It is common cause that the traditional financing models have historically lacked inclusivity and flexibility, as such key economic sectors of the economy such as the small to medium enterprises (SMEs) have consistently struggled to access requisite funding to grow and transform their operations.
SME’s have been in dire need of financing strategies to accelerate growth of the sector.
To this end the Reserve Bank of Zimbabwe has established what is a Collateral Registry for movable assets in a bid to broaden the range of acceptable collateral by lenders as part of reforms to improve access to financing and enhance financial inclusion for movable assets.
What is collateral?
A collateral is a movable asset that is subject to a security interest; or a receivable that is the subject of an outright transfer.
A collateral can also be defined as a security or guarantee that is usually in the form of an asset pledged for the repayment of a loan in the event that one cannot procure enough funds to pay.
What is the Collateral Registry?
The registry is established in terms of the Movable Property Security Interests Act [Chapter 14:35] which allows the use of movable assets as collateral for loans.
A collateral registry is a publicly accessible database of movable asset interests or ownership that allows borrowers to verify their creditworthiness and for potential lenders to obtain their ranking priority in potential claims against specific collateral.
Movable collateral that can be used as security includes equipment, inventory, accounts receivable, farm products, household items and bank accounts and many others.
The purpose of the registry
The primary function of the Registry is to enable security interests over movable property to be perfected by receiving and storing registered security interests and respective notices thereto.
The Registry will further seek to provide public access to information pertaining to registered notices pertaining to security interests.
This in effect means the Registry is a database of relevant information on debtors and secured creditors identified in registered notices and relevant information on any movable property subject to registered notices of security interest.
Conclusion
It is expected that this development will immediately benefit micro, small and medium enterprise (MSMEs) as well as the household sectors and ultimately boost productivity.
Part 2 of this Article will illustrate how MSME’s will stand to benefit from the financial inclusion thrust which is the basis upon which the Collateral Registry has been founded.
Plaxedes Tavirai is a legal intern and can be contacted on plaxedes@zenaslegalpractice.com
