17 Sep 2020

 The Ministry of Finance and Economic Development is consulting village leaders around the country on the proposed reforms on Credit Information Sharing and Movable Property/Secured Interest. 

Speaking at a consultative meeting with dikgosana in Mochudi on September 16, the ministry’s chief finance administrator, Mr Moses Wasekgwa, said this development dated back to 2014 and 2018 when the ministry appointed the World Bank to undertake diagnostic studies towards establishment of a credit reporting system and collateral registry and enactment of the Credit Information Act and Movable Property Act.

According to Mr Wasekgwa, credit reporting addressed a fundamental problem of credit markets including asymmetric information between borrowers and lenders, which might lead to adverse selection, credit rationing and moral hazard problems.

He said regulators and financial market participants were increasingly recognising the value of credit reporting system for improved credit risk and overall credit portfolio management.

He said establishment of a collateral registry was one of the projects in the Doing Business Reforms Agenda on the Getting Credit Index, which measured the legal rights of borrowers and lenders with respect to secured transactions/collateral registries.

He explained that a Collateral Registry was an online central database which contained records of all registrations of collaterals created by borrowers to secure credits from lenders.

For her part, director of Finance Administration Ms Joyce Sekgota said access to credit was crucial for economic growth and the engine for private sector development.

She said the volume of credit to the private sector especially the small and medium enterprises in Botswana was relatively low as compared to other countries.

“Financial institutions prefer to take immovable property such as land and estate as collateral for credit. Through the concept of Collateral Registry, households and businesses can register their movable assets as collateral to get credit from lenders.” She said. ends