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

This Bill will provide for a holistic approach towards the utilisation of movable assets as collateral by harmonising all the relevant Acts. In this regard, even the Reserve Bank of Zimbabwe Act and the Banking Act will be amended for the financial sector to achieve the intended objective of this Bill.

Creation of security interest by execution of security agreement

Madam Speaker, the Collateral Registry will register the security interest provided the debtor has the rights in the movable asset.  Such assets may include any type of movable assets such as machinery, automobiles, inventory, livestock and account receivables.

Collateral Registry Fees

The operations of the Collateral Registry would be funded through levying of cost recovery fees and charges to be specified in the regulations.  The fees may be charged for registration, amendment and cancellation of notices.

Consumer Protection

In order to protect the borrower from inaccurate information being registered in the Collateral Registry, the Bill will ensure that any information that is registered would be confirmed and authorised by the borrower.

Access of information to the public

Madam Speaker, currently lenders have limited information regarding the borrowers.  For example, if a lender is considering a loan to a small or medium size enterprise, one of the biggest deterrents is the possibility that the borrower has already given its assets as collateral to another lender which evolves into a dispute involving lenders concerning whose debt is superior to the other.

The Bill will therefore create a reliable and affordable public registration system to allow lenders and the public to see which assets have been pledged as collateral by the borrower which will assist the lenders in making a more informed business decision when advancing a loan.

Benefits of a Collateral Registry

The expected benefits of a Collateral Registry are as follows:

a) Promoting financial inclusion since most economic agents, including SMEs, women, youth and other under-banked groups currently experience challenges in accessing financial services due to lack of immovable property often required for collateral purposes;

b) Increased access to credit through reducing the risk of credit;

c) Improving competition in the financial sector by enabling both banks and non-bank financial institution to offer secured loans; and

d) Reducing cost of credit through reduced interest rates as economic units move from informal to formal financing.

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