Secured Transaction Registry in July
The long-awaited Secure Transaction Registry (STR), set to develop a free, formal, structured framework to provide credit for immovable assets, is expected to be released in July, top officials said.
The registry established under the Secured Transactions Registry (STR) Enactment, Act No. 17 of 2004, is intended to enhance Sri Lanka’s credit infrastructure by creating a more inclusive environment, particularly benefitting micro, small, and medium enterprises (MSMEs) in their access to credit, Pushpike Jayasundara, Director /General Manager of the Credit Information Bureau of Sri Lanka (CRIB), told The Sunday Times Business.
“Access to credit in the informal sector is severely constrained, especially for micro, small and medium enterprises,” he explained. “Due to the high perceived risk and transaction costs, the use of movable assets as collateral remains grossly underutilised. In most cases, only well-established borrowers operating within the formal business framework can secure credit, as lenders typically accept only immovable property such as land and buildings as reliable collateral.”
Under the STR framework, lenders who extend credit secured against a borrower’s movable assets can electronically register their security interest in the centralised registry introduced by CRIB. The Act provides legal recourse for lenders, allowing them to enforce their registered security interests in the event of borrower default. Additionally, the electronic nature of the registry serves a preventive function, helping to avoid double pledging of the same asset by clearly establishing priority rights among creditors. Notifications and registry entries ensure transparency and help protect the legal standing of borrowers and creditors. The costs associated with debt recovery, both administrative and legal, are significant burdens for both creditors and debtors, forming a substantial part of overall transaction costs.
The STR addresses this critical issue by enabling creditors to electronically register their security interests over movable assets instantly. This streamlined process not only reduces the cost of recovery but also facilitates more efficient dispute resolution, potentially avoiding lengthy and costly legal proceedings. The CRIB is entrusted with the responsibility of developing, maintaining, and operating the electronic registry. “The electronic registry will significantly strengthen the enforceability of security interests by establishing clear priority rights, thereby enhancing lender confidence,” Mr. Jayasundara said, noting that the STR will encourage broader lending across a more diverse borrower base, including self-employed individuals and small and medium enterprises, which previously lacked access to formal credit channels.
Mr. Jayasundara further explained that the STR will maintain a comprehensive electronic record of all registered security interests. The system, developed by CRIB, is built on an advanced technological platform and incorporates robust identification protocols such as the national identification number and business registration number as main identifiers. In addition, the system allows for asset-specific information, including machinery serial numbers and invoice references. It also accommodates the integration of technological features for asset valuation, geolocation, and photographic documentation, enhancing the reliability and integrity of the collateral registration process.
Assets coming on the STR include machinery and equipment, stocks, accounts receivables, inventories, livestock, consumer assets, crops and agriculture yield, investment instruments, trust receipts and intellectual property.
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