Hudson Wakio, managing director of Advanced Technologies, which sells computers, printers, photocopiers, and office supplies, is expanding his business. When he recently applied for a loan from local lender Credit Corporation for a delivery truck, to his surprise, approval took place far faster than he had ever imagined.
"I thought loan approval would take months; instead it only took 1 day. Within an hour the forms were processed, and by the end of the day I had the truck. I couldn't believe it," says Wakio.
Loan approval within a day is just one of the benefits of the introduction of the new Secured Transactions and Companies Acts.
The Secured Transactions Act, which has simplified all aspects of lending, was passed by the Solomon Islands Parliament in 2008. ADB assisted the government with its drafting, making it easier for people to get business loans using movable assets such as boats, cars, or farm equipment as collateral.
Tony Langston, country head of Credit Corporation's Solomon Islands Office, the biggest non-bank provider of financial services, says both the secured transactions and the company law reforms have had a positive impact on lending.
Prior to the reforms, when Credit Corporation wanted to provide a loan for a customer to buy, say, a car, a bill of sale agreement would have to be written up and then submitted to the government for approval. This process could take up to 2 months, according to Langston.
"Under the new Secured Transactions Act, we're now able to approve a loan within a day," he says.
The establishment of an electronic secured transactions registry in Solomon Islands with ADB support has also boosted access to financial services.
"Access to finance is a major constraint to economic growth in Solomon Islands," says Shadrach Fanega, permanent secretary of the Ministry of Finance and Treasury. "These business law reforms are lowering lending risks and bringing down transactions costs, improving access to financial services in Solomon Islands."
ADB also assisted the Government of the Solomon Islands with the drafting of the new, modernized Companies Act, which makes it easier to register a new company, among other things.
Part of the reform of the Companies Act in 2010 is the new electronic companies registry, Company Haus. ADB assisted in its implementation, enabling fast online registration of companies.
"The user-friendly registry allows people to register a new company in 1 to 2 days, when previously this process would take up to 3 months," says James Apato, acting registrar of Company Haus.
The online registry enables users anywhere in the world to search for information by a company name, shareholder, or director with instantaneous results, free of charge. On average over 3,200 searches are undertaken every day on the registry.
"The business law reforms in Solomon Islands are boosting the ease of doing business there," says Eugenue Zhukov, regional director of ADB's Pacific Liaison and Coordination Office in Sydney, Australia. "The company and secured transactions registries are also helping reduce the cost of doing business, encouraging compliance, and ensuring fair trading and consumer protection through appropriate regulation."
Since the Companies Act became effective, nearly 1,200 companies have re-registered, and 352 new companies have registered.
Cocoa export and trading company Solomon Komoditi (Solkom) is a newly incorporated business. It is unique in that it represents several thousand cocoa producers in several provinces through principal buyers who each own a stake in it. The company formed to enter the international cocoa export market. As a limited liability company, it is able to more easily sign contracts with serious players in the cocoa business.
Andrew Sale, a marketing and supply-chain adviser with the AusAID-funded Cocoa Livelihoods Improvement Project, works with the company and used Company Haus Registry to register Solkom.
"I submitted the application online, and went out for lunch," says Sale. "By the time I came back, I had an email confirming our registration was successful. It was that quick."
Solomon Sedo of Pitukoli Village is one of the directors and shareholders of Solkom and is a principal buyer in Guadalcanal. He works with several hundred cocoa farmers who exported a record 50 tons of cocoa to Malaysia in October.
Sedo says that the plantations are managed by families, and women make up 50% of the farmers. The increased income, he says, is "used for things such as school fees, access to clinics, and buildings in the community."
"It is here, in the rural areas, that we can really see the impact of the company law reforms," says Sedo. "Solkom has negotiated a better price for farmers, and demand for cocoa is increasing. The farmers are busier and earning more income."