Collateral Registry System hailed

The Reserve Bank of Zimbabwe (RBZ) spearheaded Collateral Registry System has been described as a “game changer” in the financial sector in facilitating access to credit to the marginalised and the youth who normally would be considered risky because of lack of collateral.

Since its launch in November 2022, the Collateral Registry System has attracted a total of 1 186 active registered security interests with a corresponding loan amount of $4,2 trillion.

In a speech read on his behalf during the ongoing inaugural Annual Financial Inclusion conference by the RBZ deputy governor Dr Jesimen Chipika, RBZ governor Dr John Mangudya said while significant progress was registered on the access strand, the FinScope surveys revealed that women, youth and micro, small and medium enterprise (MSMEs) continue to face challenges due to inadequate or lack of requisite collateral.

The conference is held under the theme “Leveraging Innovative Technologies for Financial Inclusion and Sustainability: From Access to Usage”.

“As a solution to this challenge, the bank, in November 2022, launched the Collateral Registry System which to date has proved to be a ‘game changer’ in facilitating access to credit to the marginalised and the young people who normally would be considered risky because of lack of collateral.

“It is pleasing to note that currently, the Collateral Registry System has a total of 1 186 active registered security interests with a corresponding loan amount of $4,2 trillion, “ said Dr Mangudya.

Dr John Mangudya

The operationalisation of the collateral registry marked a critical milestone in access to credit and will facilitate borrowing opportunities for micro, small to medium enterprises.

The central bank included a wide range of movable assets to be used as collateral including gold coins and livestock.

The central bank established a Collateral Registry for movable assets in order to expand the range of qualifying collateral accepted by lenders as part of the broader reforms to promote access to finance and enhance financial inclusion.

The development is set to benefit MSMEs as well as the household sectors and ultimately boost production.

SMEs face difficulties in accessing funding as financial institutions demand collateral in the form of immovable property like houses.

The banking sector has in the past been accused of imposing stringent conditions for businesses that need funding.

Dr Magundya added that following a realisation that MSMEs, women, youth and persons living with disabilities have limited, or no formal collateral required when accessing finance, in 2018, the central bank in line with the National Financial Inclusion Strategy, resuscitated the Credit Guarantee Scheme which is provided through the Export Credit Guarantee Company of Zimbabwe (ECGC).

He said the main objective is to facilitate productive lending to small businesses to stimulate economic growth and development.

Dr Mangudya told delegates that in January 2017, the central bank successfully deployed the Credit Registry System aimed at enhancing the credit referencing environment in Zimbabwe and improving access to credit.

“The Credit Registry promotes responsible lending practices, and a reduction in over-indebtedness and credit costs, as credit service providers are now able to better understand their customers using verifiable credit data.

“The long-term benefits of the registry include a reduction in the level of non-performing loans in the financial sector and improved access to credit.”

The governor said financial inclusion is not a moral imperative but remains a key priority in promoting sustainable livelihoods, wealth, and employment creation.

It also facilitates gender equality in line with the country’s Vision 2030 of an “Upper Middle Income Economy” by 2030, he noted.

“Financial inclusion is also a key enabler to sustainable and inclusive economic development, contributing significantly to the stability and confidence in the banking sector.

Gold coins

“The accelerated use and deepening of technology has transformed the way financial institutions offer their services and products. Against this background, the bank saw it fit to organise this very important event under the theme, ‘Leveraging Innovative Technologies for Financial Inclusion and Sustainability: From Access to Usage’.”

Turning to the state of the banking sector, Dr Mangudya noted that banking institutions are at the centre of financial intermediation and a resilient banking system is an important pillar of support to economic activity and sustainable economic growth.

He said the banking sector has remained sound and stable and has displayed remarkable resilience to shocks emanating from the operating environment, on the back of proactive, holistic, and supportive stabilisation measures the bank instituted, supported by the fiscal authorities.

He noted that several financial inclusion initiatives cutting across the financial services sector were implemented by stakeholders including regulators, financial institutions, development institutions and the private sector.

Since 2016 the central bank has been championing the financial inclusion agenda and to date significant progress has been made as evidenced by the results of the FinScope MSME and Consumer Surveys conducted in 2022, which indicated overall access of 83 percent up from 69 percent in 2014, he said.

Collaboration has been key in reducing the financial exclusion gap and in the attainment and achievement of major outputs.

“The FinScope surveys indicated that savings have generally been on a downward trend from about 47 percent in 2014 to 36 percent in 2022, largely due to low disposable incomes and few investment alternatives, particularly for the marginalised groups.

“The bank introduced gold coins as an investment alternative and to inculcate a savings culture among Zimbabweans.

Reflecting our focus on engendering inclusivity, the gold coins have small denominations to allow targeted groups to adopt them as an alternative store of value.

“As a complement to the sale of physical gold coins, the bank introduced Gold-Backed Digital Tokens (ZiG) to expand the value-preserving instruments available to the marginalised segments of the country and enhance the divisibility of the investment instruments.

“The ZiG is fully backed by physical gold held by the bank and its value is at par with the value of the physical Mosi-oa-Tunya gold coin and remains informed by the international gold price. In addition, the ZiG has now been transformed to be able to facilitate transactions in the economy, complementing the domestic currency.”-chronicle