IN the past, borrowing money from the banks or any other financial institution was not an easy undertaking.
Borrowing from the banks was seemingly for the affluent or those with the capacity to pay back without any difficulties.
One required proper valuable security to offer as collateral, or being in a well paid job before being considered legible to obtain a loan.
This was coupled with high interest rates, which have since been reduced to 11 per cent by the Bank of Zambia (BoZ).
The scenario has, however, changed as obtaining a loan from the bank or other financial lenders has been made easier through the Moveable Property (Security Interest) Act which some economic experts would term as ‘easy cost of doing business’.
The use of livestock as collateral by Commercial banks seems to be working well for the benefit of all stakeholders involved.
This follows the enactment of the Moveable Property (Security Interest) Act number 3 of 2016, aimed at giving lenders the assurance required to accept personal or movable property as collateral.
The Act provides more available options as admissible collateral for financial clients looking for credit facilities from the banks.
It further provides for the establishment of a collateral registry whose objective is giving lenders the assurance required to accept personal or movable property as collateral.
The Moveable Property Act is being administered by the Patents and Companies Registration Agency (PACRA), and in collaboration with the Dairy Association of Zambia (DAZ).
Banks have started piloting the use of animals as a form of collateral when lending money to Micro, Small and Medium Enterprises (MSMEs).
Bankers Association of Zambia (BAZ) chief executive officer Leonard Mwanza says statistics from PACRA indicate that movable assets are being used as surety when obtaining a loan.
Mr Mwanza said under the Moveable Property Act, banks have started piloting the use of livestock such as cattle and goats as a form of collateral.
He said ZANACO and the AB bank were some of the financial institutions that were accepting movable assets as security.
“Statistics by PACRA from various financial institutions indicate that there has been a good response in terms of using movable assets as collateral.
“The Moveable Property Act is taking shape, this is a new product development and we have noticed that one or two banks are accepting cattle under the dairy farmer as surety,” he says.
Mr Mwanza said various training programmes, targeting people involved in lending financial assistance have been conducted in conjunction with the World Bank, PACRA and BoZ.
The trainings were aimed at up-scaling lending to the MSMEs sector with areas of concern that include; how to structure products suitable for movable assets as security.
Mr Mwanza said positive interests in the trainings were recorded as it was more of understanding and transferring knowledge of other markets, and how to move from small, medium,large and commercial scale basis.
Follow-ups are also expected to be undertaken to ensure banks are in a better position to embrace movable assets as security.
And as at September 28, last year, over 12, 000 transactions had been recorded on the collateral registry since the enactment of the Act.
PACRA chief executive officer Anthony Bwembya said the transactions were done through the online system.
Mr Bwembya had informed participants at the master class for business reporters in Lusaka that PACRA had adopted the Malawian system as the developers worked round the clock to create a system that would suit the Zambian business landscape.
He expressed delight at the migration phase of the new movable property registration, a system which was expected to change the way financial transactions involving movable properties were handled.
Mr Bwembya said of the over 12 000 transactions made, the majority of them were Small and Medium Enterprises (SMEs).
“There has been steady growth in the number of people registering for collateral. This law will allow financial service providers to expand their businesses by extending loans to other sectors, particularly the SMEs,” he said.
Mr Bwembya said the Act would enable SMEs daily and easy access to credit as financial service providers would have confidence in the collateral used.
“The collateral registry has been welcomed well by the financial service providers. This innovation intends to assist SMEs easily access credit,” he said.
Recently, PACRA public relations officer Vaida Njobvu said the agency has registered over 8,695 financing statements, with over 14, 344 moveable assets pledged as collateral under the collateral registry since the enactment of the Act.
In giving a statement on the number of registered businesses, Ms Njobvu said under the collateral registry, the assets included over 3,000 household goods, 566 accounts receivables, 504 motor vehicles and 404 equipments.
Out of 24, 905 registered businesses, 15,300 were business names and 9,542 local companies.
“The agency would like to encourage Banks and Financial lending Institutions including individuals who are duly registered money lenders to take advantage of the collateral registry and register all transactions involving moveable assets as collateral.
“It is anticipated that wide usage of the collateral registry by providers of credit finance will result in increased access to credit by MSMEs to grow their businesses,” she says.
Among the eligible assets that can be pledged as part of collateral include, livestock, agricultural produce and motor vehicles.
With the use of moveable assets as collateral, businesses and particularly the SMEs should take advantage of the system and access credit to grow their businesses.
Farm equipment are also being offered as collateral as opposed to only accepting fixed property, and with the introduction of moveable property Act , the law would provide more available options as admissible collateral for customers wishing to obtain credit facilities from the banks.