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Collateral register will provide assurance to lenders – BoZ

BOZ building.

ESTHER MSETEKA, Lusaka
BANK of Zambia says the introduction of the collateral register will provide assurance to lenders and in turn reduce the cost of borrowing, a senior analyst research and regulatory policy Banji Milambo has said.
Government is next month expected to start the implementation of the collateral registry to enable micro, small and medium entrepreneurs (MSMEs) register their moveable assets to access finance from banks and financial institutions.
In an interview on Monday, Mr Milambo said the development will give confidence to financial sector players and other lenders knowing that their interests are legally secured.
“The collateral register will try to help bring appropriate information to the lenders in order for them to make an informed decision. The register will help financial players avoid a situation where the lender is not sure of the status of the borrower,” he said.
The registry is an online public database that allows financial institutions to register security interests in movable property and mitigate the risk of customers.
“The collateral register provides assurance to lenders, more information about the status of assets, and assurance brings the price of borrowing down. One of the things that increase the interest rate is the risk. So when you reduce the information [gap], you reduce the risk,” Mr Milambo said.
Under the current legal framework, only land and buildings can be used as collateral, a situation most people contend has significantly limited access to finance for enterprises and individuals wishing to borrow from established financial institutions, which are unable to secure their interests in moveable property.

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