Adviser to Prime Minister on Commerce and Investment Abdul Razak Dawood said on Friday that the recent amendment in the Secured Transaction Act-2016 would help operationalise e-registry of movable and immovable assets, which, in turn, would enhance access to credit particularly for Small and Medium Enterprises (SMEs).
“These amendments would also be instrumental in improving Pakistan’s ranking in ‘getting credit’ indicator by more than 20 positions in the World Bank’s ease of doing business report,” the adviser said in a statement issued by the Ministry of Commerce.
He said the recent amendments in Companies Act 2017 would lessen the administrative burden on businesses. “It would also impact the two indicators in our ease of doing business ranking, first on ‘starting a business’ and second ‘protecting minority investors’. A Secured Transaction Registry (STR) has been established at the Securities and Exchange Commission of Pakistan (SECP) to overview matters in this regard.”
The registry would record charges/security interests created by entities on their movable assets. Now, the Financial Institutions (Secured Transactions) Act, 2016, would be enacted to provide an integrated legal framework for the creation of security interest over movable assets, besides providing for the establishment of a secured transactions registry for unincorporated entities.
The adviser said the creation of a secured transaction registry would facilitate small borrowers from SMEs and the agriculture sector to secure credit from financial institutions against their movable assets, receivables intellectual property, inventory, agricultural produce, petroleum or minerals, motor vehicles.
He noted that micro, small and medium enterprises played a vital role in the economic development of the country due to their significant contribution in terms of output, exports, and employment.
SMEs constituted approximately 90pc of businesses in Pakistan, employed 80pc of the non-agricultural labor force, and contributed 40pc to the country’s annual gross domestic product (GDP). Despite playing a significant role in the economic growth of the country, SMEs access to formal finance was limited to only 6pc of the total financing by the banking sector.
The adviser was optimistic that this initiative would prove to be a game-changer, as it would improve the access to finance for the SMEs, agri borrowers, and rural enterprises.
