BOG unveils collateral registry

The Bank of Ghana (BoG) has launched a collateral registry aimed at streamlining the credit delivery system in the country.

The collateral registry, a body established by Parliament in line with the Borrowers and Lenders Law (Act 773, 2008), is mandated to register secure loans otherwise known as charges and collaterals which borrowers use to obtain credit facilities from lenders.

This means that there will be a record on assets used as collaterals in the country and banks or lenders would be able to confirm their existence, as well as take possession of such assets in the event of a default.

Additionally, an individual or organization can use an asset once to secure a loan from a bank or lender as a search at the registry would identify that the collateral has been used.

Experts have praised the move, noting that it would improve financing options for especially small and medium scale enterprises that have always found it challenging to secure bank financing for a number of reasons.

Since 2010, the Bank of Ghana has been running the registry in a semi-automated phase but the short ceremony at the Cedi House was to launch a fully automated web-based registry designed to conform to international standards.

Dr Kofi Wampah, Governor of the Bank of Ghana, speaking before touring the offices of the registry, noted that in the past three years the registry registered a total of 49,096 secure loans and 104,308 collaterals including movable and immovable assets.

Also, he stated that about 160 institutions, including both local and foreign, have accessed the registry while there have been 14,608 searches conducted by various lending institutions, law firms and the public.

He said complaints from both borrowers and lenders about the lack of transparency in credit access strengthened the resolve of the central bank to address the issue.

“On one hand, borrowers complained about high interest rates, hidden charges, non-disclosure of pertinent information and unfair denial of access to credit. Lenders, on the other hand, were worried about high default rates, difficulties of foreclosing on collateral through the courts and the misapplication of funds by borrowers.”

Minister of Finance and Economic Planning, Seth Terkper, in a keynote address, said the operations of the registry would provide opportunities for individuals and SMEs, who generally do not have immovable property to use their movable assets to secure credits.

For SMEs and individuals who do not have reliable financial statements, he said “this credit regime which seeks to protect lenders secured rights in movable assets is an appropriate strategy for our economy which is dominated by SMEs.”

However, he noted that a number of challenges which have been identified, include gaps and inadequacies about Act 773 in respect of secure transactions standards and best practices.

“Government has observed with great concern, the challenges faced by participants of the credit market as a result of lack of unique national identification system, this makes identification of borrowers in the credit market somewhat difficult, leading to certain malpractices.”

Mr Terkper also acknowledged the problem of duplication of registration and disjoint records associated with the absence of harmonization between the collateral registry and other registries such as the lands Commission, Company’s registry and Drivers and vehicle Licensing Authority.

International Financial Corporation (IFC) and the Swiss State Secretariat for Economic Affairs (SECO) partnered the Central Bank to modernize the registry.

Andrea Semadeni, Ambassador of Switzerland, said his government is confident the financial support to redesign the collateral registry into a modern web based system, which is the first of its kind in West Africa, would make the registry a centre of excellence in the Sub-region.

It is expected that patrons of the registry would include universal banks, savings and loans companies, rural banks, finance houses, leasing companies, licensed microfinance and money lenders, secured creditors.

While patrons are required to make a formal application in writing to the registry, members of the public are only restricted to conduct searches electronically.

Dr Wampah and Seth Terkper tour the offices of the registry with other dignitaries after the official opening of automated collateral registry yesterday.