Liberia: CBL Partners Hold Stakeholders Workshop On Modernizing Credit Reporting System and Improving the Effectiveness of Collateral Registry in Liberia

The International Finance Corporation (IFC), the World Bank and the Central Bank of Liberia have held a stakeholders workshop on Modernizing the Credit Reporting System and Improving the Effectiveness of the Collateral Registry in Liberia.

The event that was held at the Monrovia City Hall brought together individuals from several government entities including development partners.

Speaking at the opening section, the Deputy Governor for Economic Policy at Central Bank of Liberia (CBL), Governor Dr. Musa Dukuly named poor collateral registry and weak credit reference coupled with structural constraints as the impediments hampering the country’s financial inclusion.

Governor Dukuly said “Financial literacy, weak documents, and poor identification are impediments to the economy. This workshop we think will allow us to mitigate some of the constraints and be able to increase financial inclusion within the economy.”

The bank, Dukuly says, is making headway but not at the pace expected because of some of these constraints. According to him, enhancing the collateral risk chain and also improving credit reference will help significantly in increasing credit growth in the economy adding that it will help to strengthen confidence in the economy.

He added that the only way the country can drive a vital and sustainable economy is to be able to mitigate the credit rate in the economy and which he says leads to financial inclusion that will help to reduce poverty.

“We have some of our regions (Liberia) where we don’t have banks because we don’t have a bank in some of the regions we don’t increase financial services. But we are trying to navigate our way around by encouraging agents’ banking. Last year the number of agents banking increased from 188 to 260. The only way agent banking can work effectively is to support the existence of financial services in the region where we don’t have a bank,” Governor Dukuly said.

Governor Dukuly said there’s a need for Liberia to have an effective credit registry and collateral registry framework. He said: “If we don’t strengthen that it means that agent banking will not be able to provide those services in those areas where commercial traditional banks will not be able to effectively operate.”

Also, the International Finance Corporation (IFC) Resident Representative for Liberia and Sierra Leone, Alexandra Celestin, said improving the effectiveness of the Collateral Registry and strengthening the legal and regulatory frameworks to facilitate lending against movable property, will go a long way in boosting lending to small business owners especially women and youth-led ones.

Madam Celestin said the availability of the technology-based system that collects credit information on borrowers and prospective borrowers should help to facilitate the extension of credit to underserved consumers and businesses that will be able to build and leverage reputational collateral to obtain credit thus promoting financial inclusion.

“The COVID 19 pandemic is causing unprecedented disruptions to the global economy and exposing “existing financial sector vulnerabilities”. Individuals and businesses would require financing to survive the pandemic and build capacity during the recovery phase thereby increasing the demand for credit. Financial institutions’ lending portfolios have been deteriorating and will need to be reprofiled and augmented with new loans to accommodate the impact of COVID,” Madam Celestin said.

According to her, in Sub-Saharan Africa (SSA), COVID’s impact is more disproportionate as the effect on livelihoods and micro, small and medium enterprises (MSMEs) most of which are informal and face serious access to finance challenges.

She said it is estimated that at the height of the pandemic close to 50 percent of firms have struggled with debt servicing as well as solvency challenges.

“The timing is therefore auspicious for this stakeholder workshop to review existing frameworks – legal, regulatory, institutional – as well as practices that underpin the credit system and adopt workable solutions that will make such frameworks effective in boosting access to finance for MSMEs, most of which are informal in nature,” she said.

Madam Celestin said IFC has over the years been working with the Central Bank of Liberia and other stakeholders in developing and implementing reforms that will improve access to finance for micro, small and medium enterprises (MSMEs).

She said IFC has provided over US$80 million in investments as well as several technical/advisory engagements to support the private sector in Liberia which include supporting the establishment of Access Bank as the first microfinance bank in Liberia to lead the rebuilding efforts after the war and the bank is now the largest MSME bank with over 2,000 micro clients (over 60% women) and over 300 SME clients.

Assistant Minister for Economic Policy at the Ministry of Finance and Development Planning (MFDP), James Dorbor Na-Kulah Sao, Sr, said having a collateral registry will help Liberia a lot.

“The MDFP supports this initiative. Most times during meetings, we have to struggle to provide credit references and other information,” Minister Sao said.