the importance of secured transactions from the perspective of increasing the access to finance
TRANSCRIPT
Speaker: Li gi a GhazaryanFi na nc i a l Sy s t e m De v e l o p me nt Di v i s i o n
Ce nt r a l Ba nk o f Ar me n i a
THE IMPORTANCE OF SECURED TRANSACTIONS FROM THE PERSPECTIVE OF
INCREASING THE ACCESS TO FINANCE
CONTENT
FI NANCI AL SYSTEM OF ARMENI A
PROBLEMS ASSOCI ATED WI TH USAGE OF MOVABLE PROPERTY AS
COLLATERAL
POSSI BI LI TI ES OF I NCREASI NG ACCESS TO FI NANCE WI TH
I NTRODUCTI ON OF SECURED TRANSACTI ONS
THE PURPOSE AND BENEFI TS OF I NTRODUCI NG SECURED
TRANSACTI ONS
FINANCIAL SYSTEM OF
ARMENIA IN 2013
Asset s of f i nanci al syst em/GDP - 77. 1%
Domest i c credi t t o pri vat e sect or/GDP - 40. 1%
Di st ri but i on of asset s i n f i nanci al syst em
89.5%
6.4%1.5%
0.8%1.8%
So ur c e : Ce nt r a l Ba nk o f Ar me n i a
Fi nanci al Syst em of Armeni a i n 2013
PROBLEMS ASSOCIATED WITH USAGE OF MOVABLE PROPERTY AS COLLATERAL
THE IMPORTANCE OF INTRODUCING SECURED TRANSACTIONS FROM THE PERSPECTIVE OF
FINANCIAL SYSTEM AS A WHOLE«While in the developing world 78 percent of the capital stock of a business enterprise is typically in movable assets such as machinery, equipment, or receivables and only 22 percent is in immovable property, financial institutions are reluctant to accept movable property as collateral. Banks heavily prefer land and real estate as collateral.»*
«A sound legal and institutional infrastructure is critical to maximize the economic potential of movable assets so that they can be used as collateral.»**
*«SECURED TRANSACTIONS SYSTEMS AND COLLATERAL REGISTRIES», January, 2010, Investment Climate Advisory Services/World Bank Group
**Doing Business, 2005.
WHY ARE FINANCIAL INSTITUTIONS NOT WILLING TO TAKE MOVEABLE PROPERTY AS COLLATERAL?
• Lack of adequat e l egal f r amewor k:• Re s t r i c t i o n s o n t y p e s o f a s s e t s• La c k o f c l e a r c r e d i t o r p r i o r i t y• Enf o r c e me nt i s s ue s
• Lack of r egi st r y f or secur i t y i nt er est s i n movabl es:• La c k o f i nf o r ma t i o n• La c k o f p ub l i c i t y a nd t r a n s p a r e n c y
• Lack of exper i ence i n moveabl e asset l endi ng:• Re l a t i v e l y n e w t y p e o f p r o d uc t
• Lack of i nt er est :• Ins uf f i c i e n t l e v e l o f c o mp e t i t i o n i n l e nd i ng
ma r ke t s
THE PURPOSE AND BENEFITS OF INTRODUCING SECURED
TRANSACTIONS
THE IMPORTANCE OF INTRODUCING SECURED TRANSACTIONS FROM THE PERSPECTIVE OF
INCREASING ACCESS TO CREDIT
I nt r oduct i on of secur ed t r ansact i ons cont r i but es t o st abl e oper at i on of
f i nanci al syst em si mul t aneousl y assur i ng di ver si f i cat i on and expansi on of l oan
por t f ol i o
THE IMPORTANCE OF SECURED TRANSACTIONS FROM THE PERSPECTIVE OF INCREASING
ACCESS TO FINANCE
• For pr i vat e sect or :• Ex p a nd e d l i s t o f i t e ms e l i g i b l e f o r us i ng a s
c o l l a t e r a l• Inc r e a s e d a c c e s s t o c r e d i t• Lo w d o c ume nt a t i o n
• For f i nanci al sect or :• Ac t i v e p a r t i c i p a t i o n o f n o n b a nk f i na nc i a l
i n s t i t ut i o n s i n c r e d i t ma r ke t• Di v e r s i f i e d l o a n p o r t f o l i o• Ac c e s s i b i l i t y o f i n f o r ma t i o n r e l a t i ng t o
b o r r o we r s• Ex p a nd e d r i s k ma na g e me nt p o l i c y • Inc r e a s e d r e p o r t i ng s t a nd a r d s
PROSPECTS OF INCREASEING ACCESS TO
FINANCE
BASI C PRI NCI PLES USED I N THE PROPOSED SECURED TRANSACTI ONS MODEL
• Expanded scope of secur ed t r ansact i ons
• Cr eat i on of r egi st r y f or moveabl e pr oper t y
• I mpr ovement of l egi s l at i on and i nt r oduct i on of r el evant mechani sms f or enf or cement pr ocedur es
• Pr oper and t i mel y not i f i cat i on of st akehol der s
Prospect s of i ncreasi ng access t o f i nance i n t he resul t of i mpl ement at i on of secured t ransact i ons
ref orm
