NA Passes Financial Institutions Bill to Improve SME Financing

The National Assembly has passed a legal amendment bill, ‘Financial Institutions (Secured Transactions) (Amendment) Bill, 2020,’ to improve access to loans for small and medium enterprises (SMEs).

For now, SMEs have access to less than 10 percent of private-sector credit, despite having nearly a 40 percent share in GDP, according to the central bank’s data. The amendment will also make transactions more secured for financial institutions.


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The bill will bring the legal framework of secured transactions in line with the international best practices. It will also likely improve the country’s ranking on the World Bank’s Ease of Doing Business Index.

The bill will now be tabled at the upper house for its final approval. It entails a legal framework for the creation, perfection, and enforcement of security interests on movable assets. This is being done so the SMEs can better access finance through the use of their movable assets – receivables, intellectual property, inventory, negotiable instruments, agricultural produce, petroleum or minerals, motor vehicles – as security for loans, an official document showed.

Moreover, the security interests of SMEs will be regulated on the basis of their function and not their form or traditional terminology for security interests. This will also bring the regulatory laws in line with the international best practices on secured transactions laws, as well as at par with the World Bank’s requirements.

Under the law, filing a security agreement is not required, and advance registration of security interest based on authorization by the entity is allowed. A charge/security interest may be registered for a period of up to 5 years, which is extendable if required, the document said.


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Perfection of security interests may be achieved by registration in all types of security interests on movable property. However, in some cases, e.g., possession of tangible movable property or right on funds credited in a deposit account, perfection may also be achieved through possession or control, respectively. Earlier perfection by registration was not available for all types of security interest, it added.



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