Why Zimbabwe is allowing cows, cars to be used as collateral

Principally, the initiative entails the establishment of a collateral registry of movable property such as machinery, automobiles, inventory, and accounts receivables.  The registry will serve as a central source of information and will facilitate commerce, industry and other economic activities by enabling individuals and businesses to utilise their movable assets as collateral for credit, thereby injecting vitally important liquidity into their respective enterprises.  The initiative promotes the availability of credit by significantly diminishing the risk assumed by lenders as they may bond movable assets as collateral and have immediately available recourse where a borrower defaults in loan repayment.

As alluded to in the 2016 National Budget Statement, access to finance is one of the most important components for sustainable business and economic growth in any economy in the world.

However, the majority of Zimbabweans are not able to access credit from financial institutions due to lack of acceptable security in the form of immovable property such as houses or factories which are traditionally preferred by formal lending institutions.  This Bill seeks to specifically address that gap.

Purpose and functions of the Collateral Registry

Madam Speaker, the collateral registry system is aimed at the following:

1.     providing a mechanism for efficient registration of security interests in movable property and realisation of such interests in the event of a default of payment by borrowers;

2.     the creation and perfection of moveable security interests;

3.     providing a platform to inform parties and the public about the existence of a security interest in movable property; and

4.     the collateral registry will be established as a department of the Reserve Bank headed by a Registrar appointed by the Governor.

Enabling Legislative Framework

Currently, the legal framework dealing with secured transactions is fragmented and needs to be consolidated and modernised in line with international best practices.  The current laws include:

·       The Deeds Registries Act;

·       The Hire Purchase Act;

·       The Bills of Exchange Act;

·       The Grain Marketing Act and

·       The Agricultural Finance Act, among others.

This system is inefficient, costly and lacks the transparency required to support the growth of secured lending transactions.

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