To enable Small and Medium Enterprises (SMEs) to secure credit from financial institutions on a national level , The Securities and Exchange Commission of Pakistan (SECP) is all set to launch Secured Transaction Registry (STR) .
STR project would facilitate small borrowers specifically from SMEs and agriculture sector to secure credit from financial institutions against their movable assets such as receivables, intellectual property, inventory, agricultural produce, petroleum or minerals, and motor vehicles, etc.
A collateral registry, which records the potential existence of security interest in movable assets, can protect the rights of creditors in secured lending.
Movable property is not accepted as collateral due to a lack of legal framework and most of the SMEs do not own real estate and in developing countries. This makes it difficult for SMEs to get affordable credit on one hand and also restricts lending opportunities for financial institutions.
Therefore, enabling the use of movables as collateral is a prerequisite to promote easy access to credit particularly for small businesses. Without a modern secured transactions regime, moveables are deemed as dead capital because banks are reluctant to lend against such collateral.
Secured transactions framework in Pakistan will become effective once the secured transactions registry for unincorporated entities is operationalised by the SECP.
It will be a game changer for the economy through promotion of easy and affordable credit for the SMEs.
Establishment of secured transactions registry is a key component of the SECP’s recent initiative for end-to-end process automation and digital transformation, ie, “LEAP” (Leading Efficiency through Automated Prowess).
The primary focus of this initiative is to facilitate ease of doing business, to enable meeting compliance requirements through lowering cost, and to bring efficiencies in turnaround times (TATs), while accomplishing transparency and internal accountability.
