- Small and medium scale businesses can now use their movable assets as collateral in obtaining bank credit. The use of landed properties and buildings will less emphasized for small business operators who have valuable movable assets that can be used to secure funding.
- A movable asset, as opposed to a fixed asset, is an asset that is movable or portable. It includes possessions like vehicles, power generators, and personal belonging like jewelry and mobile devices. It also refers to less tangible assets like shares of stock and accounts receivable.
“Movable assets that are involved here include motor vehicles, motor bikes, movable capital equipment used in manufacturing or production such as sewing machines for fashion designers, sophisticated cameras for photographers, and others”, says Tunde Popoola, Managing Director of CRC Credit Bureau. “It will also include receivables that can be confirmed for those selling on credit.”
The whole essence is for enterprises to be able to utilize their movable assets and tools as collateral for accessing loans. This shifts emphasis away from lenders just looking at fixed assets, especially land and real estate such as buildings and warehouses only.”
- This development comes with the establishment of a national collateral registry by the Central Bank of Nigeria to reduce the difficulties encountered by MSMEs in accessing funds to develop their businesses.
- Movable assets often account for most of the capital stock of micro, small, and medium-size enterprises. As a result, movable assets are the main type of collateral that MSMEs, especially those in developing countries, can pledge in order to obtain bank financing. But for the use of moveable assets to be effective and risk-free, a collateral registry is needed. A collateral registry is a single central electronic database where all moveable assets pledged as collateral are registered, in order to avoid the re-pledging of those assets for which there are already existing liens.
“With this development, those who do not have landed properties but have movable assets can use them to secure funding while the assets are still in use.”
- The Assistant Director, MSME Development Fund, CBN, Mr. Tobin Jonathan, explained that the initiative was due to the high rate of MSME applications by commercial banks.
- In Nigeria, the MSME sector accounts for about 90 million jobs in the economy. Of the entire sector, less than 15% of MSMEs have access to finance. Lack of access to financing, most notably working-capital financing, has led to the crimping of sector growth, and a loss in latent innovation, creativity and productivity.