Registry paves the way for a more secure lending regime, since the borrower cannot present the items to borrow funds anywhere else.
The Collateral Registry Ghana, a creation of the Borrowers and Lenders Act, 2008 (Act 773), has also created a database for all the registered items, which enables the users to conduct quick searches to find out the level of encumbrance of the collateral, which now includes movable items.
The movable items can be household items, electronic appliances, computers and factory equipment, plant and machinery, motor vehicles as well as securities such as bonds, shares and treasury bills.
These items now eligible to be used as collaterals for borrowing will empower a large segment of the Ghanaian public and corporate world, especially small and medium scale enterprises to access credit, the Deputy Registrar, Mr Fred Asiamah-Koranteng told the Daily Graphic.
He explained that since the law also provided for financial institutions to realise the values of the collaterals without going to court, it made it easier for banks and financial institutions to accept all kinds of items and give out more credit.
This is welcome news for non-bank financial institutions, which deal with the informal sector and the riskiest segment of the market, the reason they have taken advantage of the new system.
Out of the 56 per cent of the Ghanaian adult population that use either a formal or informal financial product and service, 22 per cent use informal sector products. This, according to a survey commissioned by the Ministry of Finance and Economic Planning (MoFEP), translates into 2.7 million people resorting to non-bank formal financial institutions.
The survey also pointed out that about 44 per cent or 5.9 million of the population is excluded from the financial sector. Under the new collateral regime, therefore, credit can be channelled to more informal sector operators as well as small and mediums scale enterprises which form the bulk of the country�s industrial base.
Mr Asiamah-Koranteng told the Daily Graphic that the focus of the Collateral Registry was to ensure that more funds were channelled to the SMEs so as to create more employment in the economy.
Meanwhile, the Collateral Registry last week held a seminar for commercial banks, financial institutions, legal practitioners, private sector associations and other stakeholders in the financial services sector in the Western Region to enable them to understand the system better.
Source: Daily Graphic
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