Banks embrace new collateral registry
Avia Collinder, Staff Reporter
Maureen Hayden-Cater, president of the Jamaica Bankers Association (JBA), says commercial banks and other lenders will likely embrace non-traditional items and services as collateral now that the National Security Interests in Personal Property Registry (NSIPP) is up and running.
The registry, backed by statute, now allows borrowers to use household items and intangible assets as loan security alongside traditional assets such as real estate and motor vehicles.
"We are already taking bills of sale for fridges and stoves. The difference is that now it will be registered," said Hayden-Cater.
"Prior to this, these were unregistered and you would not know if another bank had taken it," she said.
Appliances and furnishings are already acceptable collateral, but up to now such items have been used largely to secure small loans issued by microfinance companies, sometimes referred to as payday loans.
The seven commercial banks have tended towards more pricey assets as backing for loans, but now, through the JBA, they have endorsed the new law as "a good starting point for secured transaction reform in Jamaica, which we anticipate will evolve over time."
In the main, the Security Interests in Personal Property Act 2013 and the new registry it spawned seek to widen the category of assets which can be used as security for credit by lenders, provide a simple registration process to record security interests in these assets and to improve access to credit for micro, small and medium-size enterprises or MSMEs.
The end result is expected to be easier ways for borrowers to use non-real estate assets - including equipment, machinery, crops, inventory and intangible assets such as intellectual property - and assignment of debt as collateral to obtain credit and for lenders to register security interests over the wider category of assets. Receivables also qualify as collateral under the new law.
Remove stamp duty
Hayden-Cater says the NSIPP registry "will be supported by the banks", but she also indicated that the JBA wants further tweaking of the policy to remove stamp duty on security interests.
The duty is seen as contrary to the spirit of the new law and its removal would reduce associated costs of borrowing, according to the JBA president.
A statement crafted by the JBA on its position, says the Govern-ment has already taken on board other recommendations by bankers and others.
"One of the key recommendations, however, which was not imple-mented, was the elimination of stamp duty to security interests created under the act. From the JBA's perspective, the elimination of stamp duty is a critical factor to reducing the cost of borrowing and to increasing access to credit," said the statement shared with the Financial Gleaner by the JBA president.
A representative of the stamp office quoted stamp duty on non-real property at $3.75 for every $200 of value. A bill of sale for personal property valued at $5,000 would therefore attract duty of $93.75.
The NSIPP registry is domiciled at the Companies Office of Jamaica.