Zimbabwe Set To Make Law To Secure Bank Loans With Cows As Collateral

Cash-strapped Zimbabwe’s bank managers may soon have no worry about their customers not having enough cash. What they have to bother about is where to build a stable to put herds of cattle that would be used as collateral if a new law comes into operation which would allow people to use their livestock to secure bank loans.

This is an idea conceived of by the Finance minister Patrick Chinamasa.

Chinamasa told parliament this week that people in the huge informal sector should be able to use their moveable assets such as cows and goats, as well equipment such as lorries and ploughs, to secure loans.

According to Chinamasa, the Movable Property Security Interest Bill would make it much easier for those with moveable assets, such as livestock to get bank loans.

“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,” Mr Chinamasa said.

The bill provides for a collateral registry to be set up by the central bank of all movable assets, including cattle to be used as security for loans. Most Zimbabweans live in the rural areas and even those in towns have access to small farms.

“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.

Chinamasa said several developing economies including Liberia, Ghana, Malawi, Kenya, Lesotho, Peru and Ukraine successfully used livestock and other movable assets as collateral to increase lending to small businesses.

While many members of parliament from the ruling Zanu PF and the opposition Movement for Democratic Change welcomed the proposed new law, economist Godfrey Kanyenze said it won’t work.

“This proposed new law tells us the majority of people are excluded from accessing financial resources. Traditional banks are not suitable for reaching out to these groups as we have seen from Asian models.

“It is not only about using cattle as collateral that matters, it is about creating alternative financial institutions such as micro finance and group lending.”

Mr Kanyenze said he didn’t believe Zimbabwe’s bank managers would be settling overdrafts with cattle seized from small farmers any time soon.

“In practice banks in Zimbabwe are not going to accept this new law,” he said.

Credit: The Telegraph

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