A survey of Saint Lucian business has revealed that access to finance ranks number one in the top ten business environment constrains, the National Competitiveness and Productivity Council (NCPC) says.
According to release from the NCPC, the cost of electricity and transportation ran a distant second and third respectively.
The council noted that it is for this reason, coupled with the thrust to improve the ease of doing business climate here, that it embarked on the introduction of legislative reform aimed at facilitating the use of movable assets as collateral.
NCPC Economist Sharma Mathurin was quoted as saying that businesses as well as individuals will be able to utilize their valuable assets “such as accounts receivables, industrial equipment, inventory, etc., as collateral in order to apply for loan financing within banks and other financial institutions.”
Mathurin noted that lending institutions on island concentrate almost exclusively on real or immovable property, such as house and land, as there is an established legal and registry framework which support the rights in real property.
However the NCPC Economist explained that this requirement inhibits the growth and productivity of many small business operators who do not possess the requirements for traditional loan financing.
“This is very detrimental to your wider economy because it basically prevents private sector expansion because it basically prevents new businesses from being able to be formed and be able to employ persons. It inhibits existing business from being able to expand their operations. It inhibits businesses from being able to access export financing in order to market their goods and services to other regional and international markets.”
The Executive Director of the Saint Lucia Manufacturers Association, Paula James, welcomed the introduction of the Secure Transactions in Movable Properties Legislation while indicating that the customer, the lender and other parties must be well protected to be able to use the legislation as a part of regular business transactions.
“The reason why a lot of persons have difficulty with accessing finance is because they have no tangible security. So as a business person you may have two vans, a car but the bank would not take a bill of sale over that as security to lend you some money if they are not sure and they cannot verify whether this movable property is not mortgaged or assigned to a financial institution and these things are easy to transfer,” James asserted.
“You can move them from point A to point B with a blink of an eye. This legislation will also help us because it will also cover if we have assets in another territory, we can look at using that asset to secure financing in Saint Lucia,” she stated.
The NCPC disclosed that it is expected that the Secure Transactions in Movable Properties Legislation should be approved before the end of this financial year.
The legislation it will be accompanied by the establishment of an online Collateral Registry of movable assets which will be housed within the High Court.
Charon Gardner Hippolyte, Former Registrar of the High Court, clarified how the registry will work.
“It would be something that is online. You don’t physically have to come in. You would be able to go and search and be able to identify if a person has any loan on a particular vehicle if you want to enter into a transaction. Now, in terms of privacy obviously it is not opened to everybody to be able to do that; so you want to make sure that it’s secure. There are aspects of privacy because quite frankly I don’t think you or I would want average Joe Public to just go onto the online registry, type in our name and ascertain exactly what we own and where we own it,” Hippolyte explained.
The NCPC has announced plans to ramp up its sensitization efforts with key stakeholders and the general public regarding the Secure Transactions in Movable Properties Legislation as the implementation date draws closer.