Senate President, Bukola Saraki has said the new legislations – Secured Transactions in Movable Assets Act and the Credit Reporting Act – 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.
The two laws were passed by the National Assembly in June and signed into law by then Acting President Yemi Osinbajo.
Under the Secured Transactions in Movable Assets Act, potential borrowers can now register assets other than land and property as collateral to secure a loan.
Specifically, borrowers can now register their automobile or other worthy assets.
Economic experts say this would solve the problem of MSME owners who mostly 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.
In a statement by the Senate President’s Media Office on Wednesday, Saraki 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.”
On the other hand, 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 new legislation, 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 programmes 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”.
OWEDE AGBAJILEKE, Abuja
