KOROR, PALAU – Unlocking the value of “movable property” through legal reform and public online registries is key to removing constraints to economic growth and access to finance in developing Pacific island economies, says a new report launched here today by the Pacific Private Sector Development Initiative (PSDI).
Analysis from PSDI, a regional technical assistance facility cofinanced by the Government of Australia, the New Zealand Government, and the Asian Development Bank (ADB), notes that obtaining credit is difficult in many of the Pacific’s developing countries. But without broad-based access to finance, investment remains constrained and economic growth potential is wasted.
The solution, say the authors of "Unlocking Finance For Growth: Secured Transactions Reform In Pacific Island Economies", lies in borrowers being able to secure credit by accessing the value of their movable property. That is, everything owned by an individual or a business excluding land or buildings, such as vehicles, machinery, crops, inventory and accounts receivable.
“By adopting ‘secured transactions’ or ‘personal property securities’ frameworks, Pacific governments can, for the first time, enable borrowers to use movable assets as collateral for loans,” says Andrea Iffland, Regional Director of ADB’s Pacific Liaison and Coordination Office in Sydney.
“Equally, if a borrower does not repay the loan, well-drafted laws give lenders the certainty to able to easily enforce their rights over that property. And because electronic online registries are easily searchable, lenders can verify that there are no prior interests against property offered as collateral.”
The ability to pledge movable property is also helping women to meet financial institutions’ collateral requirements—effectively, allowing them to borrow—as they are rarely able to pledge land or leases as loan security.
Ms. Iffland noted that a sound legal framework underpins all PSDI’s technical assistance on secured transactions to the Pacific. PSDI has supported the passage of enabling laws in eight of ADB’s Pacific developing member countries, six of which have also established state-of-the-art electronic registries for secured transactions: Federated States of Micronesia, Marshall Islands, Palau, Solomon Islands, Tonga, and Vanuatu. The governments of Papua New Guinea and Samoa have passed enabling legislation and planning to implement electronic registries.
The report was launched today at an Economic Symposium in Koror, Palau, co-hosted by the Ministry of Finance and the Palau Chamber of Commerce. Palau’s National Congress passed the Secured Transactions Act in May 2012, and an electronic registry was launched in January 2013.
ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members—48 from the region. In 2013, ADB assistance totaled $21.0 billion, including cofinancing of $6.6 billion.