HARARE Zimbabwean entrepreneurs could soon use movable assets — including livestock and vehicles — to secure loans from banks, according to a bill brought before the country’s Parliament this week.
The southern African country’s economy is now dominated by informal business following the formal sector’s contraction by as much as 50 percent between 2000 and 2008, according to government data, after President Robert Mugabe’s seizure of white-owned farms decimated the key agriculture sector.
The Movable Property Security Interest Bill, brought before lawmakers by Finance Minister Patrick Chinamasa on Tuesday, seeks to make it easier for Zimbabwe’s burgeoning informal sector to access funding from banks.
A copy of the bill seen by Reuters on Wednesday defines movable property as “any tangible or intangible property other than immovable property.”
Presenting the bill, which still has to go through several stages before being passed as law, Chinamasa said the majority of small businesses did not have the immovable assets which banks require as collateral for loans.
“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,” Chinamasa told lawmakers.
The finance minister said banks had failed to adjust to Zimbabwe’s new economic reality in which the informal sector, mostly made up of small businesses, plays a dominant role.
Loans to small businesses amounted to $250 million in the year to date, Chinamasa said, out of total bank loans of nearly $4 billion.
“As minister in charge of financial institutions, I feel there is need for a change of attitude by our banks to reflect our economic realities,” Chinamasa said.
The bill provides for a collateral registry to be set up by the central bank, which would maintain a database of all movable assets put up as loan security.
“The purpose of the registry is to facilitate commerce, industry and other socio-economic activities by enabling individuals and businesses to utilize their movable property as collateral for credit,” reads part of the bill.
Pitching the proposed law to legislators, Chinamasa cited several developing economies — including Liberia, Ghana, Malawi, Kenya, Lesotho, Peru and Ukraine — which he said used livestock and other movable assets as collateral to increase lending to small businesses.
“Their access to banking finance increased by 8 percent (on average), while interest rates declined by 3 percent per annum. This will bring benefit to the economy, including participation of SMEs in the mainstream financial sector,” said Chinamasa.
Zimbabwe’s economy enjoyed a temporary reprieve after it adopted the use of multiple foreign currencies — mainly the U.S dollar and South Africa’s rand — in 2009 to replace its inflation-ravaged local unit.
The currency move initially paid dividends, with the economy expanding by an average 11.3 percent between 2010 and 2012, according to World Bank data, while inflation came down to single digits from about 500 billion percent in December 2008.
However, declining exports from the mineral-dependent southern African country following weaker mineral commodity prices coincided with a sharp rise in imports, triggering an acute foreign currency shortage and slowing down the economy as credit to businesses dries up.
(Reporting by Nelson Banya; Editing by Sandra Maler)
more recommended stories
Kenya and South Africa agree on visa-free entry
Kenya and South Africa have agreed.
SA officially seizes R9 million gold from Zimbabwean man who attempted to smuggle it
Pretoria – The High Court in.
Influencer ‘Ray Hushpuppi’ jailed for 11 years in US
A notorious Instagram influencer from Nigeria.
19 reported dead in Tanzania plane crash
A Tanzanian passenger plane has crashed.
Nigerian police question eight people after Davido’s 3-year-old son dies
Nigerian police have taken in eight.
Museveni’s son General Muhoozi vows he will become president
The son of Uganda’s long-serving President.
A majority of Ghana’s MPs want finance minister sacked
A majority of Ghana’s ruling party.
Somalia Suicide bombing kills one soldier and injures six
One soldier was killed and at.