The new law on security interests promises small and medium-sized companies quick access to credit lines, as it simplifies procedures for constituting and executing guarantees.
Last week the Congress of the Republic,approved amendments to the Law on Secured Transactionsthat has existed since 2007 to facilitate access to bank loans. With the modifications, any transaction that has the effect of guaranteeing an obligation of the debtor with the creditor is typified as a security interest.
The Honduran government will offer companies in the tourism sector loans with annual rates of 10% and terms of up to 20 years for the construction of hotels.
Authorities in the Hernandez administration announced that among the financial products that are already available in the Honduran Bank for Production and Housing (Banhprovi), are loans for small and medium-sized tourism companies for a maximum amount of $34 thousand, with a 10% annual rate, with terms of up to seven years for fixed assets, three years for working capital and a two-year grace period for fixed assets.
The law passed by the Legislature allows companies to use their personal property as collateral to take out productive loans.
From a statement issued by the National Assembly of Nicaragua:
During the plenary session on October 5, the National Assembly approved in general the Secured Transactions Law, a legal instrument to promote access to credit for micro, small and medium enterprises by putting up any movable goods used in their daily work as collateral.
Starting from May 15 organizations can use inventories, cash flows, patents and other things as collateral for bank loans.
The regulations for the Law on Secured Transactions are now ready and the law will take effect on May 15, and from that date, companies will be able to put up crops, agricultural machinery, copyrights, among other things, as collateral for the purpose of obtaining bank loans.
An adequate legal framework is needed for the healthy and steady development of institutions engaged in microfinance.
The Association for Research and Social Studies (ASIES) has published a study on the essential institutional strengthening of microfinance in Guatemala, with its own data and references it reports from the Secretariat for Economic Integration (SIECA) on "The Importance of the Micro Financial Sector in Central America ".
In 1998, the agricultural sector accounted for 14% of total domestic credit, compared to today where it currently accounts for only 3.5%.
The industry points out that the requirements and collateral demanded can not be met by most small and medium producers.
Of total the loans to productive sectors offered by the local financial system, only 3.5% are directed towards agriculture and agribusiness activities, said Juan Rafael Lizano, president of the National Chamber of Agriculture and Agribusiness (CNNA).
In order for the Law on Secured Transactions to be put into effect in practice, the Secured Transactions Registry together with its regulations needs to be implemented.
The new Registry will be part of the National Registry Center (CNR), it will be public and will operate as an electronic platform, a system that facilitates the registration of garments and filling out forms so that secured debtors can have a personal account.
The slow pace at which the Agricultural Development Bank operates forces producers to get finance from private institutions, paying higher rates.
Although the Agricultural Development Bank (ADB) has pledged to cut the time it takes for a loan approval, from one and a half years to two months, it has not kept its promise. In 2013, the approval of agricultural loans declined by 22% compared to the previous year.
The Economic Committee in Congress has agreed to pass a law that will enable collateral such as merchandise or intangible assets such as patents to be used to obtain loans.
The law will facilitate the process for natural and legal persons to apply for loans using collateral such as their properties, tools, patents, trademarks and merchandise. "It protects consumers more, is more respectful of consumer rights, is much fairer and avoids abuses," said the congressman, Francisco Zablah.
The National Bank for Production and Housing in Honduras has hiked interest rates for new loans to micro and small enterprises.
Laprensa.hn reports: "The information was confirmed by the executive vice president and general manager of the Covelo Foundation, Juan José Lagos, who explained that the decision was based on resolution 77-04-2013 taken by the board of the National Bank for Production and Housing (Banhprovi) last April. "
The Agricultural Development Bank has obtained a $58.2 million loan which will be dedicated to domestic producers for the fiscal year 2014.
Prensa.com reports: "The figure is higher by $3.4 million, compared to 2013, it comes from the budget of $89.4 million which was presented to the National Assembly by Rigoberto Amaya, manager of the Agricultural Development Bank (BDA)".
The bureaucratic requirements contained in a bill advancing in Congress would continue to hamper access to credit for entrepreneurs.
A few days ago Congress ruled on the Law for Strengthening Development Banking, under which sureties are not required, interest would be low and deadlines for payment would be longer. However, among other things, entrepreneurs who wish to take out a loan would be required to take a training course at the National Training Institute (INA by its initials in Spanish) in order to get a certificate which would allow them to make the appropriate application.
In the first half of 2012 the volume of loans to micro, small and medium enterprises reached ¢243,000 million ($485 million) in the first half of 2012.
The figure represents an increase of just 1.36% compared to the same period in 2011, lower than the inflation rate, and 39% of the projections of the Ministry of Economy, Industry and Trade for all of 2012.
From January 19th with the entry into force of the law to encourage development the Banco Multisectorial de Inversiones (Multisectoral Investment Bank) will operate as Banco de Desarrollo, (Development Bank or BDES).
The bank can then direct lending to small and medium enterprises (SMEs). At the moment it can only do so through lines opened by private banks.
State banks will allocate $670 million through different programs aimed at Small and Medium Enterprises.
According to a survey conducted by La Nacion with State owned financial institutions, the sectors most favored will be service and trade.
"For 2011 Banco Nacional has a budget of $375 million to lend to MSMEs, Banco Popular has $243 million, BCR $30 million and Bancrédito $22 million, respectively."