Graduates Can Now Secure Loans With Their Certificates
To encourage the entrepreneurial tendencies of graduates, the National Collateral Registry has concluded plans to allow them to secure loans from financial institutions using their certificates.
The Head of Research and Development, NCR, Dr. Musa Olasupo, disclosed this at an interactive forum in Lagos.
According to him, since most young business owners don’t possess fixed assets to secure start-up funds from banks, their certificates can serve as moveable assets to be registered by their credit institutions with the NCR as collateral.
He added that employers of labour could carry out background checks during recruitment on the certificates that had been pledged as collateral in case of loan default.
Olasupo observed that young entrepreneurs as well as Small and Medium Enterprise owners were constrained by lack of capacity, lack of access to finance and poor infrastructure, adding that the Central Bank of Nigeria was ready to support them with funds.
He said, “We are looking beyond giving out credits to positioning credits to graduates’ critical infrastructure. The banks are not comfortable funding start-ups because it has been established that eight out every 10 start-ups in Nigeria die in the first two years. The banks don’t want to throw away their money.
“On the average, the interest rate in Nigeria is in double digits and how profitable are these businesses for a supplier of financier to be taking as much as that from an entrepreneur? A collateral registry is a very effective tool to address the constraints of banks’ in lending to SMEs.”
According to Olasupo, the collateral registry is an information platform for collateral in the same way that credit bureaux serve as an information portals on credit history.
He explained that moveable assets that had been used as collateral would be kept by the lending institution, but if such assets were an infrastructure necessary for business operations, they would be in the possession of the borrower.
To mitigate risks such as theft, Olasupo advised borrowers to insure assets in their possession before using them as collateral.
The Chairman, Credit Bureau Association of Nigeria, Jameelah Sharrieff-Ayedun, emphasised the need for small business owners to build a good credit history because it would be considered before loans were given to them using their moveable assets.
She added, “Building a good credit history still remains important as credit behaviour shows our approach towards responsibilities when it comes to managing our expenses and building a strong financial base.
“If anything adverse is found in the credit history, you should try to resolve the issue found in the credit history rather than ignore the discrepancies. Also, check your own credit report, as it helps you to avoid any last minute surprises, which can come your way when you go and borrow from a bank.”