DOING BUSINESS 2009 - JOHN J. HADDAD, Ph.D.

FIGURE 6.1GETTING CREDITCambodia leads in legal rights reform, Albania and the United Arab Emirates top reform29Overviewin credit informationStrength Starting of a business legal rights index (0–10) DepthFIGUREof6.1credit information index (0–6)Cambodia leads in legal rights reform, Albania and the United Arab Emirates top reform10 Dealing with construction permitsin credit informationEmploying 2008 workers8Registering propertyStrength of legal rights index (0–10)10Depth of credit information index (0–6)6Getting credit+3+9+3Protecting investors4Paying taxes+2Trading 2 across bordersEnforcing contractsClosing 0 2007 a businessCambodia Guatemala Vanuatu ChinaSource: Doing Business database.FIGURE 6.46846242008+4+9+3+3Collateral reform—East Asia & Pacific rapidly moving forwardTop 5 reform features in legal rightsSibongile was meant to fly. Number “I grew of reforms up strengthening Russian Federation. legal rights “I remember waitingreport for days year at the airport for the plane tion available through public and privateReforms ity and including accessibility feature since of credit DB2006 informa-(%)FIGURE 6.4near an Air Force base and always had by Doing a BusinessCollateral reform—East Asia & Pacific rapidly moving forwardlove for planes,” she says, DB2006 remembering a to arrive, DB2007 panicking DB2008 that after DB200953%paying so credit registries (figure 6.2).Eastern EuropeNumber of reforms strengthening Allowed out-of-court legal rights enforcement of collateralchildhood spent waving at jets at South much money and risking people’s savings by Doing Business report Both year& Central Asiacreditor protection through12(28 Africa’s economies) Hoedspruit base.it may not arrive.” But all DB2006 went well in the the legal DB2007 system and DB2008 credit registries DB200947% areEastern EuropeEast Asia After a successful 7-year career in & end, Central and Asia Sibongile’s business took off. 1 Expanded associated range with of revolving higher movable ratios of assets private12& human Pacific resources, Sibongile seized the (28 economies) 8Where collateral laws are effective that credit can to be used GDP. as For collateral example, an increase(24 economies)opportunity presented by the passage of East and Asia credit registries are present, banks of 1 in the creditors’ 35% rights index is associateda unified with registry a 6.5 percentage for movable property point in-OECDSouth Africa’s Black Economic Empowermenteconomies) Act in 2003: she started her own Kong (China), Singapore and Kenya facreasein the average annual growth rate& are Pacific8high incomemore 7 likely to extend loans. Hong Created(24 economies)(24OECDLatin business, America SRS Aviation. Opportunities for cilitate access to credit through laws that of the private-credit-to-GDP 21%high income7ratio in the& Caribbean3government contracts came quickly, but (24 allow economies) all types of assets to be used as Gave 3 years priority after to secured the reform creditors’ relative claims to the 3(32 economies)outside and insidegetting financing was difficult. “I took collateral and do not require a specific years before. 2 bankruptcy proceduresLatin AmericaSouth the government Asia& Caribbean39%tender to the 3bankers,”description of the collateral or obligation. Research shows that introducing a(8 economies)(32 economies)Exempted secured creditors’ claimssays Sibongile. “Forget it, they said. Becausethe amount of money was too large South tries and Asiaallow out-of-court enforcement3crease of 4.2 percentage points in firms’They also have unified collateral regis-from credit an automatic registry is stay associated in reorganization with an in-Sub-SaharanAfrica1(8 economies)Note: A reform may include severaland the collateral too small.”of security rights.reliance on credit. 3 reform features.(46 economies)Source: Doing Business database. This is in part becauseintroducing registries increases theSibongile ended up using her family’ssavings, Africa 0along with her mother’sSub-Saharan In Canada, El Salvador, Georgia,Middle East &Africa1North (46Korea,economies)Peru, Saudi Arabia and the United repayment rate: borrowers become less(19 economies)and aunt’s retirement funds, to finance States credit registries record and make willing to default, since defaults can preventfuture loans. In developing econo-Middle East &Note:theAfirstreformdeal:is countedleasing 1 reformaperplanereformingfromeconomytheper year.North available Africa historical 0 credit information onSource: Doing Business database.(19alleconomies)bank loans—as well as credit fromTable 6.1Note: utilities A reform and is counted retailers—for as 1 reform per both reforming individualsand companies. The registries also Rankings on getting credit are basedeconomy per year.Where is getting credit easy—FIGURE 6.2Source: Doing Business database.FIGURE and where 6.3 not?Private credit bureaus provide more comprehensive make services available to both lenders positive informationon 2 subindicatorsEasiest Rank Most difficult Rank% of FIGURE private (such 6.3 as loan amounts % of and public on-time paymentpatterns) credit bureaus and negative provide informationmore comprehensive services to lenders 33% 33%Regulations onMalaysia 1 Bhutan 172 credit bureauscredit registriesnonpossessory62.5%PrivateService Hong Kong, provided China 2 Djibouti 0173 255075100 security interestsStrength of legal(such as late payments and defaults). % of private in movable% of rights public index (0–10)South Africa 3 Eritrea 174Lists both individuals and firmscredit property bureauscredit registriesUnited Kingdom 4 Madagascar 175 And they allow borrowers to inspect andService provided0255075100Distributes Australia both positive 5 Tajikistan 176 dispute their information.37.5% 33%Depth of creditand Bulgaria negative information 6 Yemen 177 Lists both individuals and firmsDoing Business measures the legalinformation indexDistributes Israel data on all 7loansAfghanistan 178(0–6)Distributes rights of both borrowers positivebelow 1% of income per capitaand lenders and theNew Zealand 8 Syria 179 and negative informationscope and quality of credit information Scope, quality and accessibilityGuarantees Singapore that borrowers 9 Timor-Leste 180 Distributes data on all loansof credit information through publiccan United inspect States data 10 Palau 181 below systems. 1% of The income first per set capita of indicators describeshow well collateral and bank-and private credit registriesDistributes more thanNote: Rankings on the ease of getting credit are based on the Guarantees that borrowers2 sum years of the of strength historical of legal data rights index and the depth of credit can ruptcy inspect laws dataNote: Private bureau coverage and public registry coveragefacilitate lending. The secondinformation index. See Data notes for details.do not count for the rankings. See Data notes for details.Distributes data from retailers,Source: Doing Business database.Distributes set measures more the than coverage, scope, qual-trade creditors or utilities2 years of historical dataSource: Doing Business database.Distributes data from retailers,trade creditors or utilities(c) The International Bank for Reconstruction and Development / The World Bank+3+202Albania UnitedArab Emirates Ukraine Uzbekistan0 2007Cambodia Guatemala Vanuatu ChinaSource: Doing Business database.+3 +36420+4AlbaniaFIGURE 6.5+3UnitedArab Emirates Ukraine+3 +3UzbekistanFIGURETop 5ReformAllowedExpandthat canCreatedGave proutside9%Exemptfrom anNote: A reSource: DoFIGURRankon 2Regulnonposecuriin mopropeScopeof creand pNote: Pdo not