Friday, July 01, 2005
Vanuatu Secured Transactions Small-Scale Technical Assistance
By: The Enterprise Research Institute
Commissioned by the Asian Development Bank and Conducted in conjunction with CEAL. 2004
The ADB approved a small-scale technical assistance (SSTA) for a diagnostic study to improve access to affordable credit in Vanuatu. The SSTA's purpose was to prepare a sound integrated reform package, including a detailed implementation plan, to assist the Government in preparing a comprehensive reform plan for the development of a secured transactions framework. The aim - to improve access to affordable credit in Vanuatu. Vanuatu's private sector has developed to date at a disappointingly slow rate, partly because financial underdevelopment hinders adequate financing of the private sector. Vanuatu's domestic financial sector provides only a minimal range of banking services, access to credit for Ni-Vanuatu entrepreneurs is limited, and interest rate spreads are high reflecting high transaction costs and risk premiums and inefficiencies in financial intermediation. The underdevelopment of the financial sector is, among other factors, connected to two important and related, underlying issues: the lack of a secured transactions framework (i.e., the legal framework that governs collateral for loans), and adverse implications of the customary land tenure system. These elements effectively prevent the use of collateral to bridge the gap between credit supply and demand, thereby impeding access to affordable credit especially for the Ni-Vanuatu. This SSTA aimed at establishing the necessary program to allow for reform of Vanuatu's secured transactions system in the future. By allowing Ni-Vanuatu to leverage movable property as collateral lending to business borrowers will be encouraged and permit farmers, consumers, and businesses to use movable property as collateral for loans thus promoting growth and poverty reduction.
Commissioned by the Asian Development Bank and Conducted in conjunction with CEAL. 2004
The ADB approved a small-scale technical assistance (SSTA) for a diagnostic study to improve access to affordable credit in Vanuatu. The SSTA's purpose was to prepare a sound integrated reform package, including a detailed implementation plan, to assist the Government in preparing a comprehensive reform plan for the development of a secured transactions framework. The aim - to improve access to affordable credit in Vanuatu. Vanuatu's private sector has developed to date at a disappointingly slow rate, partly because financial underdevelopment hinders adequate financing of the private sector. Vanuatu's domestic financial sector provides only a minimal range of banking services, access to credit for Ni-Vanuatu entrepreneurs is limited, and interest rate spreads are high reflecting high transaction costs and risk premiums and inefficiencies in financial intermediation. The underdevelopment of the financial sector is, among other factors, connected to two important and related, underlying issues: the lack of a secured transactions framework (i.e., the legal framework that governs collateral for loans), and adverse implications of the customary land tenure system. These elements effectively prevent the use of collateral to bridge the gap between credit supply and demand, thereby impeding access to affordable credit especially for the Ni-Vanuatu. This SSTA aimed at establishing the necessary program to allow for reform of Vanuatu's secured transactions system in the future. By allowing Ni-Vanuatu to leverage movable property as collateral lending to business borrowers will be encouraged and permit farmers, consumers, and businesses to use movable property as collateral for loans thus promoting growth and poverty reduction.