Business-friendly environment

Draft reforms of secured lending system to allow liquid assets as guarantees

August 11, 2011- The Minister of State Marwan Kheireddine said that the cabinet is seeking to create flexible policies to enhance the business environment in the country.

The draft plan proposes reorganizing the Movable Assets Secured Lending system in order to encourage lending small- and medium- sized enterprises (SMEs).

The Secured Lending system involves pledging an immovable asset as collateral, usually property like buildings, until the loan is paid back. Banks do not accept movable assets as guarantees for loans as they consider it to be of higher risk.
If approved, the new lending system would allow business owners to use their liquid assets as collateral.

Expert at the World Bank’s International Finance Corporation (IFC), Murat Sultanov, said Lebanon needs a legal and organizational framework to encourage banks to offer loans on liquid assets.

Yasmina Khoury, the director of the Work Environment Enhancement Unit, said that the purpose of the proposed reforms is to encourage loans to SMEs which lack guarantees on hand.

Khoury said that the draft plan also aims at improving the country’s ranking in the International Institute for Finance (IIF)’s Lending Conditions Survey. Lebanon ranked 113th among 183 countries included in the study.