INTERVIEW: How National Collateral Registry is checking non-performing loans, bad debts
Apart from helping to provide micro, small and medium enterprises access to credits from financial institutions, the Registrar of the National Collateral Registry, Mohammed Mainasara, says the agency could also bring an end to the high incidence of non-performing loans and bad debts in the country.
The objective was to simplify the usage and availability of the collateral for purposes of securing credits. Take for an example, you are a photographer who wants to expand his business. If the bank decides to take away the camera, which is the collateral for the loan, the photographer will not have the tool to work with to repay the loan. That is the essence of the registry.NCR
The beautiful thing about these loans is that the bulk of it are coming from the microfinance banks. These are the banks that are very close to the people at the grassroots. That is what we expect to promote financial inclusion you spoke about earlier. All these are collaterals, because they are immovable assets. With the advent of warehousing receipts, which makes it possible for us to decide to keep our harvests in the custody of a warehouse, a receipt will be issued until you confirm your ownership of those crops. You can also use the receipt to approach a bank to extend credits to you.
For instance, if someone has one vehicle and decides to use it to access credit from a bank, if the person becomes complacent over his obligation to repay the loan, there are no other option than the car going to the bank, for them to sell and recover their money. That is why it is expected that both the public and the creditors should be able to conduct a search on the system to confirm the status of everyone that intends to take a loan.
For all those countries that have started using collateral relations, the rate of default on the payment of bank loans have come down drastically, while the rate of non-performing loans have almost been eliminated. Sometimes, people go to buy cars without knowing they are stolen cars. But, once you buy a car, there is always a vehicle registration number. That is why we advise people to ensure that if they buy second-hand cars, they should use the chassis number of the vehicle to check whether it has ever been used by somebody else’s car, free or still encumbered.
Once you log in your details, your BVN biometrics will immediately pop up in the network to show where you had already collected a loan. So, those registrations by people within those organizations should be able to enlighten those that are illiterates on how to use those services. Once everyone understands the system and the legal framework, we should not expect any problem. There is a method of litigation and arbitration in the event of any infraction on the rules.
On the other hand, even when there is default in the loan repayment, the bank cannot just move in and take over the loan defaulter’s property.
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