RBZ to float tender for collateral registry system

RBZ to float tender for collateral registry system
Published: 16 October 2017
THE Reserve Bank of Zimbabwe (RBZ) will soon go to tender for the provision of a collateral registry system that will allow banks and micro-finance institutions to vet the suitability of movable collateral offered by borrowers, especially in the Small to Medium Enterprises (SME) sector.

Speaking at a consultative meeting on collateral registry and the operation of the credit registry held in Mutare on Friday, RBZ principal bank examiner-bank supervision, Mrs Nonhlanhla Chiromo said the central bank was holding consultations with stakeholders in an effort to know the specifics to be included in the system to be used.

"RBZ will go to tender for the collateral registry soon. We need your input so that when we go to tender for the system , we will know what to include and what to leave out," she said.

Mrs Chiromo said the central bank would hold more consultative meetings in a few more cities for wide-ranging input. The consultations have already covered Harare. The meetings have given SMEs, banks as well as Micro-finance institutions a platform to state which movable goods can be used as collateral in accessing loans as well as measures that can ring-fence the abuse of such collateral by both the lender and the buyer.

The Credit and Collateral registries are provided for in the Amended Banking Act. The credit registry became operational in February this year while the collateral registry will become functional as soon as the systems have been put in place. Speaking at the same event, RBZ deputy director - bank supervision, Mr Ruzayi Chiviri said the collateral registry has been structured in such a way that it would protect both the interests of the lender and the borrower to unlock value in the SME sector.

"We want to protect the consumers as well as the banking institutions. So we have to make sure that when you deal with a client, everything is clear and no one will be prejudiced," he said.

The Zimbabwe Association of Micro Finance Institutions executive director, Mr Godfrey Chitambo said the collateral registry would help unlock the potential within the SME sector. He said SMEs had been facing difficulties in accessing capital to fund their businesses because they did not have the immovable collateral demanded by most banks. And while the MFIs have been accepting movable collateral, Mr Chitambo said there had been challenges in how this had been done.

"The collateral registry will unlock wealth for the SME and the economy, as it will give lending institutions that fall back plan should the borrower fail to pay back. It will also sanitise and harmonise the way we have been doing business, as MFIs will not be able to take away a client's movable property and risk damaging or losing it,"he said.

He said a registry would also push MFIs to ensure that whatever collateral is brought by the borrower is properly registered and insured thus avoiding any lawsuits and losses. It is expected that the credit and collateral registries will significantly add value to banks and micro-finance institutions' credit risk management and governance systems as well as bring down the level of non-performing loans across the sector going forward.
- newsday
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