Helping Jordanian SMEs Access Much-Needed Credit
Working with the Jordanian Ministry of Industry, Trade, and Supply (MoITS), JCP has implemented an online Movable Collateral Registry and provided training to ministry staff on the system. Combined with the recent Secured Lending law, the online registry allows banks to lend to small- and medium-sized enterprises (SMEs) using their movable assets (equipment, inventory, receivables, etc.) as collateral. As a result, banks' lending to SMEs is expected to increase by seven percent annually, representing a more than $1 billion per year increase in available financing and translating into approximately 30,000 jobs over four years.
BACKGROUND: Why SME Credit Matters
From vendors to service providers to app developers and programmers, Jordan is teeming with SMEs, many of them women-owned. That’s a sign of a healthy economy: SMEs are an important driver of economic growth, and in many countries, they are the largest contributor to job creation. To have that impact, though, SMEs need access to financial services—like affordable credit—that can help them invest in their businesses and take risks that may be easier for larger companies to hedge against. At the same time, citing those risks, banks traditionally have been reluctant to lend to SMEs, which often lack the kind of assets that can act as collateral for credit applications. JCP's work pushing passage of Jordan's Secured Lending Law as well as its design and production of the collateral registry are poised to unlock this potential.
Beyond developing the online system allowing SMEs to register “movable assets”—such as computers or vehicles—with Jordan’s Ministry of Industry, Trade, and Supply, JCP played an instrumental role in advocating for the new Secured Lending Law, which incentivizes banks to extend credit to SMEs. To promote the law as well as the utility of the registry and encourage uptake by SMEs, JCP is: 1) supporting the upgrade of the installed system to accept all types of financing notices from a variety of financial institutions—from banks to microfinance institutions and venture capital funds; and 2) providing training on this system to Ministry staff as well as other public stakeholders, including the Central Bank of Jordan, the judicial system, and other public financial institutions. A promotional launch event will also be held to promote broader knowledge and understanding of the Registry.
In addition to the development of the registry itself, JCP assisted in building the capacity of the Ministry’s staff managing the system as well as the capacity of the SMEs and financial institutions that will use the system. Also with JCP support, the Ministry signed a two-year Application Maintenance and Support Services Agreement in 2017 with the registry's software developer that includes upgrading the software at no additional cost to keep up with the demand expected as a result of the Secured Lending Law's passage. By building the foundation for increased lending to SMEs, assisting in passage of the law that will make this access to credit possible, and ensuring that this activity is a sustainable one, JCP has delivered a holistic solution that will yield long-term benefits for the Jordanian economy.
INFOGRAPHIC: How Jordan's New Secured Lending Law and Movable Collateral Registry Are Accelerating Growth for Jordanian Small- to Medium-Sized Enterprises
Want to learn more about the impact of the new Secured Lending Law and Online Movable Collateral Registry? Download this JCP-produced infographic.