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Secured Lending and Collateral Registry in Seychelles

Project Development Objective (PDO)

The objective of this project is to increase access to credit in the private sector in the Seychelles by introducing a legal framework and collateral registry for secured lending and thus strengthening lenders’ rights in movable assets. 

Background

In the Seychelles, the private sector credit-to-GDP ratio was only 25 percent in 2012, which is a serious constraint to access to finance. The lack of a secured lending system with the respective collateral registry, together with the lack of financial leasing regulations, is one of the major constraints for banks, non-bank financial institutions, and other creditors in lending to the private sector. The current practice of lending money against collateral is limited to immovable property, such as land and buildings, and other immovable property rights. It does not extend to the unbanked part of the private sector and the Seychelles population as a whole. Acknowledging this gap, the Central Bank of Seychelles thinks that this project is relevant to the government’s financial sector development agenda and has requested the technical assistance in embarking on a comprehensive reform to establish a modern secured lending system and a collateral registry for movable property.
The project will benefit micro, small, and medium enterprises; financial institutions (banks, leasing companies, and so on); and government institutions. Financial institutions will be able to expand their lending operations against movable collateral. Enterprises will have greater access to finance and will be able to use their movable assets, inventory, and accounts receivable as collateral. Government institutions will obtain the necessary infrastructure and skills to support an effective secured lending system in the Seychelles.

Activities

The project has the following two components: 
Review and drafting or amending of a legal framework
1.  Reaching consensus among key stakeholders on the need for a reform 
2.  Conducting a review of the current secured lending practices in the Seychelles 
3.  Improving the enabling environment by drafting new secured transactions laws and regulations in
     line with international practice
Design and creation of a secured transactions registry and training
1.  Assisting with the creation of a secured transactions registry
2.  Supporting the Central Bank of Seychelles in creating awareness and providing training of trainers

Expected Outcomes

This project will pave the way to a modern secured transactions system by (a) creating the underlying legal framework; (b) creating a national collateral registry for all secured interests in movables; and (c) training the trainers and most important stakeholders in using the collateral registry, so that they can train other stakeholders and the private sector in return. Once all three components are in place, the banks and other creditors in the Seychelles will be able to use a variety of collaterals (productions assets, accounts receivables, and so forth) and eventually provide much-needed loans to the private sector.