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Why and how an operational chattels securities registry will uplift SMEs

By Admin

Added 29th July 2016 01:55 PM

A well-functioning chattel securities registry in Uganda is therefore crucial at this point in time when access to finances in the country for small businesses is hard yet such businesses are equally important for the growth of our economy hence the need to support them.

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Bemanya Twebaze is the Registrar General, URSB and Government Official Receiver

A well-functioning chattel securities registry in Uganda is therefore crucial at this point in time when access to finances in the country for small businesses is hard yet such businesses are equally important for the growth of our economy hence the need to support them.

By Bemanya Twebaze

A chattel means any item of property other than real estate. Something that a person owns other than land or buildings. Such a property that can be staked as collateral in any financial institution to get credit for business purposes.

A well-functioning chattel securities registry in Uganda is therefore crucial at this point in time when access to finances in the country for small businesses is hard yet such businesses are equally important for the growth of our economy hence the need to support them.

Today, small enterprise owners cannot easily access finances to expand their businesses partly because they lack collateral, funds for feasibility studies and the various bank charges that come along. This means that they cannot access finance to enable them to grow.

One of the mandates of Uganda Registration Services Bureau (URSB) stipulated under the Chattels Securities Act 7 of 2014,  is starting up and operationalizing the Chattels Securities Registry, to enable growth of the private sector and most especially the Small and Medium sized Enterprises (SMEs), and the upcoming businesses especially youths and women.

Deliberate efforts are therefore underway to establish an electronic chattels securities registry for Uganda so as to ease the borrowers’ path to accessing affordable credit from the formal and regulated financial sector as opposed to the informal sector.

Once operationalised, the Chattels Securities Registry will be a public database containing information on all security interests in any movable property (chattels) such as livestock, vehicles, machinery, jewelry, home furniture, wood and stock among others.

The Register will also contain details of the creditor and borrower, particulars of the moveable asset pledged as collateral and the date of registering the security interest.

Services of this Chattels Registry will be open to all and accessed electronically by individuals, organizations, banks, microfinance institutions, SACCOs, licensed money lenders and legal representatives who may act on behalf of lending institutions.

The general public will only be restricted to searches on the Chattels Securities Register to ascertain encumbrances because prior to accepting a moveable asset as collateral for a loan, a creditor needs to inspect the register and obtain proof of its ownership and encumbrances, if any.

Today, businesses can only thrive if parties therein find confidence in a stable, predictable and prudent environment that can bring about healthy competition and hence improved profits which will translate into national economic growth.

The National Resistance Movement (NRM) Manifesto 2016 that is anchored on taking Uganda to modernity through jobs and wealth creation by the year 2020 provides the foundation for strengthening moveable collateral registration in Uganda.

The Manifesto recognizes that whereas Ugandans are good at establishing business enterprises, these enterprises usually collapse within a period of less than three years because of limited access to credit.

Currently, in the absence of a well-organized and well managed database for all security interests in chattels, financial institutions are reluctant to extend loans to potential borrowers and opt for immovable collateral security like land and buildings yet not every Ugandan in business owns such, most especially women and the youths.

For entrepreneurship to thrive in Uganda therefore, the constraints that sustain high lending rates amongst financial providers need to be addressed and some of these will be dealt with directly once the electronic chattels securities registry is operationalized at URSB.

Our planned approach therefore is to induce financial providers to diversify their credit portfolio to include moveable assets so that individuals can pledge their boda bodas; taxis, motor vehicles; market vendors and existing MSMEs, their inventory or trading stock; rural and urban poor such as women and youth their personal effects like electronics and jewelry to obtain start up credit at affordable interest rates.

We will also put in place the relevant infrastructure that will facilitate online payments for services offered, filing of documents, compulsory registrations and searches whose impact will be the sizeable reduction in interest rates for borrowing, long term economic growth and poverty reduction.

A county like Ghana which operationalized its collateral registry in 2010, registered 60,000 loans for a value of US$14 billion. More than 8,000 SMEs and 30,000 Micro enterprises received loans. Inventory and receivables accounted for 25% of the collateral type, household goods, 20%, whereas vehicles accounted for 19%;   (Secured Transactions and Collateral Registries: A Global Perspective - Access to Finance, IFC by Alejandro Alvarez de la Campa, Global Product Leader STCR)

Similarly, Liberia which opened in 2014 helped to unlock US $ 270 million in finances for SMEs a year later despite the Ebola crisis.

Such testimonies show that as a country, we can work together to have businesses thrive amidst the pertaining challenges by putting in place a mechanism that allows credit institutions to provide secure and affordable loans to individuals and SMEs that would not otherwise be able to have access to financing.

 The writer is the Registrar General, URSB and Government Official Receiver

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