BY FIDELITY MHLANGA
THE Reserve Bank of Zimbabwe (RBZ) is set to operationalise the collateral registry system by year end as authorities move to make movable property securitisable, an official has said.
The drive is part of the central bank’s financial inclusion agenda.
Most countries in the region have already adopted the concept in a bid to modernise and open up financial services to previously marginalised communities.
In Kenya, cars are the most common asset used to secure short-term loans. Banks take full value of brand new cars as security and up to 80% for used cars.
Zambia passed the Movable Property Act in 2016.
“The collateral registry will be operational by December 2019, we don’t have the cost estimates yet,” RBZ chief bank examiner Ruzayi Chiviri told Standardbusiness.
According to the concept paper seen by Standardbusiness, the collateral registry is expected to result in improved access to finance for small to medium enterprises and individuals.
Micro, small and medium enterprises have in the past failed to access credit due to lack of immovable collateral that mainstream lenders require as security.
Movable assets such as household goods and office equipment have been ignored by lenders as loan collateral owing to lack of a central registry where they could log in their claim on the asset.
This means ownership of an asset could easily be transferred without the bank’s knowledge, leaving it exposed in case of default.
“It is aimed at providing more efficient risk management as it leads to a better diversification of assets held by financial institutions (portfolio and credit risk diversification) and creates more space for the securitisation of loan portfolios in the secondary markets, through use of moveable collateral,” reads the RBZ concert paper.
The facility is also set to improve competitiveness of businesses as a result of financial cost savings and increased access to credit through reducing the risk of credit.
This comes after the central bank in 2017 put in place the credit registry to record creditworthiness of account holders.
As at December 31 2018, the credit registry held 845 672 records of which 563 420 were active loan accounts. Individual records represented 99% of the active loan records. Total subscribers closed the year at 165, up from 104 in 2017.
Credit registry usage levels by subscribing institutions have increased steadily to a cumulative 440 407 reports as at December 31 2018.