Harakats US$570,000 fund for Collateral Registry and Public Credit Registry
KABUL, December 20, 2009 -Harakat - Afghanistan Investment Climate Facility today approved a grant for five hundred and seventy thousand (US$ 570,000) to support the establishment of Collateral Registry and Public Credit Registry at the Da Afghanistan Bank (DAB). Both projects will be completed in over two years. The projects aim to strengthen and develop the financial infrastructure in the country.
While a multitude of factors depress economic growth in Afghanistan, the World Bank cites access to finance in Afghanistan among the most debilitating constraint to the investment climate. Lack of access to finance for the vast majority of the private sector limits growth prospects of micro, small and medium-sized enterprises (MSMEs) and restricts economic growth.
The Collateral Registry and Public Credit Registry projects have been designed to tackle the above mentioned constraint. The Public Credit Registry aims to strengthen the supervisory capability of DAB to protect depositors and lenders from incompetence, and assist banks, Microfinance Institutions (MFIs) and others to better manage credit risk by sharing credit information. The Collateral Registry aims to promote lending against movable collateral in Afghanistan; protect financial institutions’ interest in movable assets that increases their incentives to deal with movable assets, which will promote lending and leasing of various types of equipment.
While the projects are housed at the DAB and implemented by the International Finance Corporation (IFC), the Private Sector and Civil Society will have essential role in the development of both the legal framework for the registries as well as the mechanism how the facilities will function.
H.E. Abdul Qadeer Fitrat, Governor of the Central Bank of Afghanistan stated “one of the main purposes of establishing Credit Information Bureau and Collateral Registry is to mitigate risk and enable banks to differentiate between credit-worthy customers and crooks, and generate safer loans to the investors’ community and the general publish at large.”
Mr. Suleman Fatimie, CEO of Harakat started his statement by saying “The collateral registry together with the credit registry has been recognized by the banking sector as a critical condition for improving access to finance. The project aims to foster the use of movable assets as collateral to generate loans. The sharing of positive information rather than only negative information has a significant positive impact on the approval rate of the loans. Studies show that the existence of a collateral registry and credit registry improve both access to finance and repayment rates. It then serves the interest of both the costumers and the lenders. ”
Harakat is an independent, Afghan-managed organization that aims to improve Afghanistan’s business environment. Harakat provides grant funds to the private sector, government and civil society to implement activities to reduce or remove barriers that currently make it difficult to do business in Afghanistan.