National Collateral Management Company key to resolve SME finance issues

Business News General Business News

Karachi, June 01, 2018 (PPI-OT): The Union of Small and Medium Enterprises (UNISAME) has urged the stakeholders not to delay the formation of the Collateral Management Company (CMC) and the Central Depository Company (CDC) as these are the modern concepts to resolve the issues of SME finance.

President UNISAME Zulfikar Thaver said the banks are not very comfortable with the muccadams who sometimes oblige the borrowers with underhand work. The banks need CMC licensed panellist to carry out third party inspection and certify the goods. In foreign countries the CMC plays important role and acts between the borrower and the bank. The CMC also has an efficient logistics wing which looks after the imports and exports.

Thaver said the CMC and the CDC are urgently required to make the banks comfortable and the Union humbly requests the State Bank of Pakistan (SBP) and the Securities and Exchange Commission of Pakistan (SECP) to expedite matters and enable the commercial banks to use this system and not rely on the unprofessional muccadams who favour the borrowers.

The SBP has encouraged warehouse receipt financing (WRF) and it will catch on. If the receipt is from an inspection company on the panel of the bank it will make the banks comfortable. Since SECP has already notified the CMC establishment and operations regulations which were approved by the federal cabinet in last May 2017 and notified by SECP. Now the CMC needs to be formed which will apply for license to act as CMC. The core function of CMC will be accreditation of the warehouses across the country and issuance of the eWarehouse Receipts.

SECP has formally requested Central Depository Company (CDC) to form this company, equity holders of which may be leading banks, logistic and warehousing companies etc. CMC will also act as the Depository of Once the CMC obtains license from SECP and starts accreditation of warehouses, the banks will simply login into CMC’s system and will see if the warehouse is accredited and eWHR has been issued, they will lend against the eWHR.

CMC will ensure that the accredited warehouse/warehouse operator complies with the Regulations which clearly defined the roles and responsibilities of each stakeholder. The CMC may hire several PSI companies as its agents to carry out survey and manage the collateral. CMC will have assayers on its panel. CMC can have its own staff or can hire assayers for audits of the accredited warehouses CMC will act like CDC of grains.

The additional director SBP Imran Ahmed assured about the formation of CDC and also about the CMC in the capacity building working group committee meeting but the ball now seems in the court of SECP to further pursue this initiative since this relates to formation of company and SBP has to work on issuance of Prudential Regulations wherein electronic warehouse receipts can be treated as valid collateral.

Now that the business plan of CMC has been finalized the banks have to come forward to participate in the equity/shareholding just like CDC where the shareholders of CDC are mostly the banks Thaver urged SBP and SECP to expedite matters in the best interest of the economy.

For more information, contact:
Union of Small and Medium Enterprises (UNISAME)
75/1 3rd Commercial Street,
Phase IV, D.H.A., Karachi, Pakistan
Tel: +92-21-35884225-6
Fax: +92-21-35380642
Cell: +92-300-8245307, +92-321-8245307