By Lumbiwe Mwanza
ZAMBIA needs to establish a well-developed secondary market for selling collateral properties whenever the borrower fails to service the loan in a bid to promote transparency, Association of Microfinance Institution (AMIZ) president Webster Mate has said.
Speaking to The Scoop, Mr. Mate observed that there wasn’t much transparency whenever financial lenders hold the auctioning of collateral properties stating that this was as a result of not having a well-developed secondary market for such sales.
“We have some of these lenders carrying out auctions of motor vehicles as part of the collaterals they try to offload when the borrower fails to pay. However, in some instances, some of these collateral is not motor vehicles. They could be in some cases movable household goods. Selling of those things is not straightforward because Zambia does not have a well-developed secondary market for such sales.
“However, there is a process we are involved in supported by the World Bank group for Zambia to try and establish a secondary market for collateral so that when people try to recover their money from the collaterals they take, there is a market that is efficient that would give them good value for those assets.However, this is still on the drawing board with some work going on but we are not yet there,” Mr. Mate said.
He said that the Government should continue facilitating easier and straightforward auctioning of collateral properties.
And Mr.Mate further urged Small and Medium Entrepreneurs (SMEs) to take advantage of using movable assets as collateral in growing their businesses.
He said that SMEs should develop the interest to take up financial literacy services in order to take up more informed decisions, especially that lenders were required by law to open up on the terms and conditions of all financial services offered.
He further urged the SMEs that commit themselves to loans to fully understand the terms and conditions of loans in a bid to service the loans.
He said that it was unfortunate that SMEs to date tend to cry foul whenever they find themselves in a position where they were unable to fully service the loan.
He said that it was the responsibility of the borrower to fully understand as they commit themselves to loans because the lender also had a business to protect.
In 2016 the Government enacted the Moveable Property Security Interest Act to allow movable assets to be used as collateral.