The practice of borrowers assigning the same collateral to several lenders now seems to be over in the formal banking system, with a Collateral Registry now fully operational.
The Registry, established by the Bank of Ghana under the Borrowers and Lenders Act 2008 (Act 773) is to enable financial institutions secure their credit facilities in an efficient and transparent manner and ultimately improve upon the overall credit delivery system in the country.
Even though the coming into force of the Borrowers and Lenders Act has empowered lenders to dispose off assets of defaulters thirty days from the date of default without resorting to the law courts, the dubious acts of certain borrowers have swelled up bad loans in the portfolios of lending institutions.
Due to the challenges of operating in what has been described as a risky lending environment, most financial institutions charge exorbitant interest on loans extended to clients, derailing all attempts by the monetary authority to bring down the cost of borrowing.
Minimizing the risk of lending by proper documentation processes and information sharing will enable financial institutions to bring down their risk premium on loans. �The Collateral Registry will register charges created by borrowers to secure credit facilities provided by lenders,� a release from the Bank of Ghana states, adding that �the Borrowers and Lenders Act makes it possible for a charge registered with the registry to be realized without a court order after thirty days from the date of default by the borrower.�
According to the release spelling out the guidelines for the operation of the Registry, a secured credit agreement covering an amount of GH�500.00 (Five hundred Ghana Cedis) and above shall be registered with the Registry.
Beginning February 1, 2010, banks are expected to furnish the particulars of all submitted collateral to the reference bureau to facilitate easy referencing. Whist promoting a sound credit system, the initiative is also expected to provide some relief for customers whose assets are sometimes disposed off unprofessionally by some lenders.
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