HARARE, April 12 (The Source) – The Movable Property Security Interest Bill has gone through a second reading in the National Assembly, as Zimbabwe moves towards the use movable assets such as livestock, motor vehicles, inventory and accounts receivable as collateral to for bank loans.
The Bill still has several stages to go before it can became law, but Finance Minister Patrick Chinamasa told Parliament on Tuesday that the proposed law would be critical in developing small and medium enterprises (SMEs).
SMEs make up 70 percent of Zimbabwe’s economic activity and contribute more than 50 percent to the gross domestic product according to officials, but continue to face challenges when accessing financing from banks which only consider immovable property as collateral.
The Bill will provide a framework within which movable property will be used as collateral or security for purposes of obtaining loans in order to allow more people to access bank loans at reasonable interest rates, said Chinamasa.
He told the House that, to date, $250 million credit has been availed to individuals and SMEs, adding passage of the law will increase the level of creditworthiness.
He said a collateral registry will be established as a department under the Reserve Bank of Zimbabwe to promote financial inclusion.
“The Reserve Bank of Zimbabwe Act will be amended to achieve the objective of this Bill, and the assets to be considered include any type such as machinery, motor vehicles, livestock, and accounts receivable,” said Chinamasa.
The practice was universal among developing economies, he added and countries such as Liberia, Ghana, Malawi, Kenya, Lesotho, Peru and Ukraine had experienced ‘substantive economic impact.’
“Their access to banking finance increased by 8 percent (on average), while interest rates declined by 3 percent per annum. The Registry will bring benefit to the economy including participation of SMEs in the mainstream financial sector,” said Chinamasa.