San Jose, Costa Rica, 18 septiembre, 2013
Alejandro Alvarez de la Campa
Global Product Leader STCR
Secured Transactions and Collateral
Registries Program
Access to Finance, IFC
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
OUTLINE
Legal and institutional framework to facilitate the use of movable property as collateral for both business and consumer credit
Bank Accounts Inventory and raw goods
Vehicles Industrial and agricultural
equipment Durable consumer
goods Agricultural products (crops,
livestock, fish farm)
Intellectual Property
rights
Accounts receivable
Secured Transactions Systems
2. Why are Secured Transactions
Important? Why are they important
in Latin America and the
Caribbean?
SME FINANCE GAP IN LATIN AMERICA & CARIBBEAN
Source: McKinsey & Co. Global Financial Inclusion Practice
Between US$ 125-155 Billion
SME Finance Gap: value of collateral (in %)
needed for a loan in Latin America and Caribbean
Collateral Gap
Source: World Bank Enterprise Surveys
Mismatch between assets owned by companies and
collateral required
44%
34%
22%
Vehicles/machinery/equipmentAccounts Receivable
Land / Real Estate
73%
27%
Land / Real Estate Movable property
Capital Stock of Firms Collateral Taken by FIs
•BENEFITS OF A SOLID SECURED TRANSACTIONS SYSTEM
9
• Promotes Credit Diversification
• Increases Market Competition
• Reduces the Cost of Credit
• 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
- Credit risk diversification: immovable and movable
- Sector diversification in the portfolio
- Development of industries (factoring and leasing)
- NBFIs
Benefits of a solid Secured Transactions System
Variable Effect
Access to finance 8 percentage points
Access to a loan 7 percentage points
% of working capital
financed by banks
10 percentage points
Interest rates 3 percentage points
Loan maturity 6 months
10
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.
Evidence/results from first study that provides
empirical evidence about the impact of
collateral registries on:
Why are financial institutions not willing to take movable
property as collateral?
Restrictions on types of
assets
Lack of clear creditor
priority
Enforcement issues
Lack adequate legal
framework
Lack registry of
security interests in
movables
Dysfunctional Registry/
No Registry
Lack of publicity
No transparency
No experience with this
type of financing
Do not have staff with
necessary skills
Lack know how on
movable asset
lending
Not their type of
business
No competition in the
lending markets
Revenue from other
sources (TB)
Lack interest
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
LEGAL STANDARDS FOR AN EFFECTIVE SECURED
TRANSACTIONS SYSTEM
14
Effective Secured
Transactions System
Broad scope
Creation
Publicity / registration
Priority
Enforcement
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
IMPACT / RESULTS: (1) Value of financing facilitated secured with
movable property (US$) and; (2) Number of Firms/MSMEs with
increased access to credit
Clients
Governments
(Central Banks,
Ministry of
Finance/Economy
/ Justice/Trade)
Beneficiaries
Firms (mostly
MSMEs), Financial
Institutions,
NBFIs, Households
and Consumers,
Government,
Judiciary
Funding Model
IFC funds,
Pooled donor
funds, client
contributions
Value Added
In-house expertise,
global /local
presence,
developed
methodology, M&E
standards, impact.
SECURED TRANSACTIONS OVERVIEW
• Building the Capacity of
Stakeholders
• Monitoring Impact & Communications
• Creation of Electronic Registry
• Legal and Regulatory Framework
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
4.Training/awareness
5. Launching of registry
1. Training and awareness raising stakeholders (public & private stakeholders), including law and registry
2. Training on movable asset financing for Financial Institutions
1. Develop monitoring & evaluation plan including baseline information
2. Conduct periodic monitoring of impact through registry indicators & surveys
3. Communications
1 2
4 3
BUSINESS AND DELIVERY MODEL
Toolkits Impact evaluation
Network Building
Publications
Program Highlights- Knowledge Management
Knowledge Sharing
Surveys
Factsheets Events – Peer
learning
20
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
CURRENT REGIONAL PORTFOLIO
CHINA VIETNAM GHANA
IMPACT OF SECURED TRANSACTIONS REFORMS IN
AFRICA AND EAST ASIA
GHANA
Ghana video:
http://www.youtube.com/watch?v=5c84WF02_IY
Impact of Secured Transaction Reform
in East Asia
- 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
China
Impact of Secured Transaction Reform in
East Asia
- Law reform and new centralized online registry for movable
assets launched in March 2012.
- 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
VIETNAM
24
Partner with a strong institution with strong political clout.
Build consensus among stakeholders. Takes time 1
Public and private commitment is critical: government counterpart
commitment and a dynamic and supportive financial sector 2
Local ownership is key: client monetary or in-kind contributions;
local software solutions and IT support strengthen client ownership
and sustainability 3
LESSONS LEARNED
Position reforms as a “transformation of the credit market”. 4
Sustain effort with a professional team over time merging local
knowledge with global subject-matter expertise. 5
Alejandro Alvarez de la Campa
Global Product Leader, IFC Secured Transactions
THANK YOU