Secured Transactions and Collateral Registries Program

Transcription

1 Secured Transactions and Collateral Registries Program Access to Finance, IFC San Jose, Costa Rica, 18 septiembre, 2013 Alejandro Alvarez de la Campa Global Product Leader STCR

2 OUTLINE 1. Definition of Secured Transactions 2. Why are Secured Transactions Important? Why are they important in Latin America and the Caribbean? 4. IFC s Approach to Secured Transactions Reform 5. Global Portfolio and Impact in Reforming Jurisdictions 6. Reform challenges and lessons learned

3 1. Definition of Secured Transactions

4 Secured Transactions Systems Legal and institutional framework to facilitate the use of movable property as collateral for both business and consumer credit Bank Accounts Accounts receivable Inventory and raw goods Intellectual Property rights Industrial and agricultural equipment Durable consumer goods Agricultural products (crops, livestock, fish farm) Vehicles

5 2. Why are Secured Transactions Important? Why are they important in Latin America and the Caribbean?

6 SME Finance Gap 6

7 SME Finance Gap: value of collateral (in %) needed for a loan in Latin America and Caribbean SME FINANCE GAP IN LATIN AMERICA & CARIBBEAN Between US$ Billion Source: McKinsey & Co. Global Financial Inclusion Practice

8 Collateral Gap Mismatch between assets owned by companies and collateral required Capital Stock of Firms Collateral Taken by FIs 22% 44% 27% 34% 73% Vehicles/machinery/equipm ent Accounts Receivable Land / Real Estate Land / Real Estate Movable property Source: World Bank Enterprise Surveys

9 BENEFITS OF A SOLID SECURED TRANSACTIONS SYSTEM Benefits of a solid Secured Transactions System Increases Access to Credit Reducing the Risk of Credit - Underserved MSMEs & women entrepreneurs - Promotes risk management, prudent lending - - Better interest rates - Move from informal to formal financing - Cost savings for businesses Reduces the Cost of Credit Increases Market Competition - Development of industries (factoring and leasing) - NBFIs - Credit risk diversification: immovable and movable - Sector diversification in the portfolio Promotes Credit Diversification 9

10 Evidence/results from first study that provides empirical evidence about the impact of collateral registries on: Variable Access to finance Access to a loan % of working capital financed by banks Interest rates Loan maturity Effect 8 percentage points 7 percentage points 10 percentage points 3 percentage points 6 months Study also provides evidence that the impact of the introduction of movable registries on firms access to finance is larger among smaller firms, who also report a reduction in subjective, perception-based measure of finance obstacles. 10

11 Why are financial institutions not willing to take movable property as collateral? Lack adequate legal framework Lack registry of security interests in movables Lack know how on movable asset lending Lack interest Restrictions on types of assets Dysfunctional Registry/ No Registry No experience with this type of financing Not their type of business Lack of clear creditor priority Lack of publicity Do not have staff with necessary skills No competition in the lending markets Enforcement issues No transparency Revenue from other sources (TB)

12 3. How does IFC implement this work?

13 INTERNATIONAL ACCEPTED STANDARDS UNCITRAL Registry Guide and Legislative Guide on Secured Transactions World Bank Principles on Insolvency and Creditors Rights IFC Guide on Secured Transactions and Collateral Registries OAS Model Law 13

14 LEGAL STANDARDS FOR AN EFFECTIVE SECURED TRANSACTIONS SYSTEM Broad scope Enforcement Effective Secured Transactions System Creation Priority Publicity / registration 14

15 KEY FEATURES OF A MODERN COLLATERAL REGISTRY 1. Centralized on-line 2. For all types of security interests in movables 3. Registration by creditors 4. Notice based registry (no documentation) 5. Public search available to all 6. Reasonable flat fees 7. Limited role of registrar in verification 8. Security and data back up 9. No cash payments

16 SECURED TRANSACTIONS OVERVIEW Clients Beneficiaries Funding Model Value Added Governments (Central Banks, Ministry of Finance/Economy / Justice/Trade) Firms (mostly MSMEs), Financial Institutions, NBFIs, Households and Consumers, Government, Judiciary IFC funds, Pooled donor funds, client contributions In-house expertise, global /local presence, developed methodology, M&E standards, impact. IMPACT / RESULTS: (1) Value of financing facilitated secured with movable property (US$) and; (2) Number of Firms/MSMEs with increased access to credit

17 Legal and Regulatory Framework BUSINESS AND DELIVERY MODEL 1. Create Committee 2. Draft new Secured Transactions Law 3. Raise awareness 4. Submit Law to Parliament 5. Draft registry regulations 1. Determine Government Agency to host registry 2. Develop technical specifications 3. Hardware & software procurement Creation of Electronic Registry Training/awareness 5. Launching of registry Monitoring Impact & Communications 1. Develop monitoring & evaluation plan including baseline information 2. Conduct periodic monitoring of impact through registry indicators & surveys 3. Communications 1. Training and awareness raising stakeholders (public & private stakeholders), including law and registry 2. Training on movable asset financing for Financial Institutions Building the Capacity of Stakeholders 4 3

18 Program Highlights- Knowledge Management Toolkits Surveys Impact evaluation Network Building Publications Factsheets Knowledge Sharing Events Peer learning

19 4. Global Portfolio and Results

20 CURRENT REGIONAL PORTFOLIO AFRICA Ghana Liberia Malawi Rwanda Zambia MENA AMF Afghanistan Jordan Lebanon UAE West Bank & Gaza EAST ASIA & PACIFIC Cambodia China Lao PDR Mongolia Philippines Vietnam SOUTH ASIA India Bangladesh Sri Lanka ECA Azerbaijan Belarus Uzbekistan LAC Colombia Costa Rica Haiti Pipeline Nigeria, Sierra Leone, Indonesia, Egypt, Morocco, Tajikistan, etc 20

21 IMPACT OF SECURED TRANSACTIONS REFORMS IN AFRICA AND EAST ASIA CHINA VIETNAM GHANA

22 Ghana video: GHANA

23 Impact of Secured Transaction Reform in East Asia China - Law reform (2007) and new centralized online registry for accounts receivables and leasing (2008) - Project has led to more than US$ 3.5 trillion in financing secured with receivables, mostly to SMEs (around 60% of the loans) - More than 70,000 SMEs have received loans - Project has led to the development of the factoring and leasing industries

24 Impact of Secured Transaction Reform in East Asia VIETNAM - Law reform and new centralized online registry for movable assets launched in March After 1 year of operation of the new registry, 103,000 new loans for a value of $600 million have been registered and 212,000 searches conducted - It is estimated that around 54,000 SMEs have received loans 24

25 5. Reform challenges and lessons learned

26 LESSONS LEARNED Partner with a strong institution with strong political clout. Build consensus among stakeholders. Takes time Public and private commitment is critical: government counterpart commitment and a dynamic and supportive financial sector Local ownership is key: client monetary or in-kind contributions; local software solutions and IT support strengthen client ownership and sustainability Position reforms as a transformation of the credit market. Sustain effort with a professional team over time merging local knowledge with global subject-matter expertise.

27 THANK YOU Alejandro Alvarez de la Campa Global Product Leader, IFC Secured Transactions