While the attitude of some public institutions, with regard to poverty reduction, is that of wait-and-see, others go several steps further to make positive contribution to the war against poverty.
The federal government has given itself a target of bringing out one hundred million of us back to the good life, over the next ten years. That looks like a very tough challenge, given that the number of people in extreme poverty is increasing by about six people every day. Moreover, the current outlook does not promise much remission.
All the factors that promote poverty are at still alive and well. Some are actually getting worse. The need to raise the consciousness of the public to recognise and take advantage of the available poverty reduction opportunities becomes an important nation service.
This is why we continue to applaud the Nigerian Deposit Insurance Corporation (NDIC) and the Central Bank of Nigeria (CBN) in their effort to help drive the poverty reduction programme of the federal government. They do this in many different ways, including the provision of on-lending facilities at concessionary rates and risk prevention supervisory activity. r
In addition, the NDIC has been highlighting the importance of the collateral registry recently introduced by the CBN. The registry, which is a publicly available noticeboard, gives information on movable collaterals that have been used to secure loans, and registered for public information at the registry.
Although the registry has been properly established and pulling its weight in the informal credit market in Nigeria, the NDIC has not relented in calling attention to the need for lenders to understand the Secured Transactions in Movable Assets Act, 2017, and the regulations issued by the Central Bank in that regard.
The Collateral Registry Act, 2017, and its twin brother, the Credit Reporting Act, 2017, constitute two critical pieces of legislation that have not only changed the informal credit landscape but helped to improve the rating of Nigeria on the Ease of Doing Business rankings. Unfortunately, but not surprisingly, these innovative laws were greeted with very low ovation, when they were passed in 2017.
Although some institutions in the private sector have held seminars ad discussions on the laws, more still remains to be done. It will be fatal to the informal sector if the gains of these laws are not fully appropriated and internalised.
This why the recent and continued sensitisation of operators in the microfinance industry by the NDIC deserves commendation. Perhaps, our attention is still focused on the challenges of insecurity and the many troubles our country has been going through in the last few years. However, the low applause also typifies Nigerian’s non-inclination to much reading — an already festering malaise in the Nigerian polity: low appetite for technical knowledge and the near absence of volunteer spirit.
I consider it a national service on the part of all to take every possible steps to ensure the proper implementation of these twin laws. This will enable us to maximally profit from their proven benefits seen in other climes.
My biggest surprise was the apparent non-reaction from some of the core stakeholders and likely beneficiaries of the reforms — finance companies, mortgage banks, microfinance banks, Nigerian Association of Small and Medium Enterprises (NASME) and Small and Medium Enterprises Development Agency of Nigeria (SMEDAN). These entities for which I believe the two laws combined are a haymaker and a lifesaver, seemed to be completely aloof to the laws.
To the best of my knowledge, they have not made significant efforts to promote the laws and educate their members. Meanwhile, if we had the collateral registry before now, the mountain of non-performing loans of the lenders among them, and the financial purgatory faced by the MSMEs in search of funds, may have been averted.
We need not overemphasise the fact that the microfinance banks were set up to make loans to entities that may not have proper or acceptable collateral. They operate in a trust environment in which trust has long been on vacation, even among the clergy. In short, they were created to make unsecured loans because of the absence of collaterals among their target clients. That is a hard place to be.
To find that all of a sudden, there is a law that converts the hitherto unbankable assets of entities that are predominantly, if not exclusively their clients, to bankable assets, and somebody is unexcited is hard to believe.
Although the collateral registry is not a magic wand that removes all the credit problems of informal credit market operators, it is a major breakthrough in the search for improved loan books among the lenders. There is need for more work on the part of all stakeholders to further what the NDIC and Central Bank are doing in this regard.
We are probably assuming that the MSMEs will gladly use their chattels to borrow money if the opportunity arises. That may not be true because there are some rigidities to be addressed. There are some socio-cultural impediments to pledging private property for loans in some part of the country. In some cultures, people feel ashamed of taking loans to run their businesses. Even worse is to use their personal property to borrow money.
We are still largely an illiterate country plagued by traditions and superstition. We may be wrong to think we have done enough for the economically active poor by providing them the legal framework for using their chattels to borrow money. There are still many places where it is a taboo to pawn one’s asset or use it to borrow money. This is what the we have to confront and the continuous sensitization of the public is very important. There is a lot to be done.
Last week, the NDIC assembled the operators of non-bank financial institutions in the South-south city of Uyo, the Akwa Ibom state capital, for a sensitisation workshop. Specialists in different aspects of the use of movable assets to secure loans were invited at the corporation’s expense to help the operators to understand the legal implications and opportunities the laws have thrown up. The workshop revealed, sadly, that so many people who should be operating and making good returns on the back of the laws are hardly properly appraised of them.
Evidently, understanding the regulations guiding the use of movable assets to secure loans has the potential to enhance the fortunes of the operators in the informal credit market, as well as their clients. Many operators have actually not seen the Act, which has long since been gazetted. This problem of not seeking knowledge is an endemic one. How could people who desperately need to properly secure their loans suddenly find it difficult to embrace a system that has answers to their problem?
Thankfully it was not all gloom. The operators were not only excited; they were grateful for the opportunity given them by the corporation to build capacity. There was evident enthusiasm on the part of the participants at the workshop to learn and use the registry.
Perhaps, what we need do is to continue on the path the NDIC has traded and continue to give support to the operators, especially as they battle with the challenge of recapitalization. We can achieve much together provided we do not bother about who takes the credit for our success.
EMEKA OSUJI
