By MAIMBOLWA MULIKELELA –

THE Bank of Zambia (BoZ) will establish a collateral registry for movable assets to enable borrowers to use non-fixed assets as collateral security.
This is aimed at increasing access to finances especially by the Small and Medium Entrepreneurs (SMEs).
The collateral registry for movable assets will allow the use of inventory, accounts receivables, livestock, equipments, machinery and other moveable assets as collateral security.
In Zambia, financial institutions have devoted most of their attention to the use of land and building as collateral to secure loans, while the use of movable assets as collateral is still in its early stages of development.
BoZ governor Denny Kalyalya said the Central Bank was developing a legal framework for the establishment of a collateral registry for movable assets.
“This will increase access to finance, especially for SMEs, and lead to better terms for loan contracts,” Dr Kalyalya said.
Reforming the framework for movable collateral lending allows businesses, particularly SMEs, to leverage their assets into capital for investments and growth.
“Currently many SMEs are excluded from the formal credit market largely because they lack assets that can serve as collateral, although they may generally have a wide array of productive assets that could secure a loan but a legal framework prevents this,” Dr Kalyalya said.
He said clear and secured lending laws that allow the use of movable collateral could, therefore, significantly increase the level of credit as it enabled SMEs to use their movable assets to obtain credit.
Using moveable collateral further allows for a more efficient risk management as it leads to a better diversification of assets held by financial institutions.
This will improve the competition in the financial sector, by enabling both banks and non-bank financial institutions to offer secured loans.
Using moveable collateral additionally creates more space for the safeguarding of loan portfolios in the secondary markets and enhances the ability of regulators to analyse portfolio risks.
“We are also implementing a regulatory framework for agent banking to permit financial services providers to contract third parties to provide certain financial services on their behalf without having to put up brick and mortar,” Dr Kalyalya said.
“This model will, therefore, increase financial inclusion to the majority of the excluded Zambians at lower cost to both the financial services providers and the customers than would otherwise be,” he said.