Financial inclusion and the law in Zimbabwe: Reviewing the RBZ’s Collateral Registry — Part 2
The establishment of the collateral registry is also intended to boost microcredit growth and improve credit risk management in the microfinance.
The purpose of the registry is also to give notice to the public of the existence of such a security interest.
What is a security interest?
A security interest is a property right in a movable asset that is created by an agreement between a lender and a borrower to secure access to a loan or a line of credit.
Who can register on the collateral registry?
Individuals, small businesses and players in the informal sector are now able to register their movable assets in an official database following the launch of the collateral registry which is expected to promote inclusive lending to the private sector.
What are the steps one should adopt to register a movable property in the collateral registry?
There should first be an agreement signed with the secured creditor before registering an interest in the collateral registry.
There should be an agreement which is a signed, binding document between the lender and the collateral owner.
An agreement is arrived at after the lender has carried out an assessment of the value of the movable property against which a potential borrower requires credit.
This is the contract between the debtor and the secured party in which the debtor agrees to grant a security interest in their asset to be used as collateral.
A security agreement must be in writing and signed by the secured creditor and the debtor.
Who can access the collateral registry?
The registry is accessible by users, such as banking institutions, deposit-taking microfinance institutions,credit-only microfinance institutions, savings and credit cooperative societies and other secured creditors, to register security interest.
Other commercial institutions and individuals may also register as users to search the collateral registry.
Conclusion
The scope for borrowing loans by Players in the small to medium enterprises have been widened by the introduction of the collateral registry. This is a good development as it promotes financial inclusion among small businesses and promotes transparency and minimise credit risk among lenders.
Fungai Chimwamurombe is a registered legal practitioner and Senior Partner at Chimwamurombe Legal Practice and can be contacted for feedback at fungai@zenaslegalpractice.com and WhatsApp 0772 997 889. Plaxedes Tavirai is an intern and can be contacted on plaxedes@zenaslegalpractice.com
