MASVINGO – The Reserve Bank of Zimbabwe (RBZ) recently conducted a Collateral Registry System training workshop with microfinance and banking institutions to capacitate them on the use of the automated system.
A collateral registry is a publicly available database of interests in or ownership of movable assets allowing borrowers to prove their credit worthiness and potential lenders to access their ranking priority in potential claims against particular collateral.
The workshop which was held at Flamboyant, a Regency Group hotel last week on Monday was also meant to equip law firms, Micro, Small and Medium Enterprises and individuals with information on the operations and benefits of the system.
The registry was launched through Statutory Instrument 190 of 2022 in line with the Movable Property Security Interest Act (Chapter 14:35).
Speaking at the training program, RBZ Deputy Director, Bank Supervision Division, Ruzayi Chiviri commended the new system which he said carries notable benefits for borrowers and lenders.
The movable assets include livestock, household goods, crops, business stock as well as farm equipment.
“The system enables borrowers to leverage their movable assets to obtain credit. The general public can also access the registry to check if an asset they are about to purchase has not been pledged as collateral for a loan that is being serviced.
“The system makes it easier to get a loan especially for special groups such as Micro, Small and Medium Enterprises and individuals who may not have access to immovable assets such as land and houses typically required by lenders,” said Chiviri.
Chiviri said the use of another person’s assets as collateral for a loan is possible when there is a written and signed consent document of the agreement between the owner of the asset and the borrower.
He added that pooling of assets by multiple individuals is possible so as to obtain a higher-value loan. Again these assets can either be individually owned by each participating party or co-owned by multiple parties.
RBZ Principal Bank Examiner, Vimbai Muchedzi in her presentation stated that assets pledged as collateral against a loan accessed can be registered in the Collateral Registry System.
“This will be the duty of the lending institution or law firms who may be acting on behalf of secured creditors. Terms of loans will be dictated by the lending institution which can be banking institutions, deposit-taking microfinance institutions, credit-only microfinance institutions, savings, and credit cooperative societies and other secured creditors. The RBZ will only be managing technical aspects of the Collateral Registry system,” said Muchedzi.
Chihambakwe Law Firm lawyer, Knowledge Mabvure felt that the system may rob them of their work as everyone can perform the process through the website without requiring their services.
“Our future is under threat; this is notarial work which is regulated by the Deeds Registry Act. A lawyer who is a notary public is authorized to draft notarial bonds. Financial institutions are empowered in terms of the Movable-Properties Security Interest Act (Chapter 14.35) to register the same on the online platform through the Reserve Bank collateral registry system from the comfort of their offices without any qualifications required. There is no more need for banking institutions to approach law firms for registration of notarial bonds. As law firms we are challenged to be innovative and fit into the system,” said Mabvure.
Transparent collateral registries allow lenders to check if collateral being offered as security for a loan has already been pledged to another lender. Modern collateral registries are often computerized, improving the timeliness, accuracy, and accessibility of collateral information to avoid disputes over rights to property.
This also entails notarial bond, note of hand, charge, secured debenture, pledge, trust receipts, financial lease and any other transaction that secures payment or performance obligation.
