Secured Lending

Examples of Our Work

China

In China, 80 percent of firms report that access to credit is a significant obstacle, more than for any other business constraint. Following a request from China’s Central Bank, FIAS and IFC's Loan Advisory Services unit joined forces in mid-2004 to address the challenges China’s credit markets face by adopting a balanced approach to analytical work as well as to advocacy and capacity building. The team employed rigorous analytical methodology that involved:

• carefully studying the legal and institutional framework in China
• identifying main shortcomings
• documenting the economic consequences of the restrictive framework through small or medium enterprise (SME) and financial institution surveys
• formulating recommendations that would be applicable for the Chinese context.

As a result the National People's Congress of China approved the country’s new Property Law in March 2007, including a chapter on secured transactions. The chapter on secured financing significantly improves the legal framework for secured lending, potentially putting in circulation over $2 trillion of movable assets mostly held by small and midsize enterprises and farmers in China. Additionally, People's Bank of China launched a new internet-based receivables registry with FIAS' support. The system is the first unified, electronic registry in China based on modern secured transactions principles. Since March 2007, several Chinese banks have begun designing their asset-backed financing products and setting up their internal procedures to capitalize on these new opportunities. Over the next few years, IFC's China Facility and FIAS will continue to support the implementation of the Property Law and, in particular, help to develop an asset-based lending industry in the country.

Vietnam

In Vietnam, FIAS and IFC Advisory Services began advising the Vietnamese government in September 2006 on streamlining its secured transactions laws and registry. A new Secured Transactions Decree enacted in December 2006 led to a three-point improvement on the Doing Business "getting credit" indicator (Legal Rights Index), raising the Vietnamese legal framework on par with the OECD average. Additionally, Vietnam's ranking for getting credit improved from 80 to 48 among 145 countries. As a result of the law, any asset can now be used as collateral, and creditors are better able to assess the risk profile of their lending portfolios.

In 2008, FIAS worked to maximize the impact of these new laws by supporting the implementation phase. With the new policy framework in place, the project's primary focus has become streamlining the administrative operations of the National Registration Authority for Secured Transactions. As a subsequent support, FIAS and IFC Advisory Services began working with the government to upgrade the secured transactions registry from a paper-based system to an electronic platform. The new electronic registry is expected to be operational in 2009, reducing registration time from six days to six minutes. In addition, ongoing specialized workshops and seminars are being conducted to help Vietnam's financial sector build capacity, learn risk-management techniques, and structure new products.

Nepal

In Nepal, FIAS will oversee the implementation of an electronic nationwide collateral registry. The registry will be established on a public-private partnership basis with the Ministry of Finance and the Credit Information Bureau. According to a survey of lenders, the registry is expected to receive 11,500 registrations representing new loans each year within five years of its inception.