PSCEDP Manager Chaba Mokuku
Bereng Mpaki
MOVABLE assets, including intangible property, could soon be used as collateral for obtaining loans in a move that seeks to improve access to finance for enterprise development.
According to Private Sector Competitiveness and Economic Diversification Project (PSCEDP II) Project Manager, Chaba Mokuku, they were involved in the design and deployment of a modern movable collateral registry that would permit the reliable use of movable and intangible assets as collateral.
The PSCEDP II seeks to fight pervasive poverty through the development of the private sector to create jobs in Lesotho. The World Bank-supported project comprises of three components; improving the business environment, supporting economic diversification and project implementation support.
Mr Mokuku said the reform sought to address issues relating to the creation, registration and enforcement of security interests over movable collateral.
“We are currently assisting the Central Bank of Lesotho in developing a Secured Transaction Law that would allow for the registration and usage of movable property as collateral,” he said.
“The movable assets will be registered in what is called a collateral registry so they can be used as collateral depending on their value. “This is an important tool that has the potential to unlock the challenge of access to finance especially for upcoming entrepreneurs.”
A secured transaction is a loan or credit transaction in which the lender acquires a security interest in collateral owned by the borrower and is entitled to foreclose on or repossess the collateral in the event of the borrower’s default.
He said the initiative was meant to benefit recent graduates who may not have immovable assets.
“Financial institutions in the country often require immovable assets like houses and land as collateral needed for loan seekers to secure a loan,” said Mr Mokuku.
“But the reality is many people, especially the younger population, do not necessarily have such immovable assets. They may have smaller movable assets such as vehicles, computers or even intangible assets such as business invoices from their debtors. This will be useful especially to young entrepreneurs.”
He said the collateral registry would complement finance leasing reform since the proposed registry would include information on security interests acquired through finance leasing.
Financial leasing is an agreement wherein the lessor receives lease payments for the covering of ownership costs.