SECP Launches a Registry Allowing SMEs to Use Moveable Assets as Loan Collateral

Pakistan’s micro, small, medium sized enterprises and individual consumers are set to benefit from the creation of an electronic registry that allows the country’s financial institutions to use moveable assets such as agricultural produce as collateral for loans.

The move follows the launch of the collateral registry by the Securities and Exchange Commission of Pakistan (SECP), supported by IFC, a member of the World Bank Group (WBG).

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It’s part of work undertaken by WBG since 2015 to boost access to finance in Pakistan, which includes changes to improve the country’s legal and regulatory framework for secured transactions, as part of Pakistan’s Doing Business reform initiative.

The establishment of the collateral registry will help financial service providers such as banks, microfinance institutions, and leasing companies register moveable assets in offering credit to people, as well as micro, small and medium-sized enterprises.

“This represents a significant milestone for Pakistan and comes at a time when the country’s micro, small and medium-sized enterprises (MSMEs) are adversely impacted by COVID-19,” said IFC’s Country Manager for Pakistan, Nadeem Siddiqui.

This global crisis clearly shows the importance of boosting financing to MSMEs, especially as lending to these only stood at 8 percent of banks financing last year, which is far less than in other countries of the region. Hence, more needs to be done to improve the credit infrastructure and to de-risk the MSME sector.

The amendments to Pakistan’s secured transactions law, which was promulgated on April 30, 2020, follows the collaboration between the Securities and Exchange Commission, the State Bank of Pakistan and the Board of Investment, with support from the World Bank Group, the United Kingdom’s Department for International Development (DFID) and Karandaaz. Without the online collateral registry, the secured transactions regime was incomplete.

IFC’s work will now focus on assisting the Government of Pakistan mainstream the reform for its beneficiaries and help develop the market for movable asset-based lending.

IFC, in collaboration with SBP and SECP, has already trained more than 100 representatives from financial institutions through online sessions on the secured transaction regime and the online collateral registry. IFC hopes to continue training online, amid the pandemic.



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