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 utilise 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.
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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.